Loans Buy a home FHA purchase
FHA loans: flexible credit, 3.5% down
Insured by the federal government, FHA loans are built for buyers whose credit or savings do not fit a conventional loan yet. The trade-off is mortgage insurance that usually stays for the life of the loan.
New to this loan? Start here: The four main loan types A 3-minute lesson
Who it fits
FHA works well when credit is still being rebuilt, debt-to-income is on the higher side, or a family member needs to help you qualify. With stronger credit, a conventional loan such as HomeReady often costs less over time because its mortgage insurance can be canceled.
In Montezuma, Archuleta and Dolores counties, FHA limits sit at the national floor of $541,287 for one unit, while La Plata’s limit is higher (look up a county). Manufactured homes on permanent foundations and rural homes with wells and septic can qualify when they meet HUD’s standards. If the home needs work, an FHA 203(k) loan adds repair costs to the same mortgage.
What FHA mortgage insurance costs
Every FHA loan has two parts of mortgage insurance:
- Upfront premium: 1.75% of the loan, usually added to the balance rather than paid in cash.
- Annual premium: about 0.55% of the loan per year with 3.5% down, or 0.5% with 5% or more, paid monthly.
On a loan over $726,200 the annual rate is higher. Your Mortgage Plan shows the dollars for each option.
Calculators and guides
- Mortgage payment calculatorYour full payment for each loan type, and where any payment goes.
- Best mortgages for first-time buyers in Southwest ColoradoHow the low-down options compare here
- Buying with a co-borrowerFamily and non-occupant co-borrowers
- Which loans fit my score?Which loan types usually fit your credit score.
- Same home, four loan typesConventional, FHA, VA and USDA side by side, VA first.
- When mortgage insurance comes offWhen conventional mortgage insurance comes off, and how FHA differs.
Common questions
What credit score do I need for an FHA loan?
FHA allows 3.5% down at 580 and 10% down at 500–579. Many lenders set their own minimums higher, so comparing lenders matters.
Can a parent co-sign on an FHA loan?
Yes. A family member who will not live in the home can be a co-borrower, and you can still put 3.5% down.
Does FHA mortgage insurance ever go away?
With less than 10% down it stays for the life of the loan. Many owners later refinance into a conventional loan to drop it once they have 20% equity.
Who is not eligible?
Since May 2025, non-permanent residents are not eligible for new FHA loans. U.S. citizens and lawful permanent residents are.