Is FHA only for first-time buyers?

No, and this is the most common misunderstanding about it. First-time and repeat buyers can both use FHA. The home generally has to be the one you live in, and your file still has to meet the current rules.

Is FHA a worse loan than conventional?

Neither one is worse. They are built differently, and which comes out ahead depends on your credit, your cash, the house and how long you keep the loan. The only comparison worth trusting is both offers run on your file.

Loan program

FHA loans

The government-insured loan most first-time buyers compare first.

What it is

An FHA loan is an ordinary mortgage from an ordinary lender. What makes it FHA is the insurance the Federal Housing Administration puts behind it. That insurance protects the lender, and you are the one who pays for it. In exchange, FHA sets its own qualifying rules, and for some buyers those rules are easier to meet than the alternatives. Whether they are easier for you depends on your file. The house has to meet FHA's rules too, and it generally has to be the home you live in.

Who it's for

First-time buyers weighing a government-insured loan against a conventional one
Buyers who will live in the home, since FHA is generally for a primary residence
People whose credit or savings make the conventional path harder to reach

The essentials

Mortgage insurance is the trade

FHA loans carry mortgage insurance. It is part of the payment, and how long it stays on the loan depends on the loan you end up with. Ask that before you compare FHA to anything else on the monthly payment alone.

The house has to qualify too

FHA has its own requirements for the property and for you occupying it. A home that would sail through a conventional appraisal can still pick up an FHA condition. Worth knowing before you write an offer.

Cheapest month is not cheapest loan

FHA and conventional can land in very different places once the mortgage insurance, the cash you need at closing and the years you plan to stay are all in the same picture.

Common questions

Is FHA only for first-time buyers?: No, and this is the most common misunderstanding about it. First-time and repeat buyers can both use FHA. The home generally has to be the one you live in, and your file still has to meet the current rules.
Is FHA a worse loan than conventional?: Neither one is worse. They are built differently, and which comes out ahead depends on your credit, your cash, the house and how long you keep the loan. The only comparison worth trusting is both offers run on your file.

Source: HUD Single Family Housing Policy Handbook 4000.1. Current program documents and the borrower's final disclosures control.

Related programs

Conventional loans

The standard purchase loan, and the one FHA usually gets measured against.

Down payment assistance

A category, not a product. What it wants back later is the part to read.

VA loans

A benefit earned by service, plus the rules that come with it.

This page is general information about loan programs, not a commitment to lend or an offer of credit. Program availability, terms, and qualification depend on your situation and are subject to underwriting approval. Tareq Maayta, NMLS #1443073. Loans through Finance USA Corporation, NMLS #135625. Equal Housing Opportunity.