5 Quick Points to Simplify the Federal Housing Administration Loan

One of the most important loan products to understand

Tunji Onigbanjo
6 min readFeb 25, 2021


Photo by Precondo CA on Unsplash

A Federal Housing Administration (FHA) loan is a type of mortgage insured by the FHA and is issued by an FHA-approved lender. It can be used on residential properties ranging from single-family homes to four-plexes. FHA loans typically have 15-year or 30-year terms.

The FHA was established in 1934 by Congress through the National Housing Act of 1934. It was during the Great Depression when the housing industry was in extreme trouble. Back then, approximately 40% of households owned their homes. With the FHA being one of the leading programs for homeownership, as of Q2 2020, homeownership in the United States is at approximately 68%.

The FHA loan is known for primarily offering one of the lowest down payments if you meet the requirements at 3.5%. That means you can borrow up to 96.5% of that home you want. With that being said, the five following points need to be further understood to determine if the FHA loan is the right kind of mortgage product for you:

1. FHA Loan Requirements

2. Mortgage Insurance

3. Types of FHA Loans

4. FHA Loan Limits

5. Closing Costs

1. FHA Loan Requirements

When it comes to qualifying for a down payment as low as 3.5% for an FHA loan, the following are the requirements: a FICO score of at least 580, debt-to-income ratio less than 43%, the home must be your primary residence, you must have a steady income and proof of employment, and mortgage insurance.

When it comes to the FICO score requirement, a FICO score of at least 580 is the most important factor to qualify for a down payment as low as 3.5%. If your FICO score falls in the range of 500 to 579, you can still qualify for an FHA loan. Your down payment will instead be 10%. Down payments for FHA loans can come from savings, gifts, or a grant from a down payment assistance program.

Debt-to-income ratio is the percentage of your monthly gross income, income before taxes, that goes to paying monthly debts such as rent, mortgages, and credit cards. The simple formula is…



Tunji Onigbanjo

Financial literacy is important.


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