FHA Mortgage Guide

An FHA mortgage is a home loan insured by the Federal Housing Administration. Because the loan is government-insured, lenders are able to offer more flexible underwriting guidelines compared to many conventional loan programs.

FHA loans are designed to expand access to homeownership while still maintaining responsible lending standards. They are helpful for buyers who are are faced with challenges such as:

• Rising home prices

• Limited down payment funds

• Higher student loan balances

• Credit rebuilding

FHA Loan Highlights

Here’s a snapshot of what FHA financing offers:

• Minimum down payment as low as 3.5% (with qualifying credit score)

• No income limits for standard FHA loans

• Flexible underwriting, including higher allowable debt-to-income ratios

• Upfront and monthly mortgage insurance required

• Assumable mortgage (a qualified future buyer may potentially assume your FHA loan)

• Available for 1-4 unit properties (must occupy as primary residence)

• Available for approved condominiums and manufactured homes

• FHA 203(k) renovation financing available

• Down payment assistance programs may be available (income limits may apply)

For current loan limits, you can review the FHA Loan Limits here

FHA Down Payment Requirements

One of the biggest advantages of FHA financing is the lower down payment requirement.

• 3.5% down with qualifying credit score

• 10% down with lower credit scores (case-by-case)

• Gift funds allowed

• Down payment assistance programs may be layered in some cases

This flexibility can help buyers enter the market sooner rather than waiting years to save 20%.

FHA Seller Contributions

FHA allows sellers to contribute up to 6% of the sales price toward the buyer’s closing costs, prepaid items, and temporary rate buydowns — one of the more generous seller-contribution limits compared to conventional financing, where the allowable amount is tied to your down payment and occupancy type.

This flexibility can be especially useful in negotiations, letting buyers ask sellers to help cover costs rather than reduce the purchase price, which can matter for appraisal and comparable-sale purposes. In order to obtain a seller contribution (aka seller credit), it’s important that it is negotiated in your contract when you present an offer on a home.

The seller contribution cannot be applied towards the down payment.

FHA Mortgage Insurance (MIP)

FHA loans require two types of mortgage insurance — an upfront premium paid at closing and an annual premium added to your monthly payment.

Upfront MIP (UFMIP)

1.75% of the base loan amount — typically financed into the loan rather than paid out of pocket at closing.

Annual MIP — 30-year loans

Loan amount LTV Annual MIP rate

≤ $726,200 ≤ 90% 0.50%

≤ $726,200 90.01% – 95% 0.50%

≤ $726,200 > 95% 0.55% (most common)

> $726,200 ≤ 90% 0.70%

> $726,200 90.01% – 95% 0.70%

> $726,200 > 95% 0.75%

Annual MIP — 15-year loans

Loan amount LTV Annual MIP rate

≤ $726,200 ≤ 90% 0.15%

≤ $726,200 > 90% 0.40%

> $726,200 ≤ 78% 0.15%

> $726,200 78.01% – 90% 0.40%

> $726,200 > 90% 0.65%

FHA Streamline Refinance — MIP rates

Original loan origination date UFMIP Annual MIP

Before June 1, 2009 0.01% 0.55%

June 1, 2009 or later 1.75% Standard rates above apply

The significantly reduced UFMIP (0.01%) for pre-June 2009 loans makes a streamline refinance especially compelling for homeowners and landlords carrying older FHA mortgages — even when the rate improvement is modest.

How long does MIP last?

• Less than 10% down: MIP stays for the life of the loan — the only way to remove it is to refinance to a non-FHA loan

• 10% or more down: MIP cancels after 11 years

• Loans originated before June 3, 2013: MIP cancels automatically when LTV reaches 78% — contact your servicer to request removal

In some situations, refinancing into a conventional loan later may allow you to remove mortgage insurance entirely.

Rates effective for FHA case numbers assigned on or after March 20, 2023. Last reviewed: Oct 2026.

