Royal Mortgage›Loan programs›FHA
The one door
There is one place to apply, and this is it.
Takes you to our secure application site at my1003app.com.
FHA home loans
The loan that gets people into the house.
FHA is insured by the Federal Housing Administration, which is what lets a lender accept a smaller down payment and a lower credit score than a conventional loan usually allows. It is often exactly the right answer while a credit score is still climbing.
It also carries mortgage insurance that behaves differently from conventional PMI. We will explain that at the start and build the exit into the plan.
The Federal Housing Administration insures the loan; it does not make it. Royal Mortgage LLC is a private company and is not HUD, the FHA, or endorsed by any government agency.
What FHA offers
The reasons it exists.
A low down payment
Less money down than a conventional loan usually asks for, once the credit score meets the program's threshold. A lower score means a larger down payment.
More forgiving credit
Past bumps carry less weight than on a conventional file, and the waiting periods after a credit event are shorter.
Gift funds allowed
The entire down payment can be a documented gift from an eligible source. For many first-time buyers this is the whole ballgame.
Higher debt ratios
FHA will often accept a higher debt-to-income ratio than conventional guidelines, with compensating factors.
Non-occupant co-borrowers
A parent or family member can be on the loan without living in the house, which can be the difference between qualifying and not.
Assumable
A qualified buyer can take over the loan and its rate later, which is a real asset attached to the property.
Who this is for, and who it is not
FHA versus conventional, honestly.
FHA is your loan if
- The credit score is not there yet for conventional pricing
- The down payment is a gift
- The debt ratio is tight
- There was a credit event and not enough years have passed
- You are buying two to four units and living in one of them
Conventional is your loan if
- The score is strong enough that PMI is cheap and removable
- You plan to stay a long time and the life-of-loan premium adds up
- The property or the condo project is not FHA eligible
- You are putting a meaningful amount down
- It is an investment property. FHA is for a home you occupy
How FHA mortgage insurance works
The part that surprises people, said plainly and first.
FHA charges two premiums, and they are not the same thing:
- An up-front premium, charged once and usually financed into the loan rather than paid in cash — which means it is borrowed, and you pay interest on it.
- An annual premium, divided by twelve and added to your monthly payment.
- On most FHA loans the annual premium stays for the life of the loan. Conventional PMI comes off once you reach a certain equity level. FHA generally does not — you refinance out of it instead.
That is not a reason to avoid FHA. It is a reason to treat FHA as the loan that gets you in, with a plan to refinance into conventional once equity and credit support it. How that refinance works →
The FHA programs worth knowing
There is more here than the standard purchase loan.
203(k) renovation
Buy the house and finance the work on one loan, based on what the property will be worth after the renovation. This is the answer for the house that is priced low because it needs everything.
FHA streamline refinance
For borrowers who already have an FHA loan and want a lower rate. Far less documentation, and often no new appraisal.
FHA on two to four units
Live in one unit and rent the others, with FHA down payment terms. It is a straightforward route into owning property, and it is a live-in loan, so you have to occupy a unit.
Condominiums
FHA requires the project itself to be eligible, not just the buyer. We check the project before you write an offer rather than after.
What to have ready
Nothing exotic. The gift letter is the one people forget.
- Recent pay stubs, and the last two years of W-2s or returns if you are self-employed
- Recent statements for the accounts your down payment comes from
- If any of it is a gift: a signed gift letter, and the donor's paper trail. Start on this early
- A government photo ID, and your authorization to pull credit
- Anything that hits your monthly budget: student loans, child support, an IRS payment plan, a co-signed car
- If it is a condo, the project name — so we can check eligibility before you write an offer
The honest trade-off
FHA gets you in the door. This is what it asks in return.
- The annual premium generally stays for the life of the loan. Conventional PMI comes off at an equity level; FHA's usually does not.
- The refinance out of it is a plan, not a promise. It depends on your equity, your credit and the market on the day you go to do it. Build for it, do not count on it.
- There is an up-front premium as well as the annual one. Financing it keeps cash in your pocket at closing and adds it to what you are borrowing.
- The property has to qualify, not just you. FHA appraisals carry condition standards, and a condo project has to be eligible on its own.
- It is a live-in loan. FHA is for a home you occupy, so an investment property is a different conversation.
How an FHA file runs here
Five moves, in this order.
- Your real numbers, first Income, assets, credit and the payment they actually support — before you tour a house or choose a program.
- FHA or conventional, decided with your figures in it We run the comparison on your file rather than on a general rule, and we show you the working. If conventional is better for you, that is what we will say.
- The property check Condition standards, and condo project eligibility, checked before you write an offer instead of three weeks into a contract.
- Documents, requested in order One list at a time, as the file needs them, including the gift paperwork early.
- Underwriting, with a person on it A Royal Mortgage underwriter reviews and signs. The file moves through named stages, and the plan to refinance out of the insurance is written down at the start.
FHA next to a conventional loan
The same buyer, two different sets of rules.
- Down paymentLess than conventional usually asks for
- CreditMore forgiving, with shorter waits after a credit event
- Mortgage insuranceUp-front and annual premiums, both
- Does the insurance come offConventional PMI does. FHA generally does not
- Gift fundsThe whole down payment can be a documented gift
- The propertyMust be eligible too, condo projects included
FHA loan limits are set annually and vary by county and by the number of units. We will tell you the limit that applies to your property before you write an offer.
The one door
Find out which loan is actually yours.
One application covers FHA, conventional, VA and everything else. We choose the program once we can see the real numbers.
Any question on this page can go straight to Royal Ai. The gold bubble in the corner takes questions in plain words.