What is an FHA loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, part of HUD. The insurance protects the lender, which is why FHA can be more flexible on credit and down payment than many other loans. FHA loans are for homes you'll live in, and they're made by FHA-approved lenders, not the government.
Who is FHA a good fit for?
FHA often fits first-time buyers, buyers whose credit is good but not perfect, and buyers with smaller savings for a down payment. It can also work for a small multi-unit property if you live in one unit. If your credit is strong and you have more saved, compare a conventional loan too.
How does FHA mortgage insurance work?
FHA loans have two mortgage insurance premiums: an upfront premium, usually financed into the loan, and an annual premium paid monthly. How long the annual premium lasts depends on your down payment and term. On your Loan Estimate, look for the upfront premium in Section B and the monthly amount in Projected Payments.
HUD publishes the current premiums and rules. If an FHA Loan Estimate doesn't show mortgage insurance anywhere, ask why. Many FHA borrowers later refinance into a conventional loan to drop it once they've built enough equity.
What about the down payment and credit?
HUD sets FHA's down payment and credit rules, and the two are linked: your credit affects what you'll need to put down. Lenders can also add stricter requirements. The down payment can come from savings or an acceptable gift. A quick conversation tells you exactly where you stand.
Source: HUD: Let FHA loans help you.
FHA vs. conventional
FHA is usually more forgiving on credit; conventional can be cheaper for strong credit and lets you cancel mortgage insurance later. The honest answer depends on your credit and down payment. Ask for both Loan Estimates and compare monthly payment, cash to close, and page 3's In 5 Years line.
What to check on an FHA Loan Estimate
- Page 1: Loan Type says FHA, and the loan amount includes any financed upfront premium.
- Projected Payments: mortgage insurance is shown.
- Escrow: based on the real property taxes, not a placeholder. This matters in Texas.
- Section A: ask about points and every lender fee.
- Seller credits: if your contract has them, they should appear on page 2.
- Tennessee: Section E should include the transfer tax on a purchase. Ask whether the mortgage tax applies; some FHA deeds of trust may be exempt.
FHA property rules
The home must be your primary residence and meet HUD's minimum property standards, checked by an FHA appraisal. The appraisal looks at value and basic safety and soundness. It isn't a full home inspection, so get your own inspection too.
More: FHA loans in Texas and Tennessee · First-time homebuyer guide
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FAQ
Can I get an FHA loan more than once?
Yes. FHA isn't only for first-time buyers. You generally can't have more than one FHA loan at a time, with limited exceptions.
Can gift money be used on an FHA loan?
Generally yes, from acceptable donors with a gift letter and documented transfer.
Is FHA mortgage insurance forever?
Not always. It depends on your down payment and term. Many borrowers refinance to a conventional loan later to remove it.
Send me your Loan Estimate and I'll look it over myself.
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By John Stafford, Loan Officer, NMLS #2470539. John Stafford NMLS #2470539 | GoRascalJohn powered by GoRascal Inc. NMLS #2072896. Licensed in Texas and Tennessee. Equal Housing Opportunity. This article is general education, not legal advice, a loan approval, or an offer of credit. Example figures are illustrations only. Last updated October 22, 2026.