FHA Loans: What They Are and Who They Fit

What is an FHA loan?

The Federal Housing Administration (FHA) runs a loan insurance program meant to expand homeownership opportunities. FHA provides mortgage insurance to FHA-approved lenders to protect them against losses if the homeowner defaults, and the cost of that insurance is passed along to the homeowner ^[2].

HUD's Section 203(b) program is the best-known FHA program. Its stated purpose is to provide mortgage insurance for a person to purchase or refinance a principal residence, on structures with one to four units ^[1]. The FHA does not lend the money itself: you apply through an FHA-approved lender ^[1].

Global G Home Loans, LLC is a mortgage broker, and FHA is one of the loan types we work on. Whether an FHA loan fits your situation depends on your full file, which a loan officer reviews with you.

What down payment and credit score does an FHA loan require?

CFPB describes FHA qualifying standards as generally more flexible than for conventional loans ^[2]. HUD's lender handbook puts specific numbers on this. For a purchase, the maximum loan-to-value ratio is 96.5 percent of the adjusted value, and the borrower must make a minimum required investment of at least 3.5 percent of the adjusted value ^[4]. HUD's program page likewise describes financing of approximately 96.5 percent ^[1].

Credit score changes what is available. Under HUD's handbook, a borrower whose minimum decision credit score is at or above 580 is eligible for maximum financing, a borrower between 500 and 579 is limited to a maximum loan-to-value of 90 percent, and a borrower below 500 is not eligible for FHA-insured financing ^[4]. Individual lenders may set their own additional requirements, so these figures are a floor set by the handbook, not a promise of approval.

• Maximum loan-to-value on a purchase: 96.5 percent of adjusted value ^[4].
• Minimum required investment: at least 3.5 percent of adjusted value ^[4].
• Minimum decision credit score of 580 or higher: eligible for maximum financing ^[4].
• Minimum decision credit score of 500 to 579: maximum loan-to-value of 90 percent ^[4].

How does FHA mortgage insurance work?

CFPB states that FHA mortgage insurance is required for all FHA loans. It has two parts: an upfront cost paid as part of closing costs, and a monthly cost included in the monthly payment ^[3].

If you do not have enough cash on hand to pay the upfront fee, you are allowed to roll it into the mortgage instead. CFPB notes that doing so increases both the loan amount and your total costs ^[3]. HUD's program page also describes financing the upfront premium and paying an annual premium ^[1]. We do not publish premium amounts on this site; your loan officer provides them in your official disclosures.

Can I use an FHA loan for a second home or investment property?

FHA loans are for a principal residence. HUD's handbook defines a principal residence as a dwelling where the borrower maintains or will maintain a permanent place of abode and typically occupies it for the majority of the calendar year, and a person may have only one principal residence at a time ^[4].

At least one borrower must occupy the property within 60 days of signing the security instrument and intend to continue occupancy for at least one year ^[4]. The handbook also says FHA will not insure a mortgage when the transaction was designed to use FHA insurance as a vehicle for obtaining investment properties ^[4]. If you are buying a second home or an investment property, a different loan type is usually the better question to ask us about.

Do I need a Social Security number or U.S. citizenship for an FHA loan?

HUD's handbook says U.S. citizenship is not required for mortgage eligibility, and it lists the categories of non-citizens who are eligible for FHA-insured financing as lawful permanent residents and citizens of the Federated States of Micronesia, the Republic of the Marshall Islands or the Republic of Palau ^[4]. HUD Mortgagee Letter 2025-09 removed the sections on non-permanent residents, eliminating their eligibility, for FHA case numbers assigned on or after May 25, 2025 ^[5]. The handbook also says each borrower must provide evidence of a valid Social Security number, with narrow exceptions, for example for individuals employed by the World Bank or a foreign embassy ^[4]. The handbook adds that a Social Security card alone is not sufficient to prove immigration or work status ^[4].

In practice this means a borrower who has only an ITIN, or no U.S. taxpayer or Social Security number at all, generally cannot use an FHA loan. Other loan types exist for those situations, and our get-started questionnaire asks about your Social Security number status up front so we can point you to the right path.

Is an FHA loan right for me?

An FHA loan may fit a buyer who plans to live in the home as a principal residence, has a valid Social Security number, and wants the more flexible qualifying standards CFPB describes ^[2][4]. It may not fit a buyer purchasing an investment property or second home, or a buyer without a Social Security number ^[4].

Because eligibility depends on details of your file and on the specific property, the honest answer comes from a conversation, not a web page. Start with the questions below, then contact us.