FHA Loans – Purchase And Refinance Loan Requirements For 2021

FHA loans are available for people with credit scores of 580 or higher and down payments as low as 3.5%. This makes FHA loans more accessible than other mortgages.

Who FHA Loans Are Best For

This loan is a great option for people whose credit scores are 580 and higher, and who have a 3.5% down payment. Read more about other benefits below.

How FHA Loans Work

These loans are insured by the Federal Housing Administration (FHA). 

The FHA protects lenders against defaults on payments. This makes it easier for you to qualify, and allows lenders to offer lower interest rates.

What You’ll Need To Qualify For An FHA Loan

  • A minimum 3.5% down payment.
  • A minimum FICO® Score of 580.
  • A debt-to-income ratio (DTI) of no more than 50% and a steady employment history. Estimate your DTI by adding your monthly debt payments (such as credit card and car payments) and dividing the total by your monthly income before taxes.
  • Money to cover the upfront mortgage insurance premium (UFMIP). The amount is usually equal to 1.75% of your loan amount.
  • Money to cover closing costs, which could be anywhere from 2% – 6% of the purchase price.

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FHA Mortgage Rates

Product Rate APR
FHA 30 Year Fixed 2.75% 3.704%
FHA 25 Year Fixed 2.75% 3.846%
FHA 15 Year Fixed 2.25% 3.423%
30-year FHA Fixed-Rate Loan: An interest rate of 2.75% (3.704% APR) is for the cost of 2.00 Point(s) ($4,070.00) paid at closing. On a $203,500 mortgage, you would make monthly payments of $962.79. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 74.91%. Payment includes a one-time upfront mortgage insurance premium at 1.75% of the base loan amount and a monthly mortgage insurance premium (MIP) calculated at 0.8% of the base loan amount. For mortgages with a loan-to-value (LTV) ratio of 74.91%, the 0.8% monthly MIP will be paid for the first 11 years of the mortgage term. Thereafter, the monthly loan payment will consist of equal monthly principal and interest payments until the end of the loan.25-year FHA Fixed-Rate Loan: An interest rate of 2.75% (3.846% APR) is for the cost of 2.125 Point(s) ($4,324.38) paid at closing. On a $203,500 mortgage, you would make monthly payments of $1,070.39. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 74.91%. Payment includes a one-time upfront mortgage insurance premium at 1.75% of the base loan amount and a monthly mortgage insurance premium (MIP) calculated at 0.8% of the base loan amount. For mortgages with a loan-to-value (LTV) ratio of 74.91%, the 0.8% monthly MIP will be paid for the first 11 years of the mortgage term. Thereafter, the monthly loan payment will consist of equal monthly principal and interest payments until the end of the loan.15-year FHA Fixed-Rate Loan: An interest rate of 2.25% (3.423% APR) is for the cost of 2.00 Point(s) ($4,070.00) paid at closing. On a $203,500 mortgage, you would make monthly payments of $1,406.16. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 74.91%. Payment includes a one-time upfront mortgage insurance premium at 1.75% of the base loan amount and a monthly mortgage insurance premium (MIP) calculated at 0.45% of the base loan amount. For mortgages with a loan-to-value (LTV) ratio of 74.91%, the 0.45% monthly MIP will be paid for the first 11 years of the mortgage term. Thereafter, the monthly loan payment will consist of equal monthly principal and interest payments until the end of the loan.

FHA Loan Benefits

  • Credit score requirements are lower compared to other loans.
  • You could still qualify for an FHA loan if you’ve had a bankruptcy or other financial issues in the past.
  • They’re available with fixed or adjustable rates and for 30- or 15-year terms.
  • They have low down payment requirements. You can put down as little as 3.5%.


Refinancing with an FHA loan has some great benefits, too:

  • Closing costs can be rolled into your loan.
  • If you’ve already got an FHA loan, you can refinance with an FHA Streamline. Less documentation is required for this option, and you may not need an appraisal. The FHA Streamline is a good option if you’re not looking to take cash out.

FHA Property Requirements

  • Your loan can’t exceed the loan amount limits in your area. The FHA's limit for lower-cost areas is set at $356,362 in 2021. In high-cost areas, the limit for 2021 is $822,375. Look up the loan limits in your area.
  • The home must meet the FHA’s minimum property standards for safety, security and structural integrity. 
  • When buying a home, you’ll need to move in within 60 days of closing.
  • It must be your primary residence. Investment properties and second homes don’t qualify for FHA loans.

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