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FHA Loan Stipulations: What You Need to Know

For many first-time homebuyers, Federal Housing Administration (FHA) loans can be an attractive option. They require lower down payments and have more forgiving credit score requirements than other types of loans. However, FHA loans also come with some stipulations that you need to understand before you apply. Keep reading to find out what these stipulations are and how they may affect your home buying process.

Loan Limits

One of the main stipulations of an FHA loan is the loan limit. These limits vary depending on the county where you plan to buy a home. In 2021, the FHA loan limit for most parts of the United States is $356,362 for single-family homes. However, in high-cost areas, such as Hawaii and Alaska, the limits can reach as high as $822,375. These limits are important to keep in mind when you are searching for a home, as they determine the maximum amount you can borrow through an FHA loan.

Down Payments

Another key stipulation of FHA loans is the down payment requirement. While traditional mortgages may require a down payment of 20% or more, FHA loans require a minimum down payment of just 3.5% of the purchase price. This lower down payment can make it easier to afford a home, especially for first-time buyers who may not have a lot of cash saved up. However, keep in mind that the lower your down payment, the higher your monthly mortgage payments will be.

Credit Score Requirements

While FHA loans are known for their more lenient credit score requirements, there are still stipulations you need to meet. In general, the FHA requires a credit score of at least 580 to qualify for a loan with a 3.5% down payment. If your score is between 500 and 579, you may still be able to get an FHA loan, but you will need to put down 10% instead of 3.5%. Keep in mind that these requirements may vary depending on the lender you work with, so be sure to ask about their specific guidelines.

Mortgage Insurance Premiums

One of the most important stipulations of an FHA loan is the mortgage insurance premiums (MIPs). These premiums are required for all FHA loans and are paid in two parts: an upfront premium and an annual premium. The upfront premium is 1.75% of the loan amount and is usually rolled into the loan balance, while the annual premium ranges from 0.45% to 1.05% of the loan amount, depending on the loan term and down payment. These premiums help protect lenders in case you default on the loan and can add significantly to your monthly payment.

The Property

Finally, there are some stipulations regarding the property itself that you need to be aware of. To qualify for an FHA loan, the property must be your primary residence, meaning you cannot use an FHA loan to buy a rental property or vacation home. The property must also meet certain safety and habitability standards, such as having working electrical and plumbing systems and being free of any health hazards. Your lender will order an appraisal to ensure the property meets these standards before approving your loan.


While FHA loans can be a great option for first-time homebuyers, they do come with some stipulations that you need to understand. From loan limits and down payments to credit score requirements and mortgage insurance premiums, there are many factors to consider. By working with a knowledgeable lender and doing your research, you can make sure you fully understand these stipulations and find an FHA loan that meets your needs and financial goals.

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