FHA Loans
An FHA loan is a mortgage that a private, FHA-approved lender makes and the Federal Housing Administration insures. If you stop paying, the insurance repays the lender for a loss. Because the lender carries less risk, it can accept smaller down payments and a wider range of credit profiles.
Key Takeaways
- The FHA, part of HUD, insures the loan. It does not make the loan; an approved lender does.
- You pay for the insurance with a 1.75% upfront premium and an annual premium paid monthly.
- The process runs from preapproval through an FHA appraisal and underwriting to closing, often in 30 to 45 days.
- Know four numbers: 3.5% down, 580 score, 1.75% upfront premium and your county loan limit.
Who insures an FHA loan, and who lends it?
The Federal Housing Administration is part of the U.S. Department of Housing and Urban Development (HUD). It sets the rules and collects mortgage insurance premiums from borrowers. It does not give you money.
The money comes from an FHA-approved lender. Many borrowers go straight to one lender. At Lendia, we compare options from multiple lenders so you can see which one fits your situation best. The loan must follow FHA rules no matter who funds it.
Why does insurance change the rules?
A conventional lender usually wants a larger down payment and a higher score because it takes the loss if a borrower defaults. With FHA insurance in place, that loss is covered. In return, you pay two premiums, which we explain in FHA mortgage insurance explained.
How does the FHA loan process work, step by step?
- Check your credit and budget. Pull your reports and decide what monthly payment you are comfortable with. See the FHA loan requirements for score and debt guidelines.
- Get preapproved. A Licensed Lendia California Loan Officer reviews your income, assets and credit and issues a preapproval letter, subject to verification.
- Shop for a home and make an offer. Your agent can use your preapproval in the offer. FHA allows the seller to contribute up to 6% toward closing costs.
- Order the FHA appraisal. The appraiser checks value and also confirms that the home meets FHA minimum property standards.
- Go through underwriting. The underwriter verifies your income, assets, credit and the property. Expect requests for documents.
- Review your Closing Disclosure. You must receive it at least 3 business days before closing.
- Sign and close. You bring your down payment and closing funds, sign, and the loan funds.
What are the key FHA numbers?
| Item | What to know |
|---|---|
| Down payment | 3.5% with a 580+ score; 10% with a 500 to 579 score |
| Upfront premium | 1.75% of the base loan, can be financed |
| Annual premium | Roughly 0.50% to 0.75% of the loan per year on typical 30-year loans |
| Debt-to-income | Common guideline 31% housing and 43% total; higher is possible with strong compensating factors |
| Loan limit | 2026 one-unit limits range from $541,287 to $1,249,125 by county |
| Units and occupancy | One to four units, primary residence |
| Gift funds | Allowed for the down payment |
What do closing costs look like?
Buyer closing costs in California often run roughly 2% to 4% of the purchase price. They include lender fees, the appraisal, title and escrow fees, recording fees, prepaid interest and the first deposits for homeowners insurance and property taxes. With FHA, the seller can contribute up to 6% of the price toward these costs if the contract allows it. On the $700,000 example, 6% is $42,000 ($700,000 x 0.06). Your Loan Estimate, delivered within 3 business days of application, lays out the costs line by line.
How is FHA different from a conventional loan?
The biggest differences are mortgage insurance and flexibility. FHA often accepts lower scores and higher debt ratios. Conventional loans have private mortgage insurance that can be removed once you reach enough equity. Neither is always cheaper. Our guide on FHA vs. conventional compares them with California numbers.
Where should I go next?
Read the benefits of an FHA loan and the cons. Then see the FHA loan basics, the credit score requirements and the 2026 California FHA loan limits. Back to the FHA loans chapter.
At Lendia, we walk you through every step
At Lendia, we explain each stage in plain English and show your FHA payment next to conventional and VA options. Contact us or get a rate quote now. Rates and terms depend on your situation; approval requires qualification.
Frequently Asked Questions
Does the FHA lend me the money?
No. The FHA insures the loan. An FHA-approved lender provides the funds.
Is FHA only for first-time buyers?
No. Repeat buyers can use it too, as long as the home is a primary residence.
Can I use FHA on a duplex?
Yes, up to four units if you live in one. See FHA multi-unit loans.
How long does an FHA loan take to close?
Many close in roughly 30 to 45 days, but timing depends on the appraisal, your documents and the contract terms.
Does an FHA loan have a prepayment penalty?
No. See FHA prepayment penalties.
Can I buy a condo with FHA?
Often yes, if the condo project meets FHA requirements. We can check a project before you write an offer.
Talk to a Licensed Lendia California Loan Officer
At Lendia, we review your situation and show you the programs you qualify for.