What is an FHA loan and who qualifies?

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration, designed to help buyers with lower credit scores or smaller down payments. You can qualify with a credit score as low as 580 and a 3.5% down payment, or a score between 500–579 with 10% down. FHA loans allow higher DTI ratios and are more lenient with past financial hardships. All FHA loans require upfront mortgage insurance premium (MIP) of 1.75% and annual MIP for the life of the loan in most cases. FHA loans are subject to loan limits that vary by county and property type.