FHA loans
The most forgiving mainstream loan programme — 3.5% down with a 580 credit score, and debt ratios that stretch further than conventional will allow.
What an FHA loan is
An FHA loan is a mortgage issued by an ordinary lender and insured by the Federal Housing Administration. The government does not lend you the money — it guarantees the lender against loss, which is what lets lenders accept lower credit scores, smaller down payments and higher debt ratios than they otherwise would.
You pay for that insurance directly, and that trade-off is the single most important thing to understand about the programme.
Qualifying
| Requirement | FHA standard |
|---|---|
| Credit score | 580 for 3.5% down; 500–579 requires 10% down. Many lenders set their own higher floor ("overlays"), often 600–620. |
| Down payment | 3.5%, and it can be entirely gifted by a family member |
| Debt-to-income | More flexible than conventional; with compensating factors, ratios well above 50% are sometimes approved |
| Occupancy | Primary residence only — no second homes, no pure investment purchases |
| Property types | 1–4 units, if you live in one of them |
| Bankruptcy / foreclosure | Shorter waiting periods than conventional |
Buying a duplex is allowed
FHA permits 2–4 unit properties provided you occupy one unit. In parts of Miami-Dade and Broward this is one of the more realistic routes into ownership — the rent from the other units can help you qualify, and you are buying at owner-occupant terms rather than investor terms.
Mortgage insurance
FHA charges mortgage insurance premium (MIP) in two parts:
- Up-front MIP — a percentage of the loan amount, charged at closing. It is almost always financed into the loan rather than paid in cash, which means your loan balance starts slightly above your purchase price minus down payment.
- Annual MIP — charged monthly as part of your payment, calculated on the loan balance.
The critical difference from conventional PMI: on most FHA loans with less than 10% down, annual MIP lasts for the entire life of the loan. It does not fall away when you reach 20% equity. Putting 10% or more down shortens it to eleven years, which almost nobody does — if you have 10%, conventional is usually the better product.
The rates change
HUD adjusts both the up-front and annual MIP rates periodically, and they vary by loan term and loan-to-value. Get the current figures from your lender rather than from any website, including this one.
Loan limits
FHA sets a maximum loan amount that varies by county and is revised annually. The Miami–Fort Lauderdale–West Palm Beach metro area is treated as a higher-cost area, so the limit here is above the national floor — but it is still well below the price of a great deal of local inventory, which is the practical constraint most South Florida buyers hit.
Because the figure changes every year, look up the current limit for Miami-Dade or Broward on HUD's official lookup tool, or ask your lender, rather than relying on a number printed anywhere else.
Condos — read this before you search
This is where FHA buyers in South Florida most often get caught out. FHA will not lend on a condominium unless the project itself is approved — not just the unit, and not just you.
A large share of South Florida condominium buildings are not on the approved list. Reasons include the ratio of investor-owned to owner-occupied units, the proportion of owners delinquent on dues, commercial space in the building, pending litigation, and reserve funding levels — all of which have become harder to satisfy since Florida's post-Surfside reserve requirements took effect.
There is a single-unit approval route for individual units in unapproved buildings, but it has its own conditions and is limited in how many units per building can use it.
Check approval before you fall for a unit
HUD publishes a searchable list of approved condominium projects. Checking it takes two minutes and saves a great deal of disappointment. If condos are central to your search and the building you want is not approved, conventional financing is often the answer.
Property condition standards
FHA appraisers assess value and whether the property meets minimum property standards. They will flag safety and habitability issues — an actively leaking roof, exposed wiring, missing handrails, broken windows, peeling paint on pre-1978 homes, non-functioning systems.
Anything flagged generally has to be repaired before closing, which in practice means the seller must agree to fix it, or the deal fails. That makes an FHA offer less attractive on a fixer-upper, and sellers know it. It is a genuine competitive disadvantage in a multiple-offer situation, and something to plan around rather than discover.
The FHA 203(k) renovation programme is the exception — it lets you finance the purchase and the repairs in a single loan. It is more paperwork and a longer close, but for the right property it works well.
FHA vs conventional at a glance
| FHA | Conventional | |
|---|---|---|
| Minimum down | 3.5% | 3% (first-time), otherwise 5% |
| Minimum score | 580 | 620 |
| MI removable? | No, on most loans | Yes, at 20% equity |
| MI cost at low credit | Same regardless of score | Rises sharply as score falls |
| Debt ratios | More flexible | Tighter |
| Condo approval | Project must be FHA approved | Project must be warrantable — a broader pool |
| Property standards | Stricter appraisal requirements | More lenient |
| Seller perception | Weaker offer | Stronger offer |
The rule of thumb: below about 680, FHA is often cheaper overall because conventional PMI is priced on credit score and gets expensive fast. Above about 700 with 5% or more down, conventional usually wins, because the mortgage insurance goes away and the offer is stronger.
Getting out of MIP
Since annual MIP on most FHA loans does not cancel, the exit is to refinance into a conventional loan once you have 20% equity — through appreciation, principal paydown, or both. In an appreciating market that can happen faster than people expect.
Whether it is worth doing depends on where rates are when you get there. If you took an FHA loan at a low rate and rates have since risen, refinancing to remove MIP may cost more in interest than it saves. Run the actual numbers rather than assuming.
There is also an FHA streamline refinance for staying within FHA at a lower rate — reduced documentation, no new appraisal in most cases — but it keeps the MIP.
Who FHA suits
Good fit if:
- Your credit is in the 580–680 range
- Your debt-to-income is higher than conventional will accept
- Your down payment is a gift from family
- You are within a few years of a bankruptcy or foreclosure
- You are buying a 2–4 unit property and will live in one unit
Look elsewhere if:
- You are eligible for a VA loan — VA is better in almost every case
- Your credit is above 700 and you can put 5% down
- You want a condo in a building that is not FHA approved
- You are buying an investment property or second home
- You are competing hard in multiple-offer situations and have a conventional option
Not sure which programme fits?
That is exactly what a buyer consultation is for. Bring your rough credit range, income and savings, and you will get an honest comparison — including the case for waiting a few months if that is genuinely the better move.
General information only, not a loan commitment, a quote, or financial advice. FHA rules, MIP rates, loan limits and lender overlays change — confirm current terms with a licensed mortgage lender before making any decision.