FHA Streamline Refinance

If you currently have an FHA mortgage, you may qualify for an FHA Streamline Refinance

This program is designed to simplify refinancing for existing FHA borrowers and may include:

• No appraisal required (in most cases)

• Reduced income documentation

• Limited asset verification

• Lower monthly payment or improved loan terms

With rising property values across the Puget Sound region, many homeowners appreciate the simplicity of this option.

Even if your home was originally purchased as owner-occupied and later converted to a rental, you may still qualify under certain circumstances.

FHA 203(k) Renovation Loans

FHA also offers a renovation option known as the FHA 203(k) loan.

This program allows buyers or homeowners to:

• Purchase a home and finance repairs into one loan

• Refinance and include renovation costs

• Improve older Seattle-area homes

• Modernize duplex, triplex, or fourplex properties

For buyers considering older homes in Washington, this can be a powerful tool.

Who Is a Good Fit for an FHA Loan?

FHA financing may be a strong option if you:

• Are buying with a smaller down payment

• Are rebuilding or improving credit

• Need more flexible qualification guidelines

• Want to purchase a 2–4 unit property and live in one unit

• Are interested in renovation financing

• Want an assumable loan feature

With the current competitive housing market, it’s important to compare FHA alongside conventional, VA, and other eligible options to determine the best overall strategy.

If you don’t have a traditional credit history at all — no credit cards, no auto loans, no established credit file — FHA offers a path to qualify using documented rent, utility, and other payment history instead.

Can FHA Loans Compete in the Market?

While FHA loans sometimes get an unfair reputation, FHA buyers have been able to successfully compete with Conventional buyers. With the lowered Mortgage Insurance Premium rates, FHA loans can sometimes have lower overall payments compared to conventional loans with PMI.

What matters most is:

• Strong overall borrower qualifications

• Solid pre-approval

• Realistic offer strategies

• Clear communication with listing agents

Loan type alone does not determine offer strength.

Frequently Asked Questions about FHA Loans

What credit score do I need for an FHA loan?

FHA guidelines allow a credit score as low as 580 to qualify for the minimum 3.5% down payment. Borrowers with scores between 500 and 579 may still qualify, but typically need at least 10% down. Keep in mind that individual lenders can set stricter requirements than FHA’s baseline, so your actual approval also depends on income, debt-to-income ratio, and overall credit history — not credit score alone.

How much down payment do I need for an FHA loan?

Most FHA borrowers put down 3.5% with a qualifying credit score of 580 or higher. Borrowers with scores between 500 and 579 generally need 10% down. Down payment funds can come from personal savings, gift funds, or down payment assistance programs, which may be layered with FHA financing in some cases.

How long does FHA mortgage insurance (MIP) last?

If your down payment is less than 10%, MIP stays for the life of the loan — the only way to remove it is to refinance into a non-FHA loan. With 10% or more down, MIP cancels after 11 years. For loans originated before June 3, 2013, MIP cancels automatically once the loan reaches 78% loan-to-value. Refinancing into a conventional loan later is often the path homeowners use to eliminate mortgage insurance sooner.

How much can a seller contribute toward closing costs on an FHA loan?

FHA allows sellers to contribute up to 6% of the sales price toward the buyer’s closing costs, prepaid items, and temporary rate buydowns — a more generous limit than conventional financing, where the allowable contribution is tied to the buyer’s down payment and occupancy type. This can be a useful negotiating tool, letting buyers ask sellers to help cover costs rather than reduce the purchase price.

What is an FHA Streamline Refinance?

An FHA Streamline Refinance is a simplified refinancing option available to homeowners who already have an FHA mortgage. It’s designed to reduce paperwork and, in most cases, doesn’t require a new appraisal, along with reduced income documentation and limited asset verification. It can help homeowners lower their monthly payment or improve their loan terms with less hassle than a standard refinance.

Can I use FHA financing to renovate a home?

Yes. The FHA 203(k) loan allows buyers to purchase a home and finance repairs into a single loan, or homeowners to refinance and roll renovation costs into their mortgage. This can be especially useful for older homes in the Seattle area, or for modernizing a duplex, triplex, or fourplex.

Last updated October 2026.