FHA loans are the most lenient mortgage program on the market right now — 3.5% down, credit scores as low as 580, and debt-to-income ratios up to 56.99% on the back end. That flexibility is genuinely valuable for the right buyer. But FHA is not the right loan for every buyer, and we will tell you the truth about when it is and when it is not — something most lenders will not do.
At First Commerce Financial we shop your FHA loan across multiple wholesale lenders in Michigan, Florida, Arizona, and Texas. No junk fees. No pressure. A straight answer about whether FHA is actually your best path.
An FHA loan is a mortgage insured by the Federal Housing Administration. Because the FHA insures the loan against default, lenders are willing to offer more flexible qualification terms — lower down payments and more lenient credit and debt-to-income requirements — than they would on a conventional loan. The FHA does not lend money directly; it guarantees the loan, which reduces the lender's risk and opens the door for buyers who would not otherwise qualify.
FHA is the go-to program for first-time buyers with limited savings, buyers rebuilding credit, or buyers with higher debt loads — student loans, car payments, existing obligations — that push their debt-to-income ratio above what conventional lenders will accept.
🏠 Down Payment
3.5% down with a credit score of 580 or higher. 10% down if your score is between 500 and 579. Down payment can come from a gift from a family member or an approved down payment assistance program — no seasoning requirement on gifted funds.
📈 Credit Score
580 minimum for 3.5% down. 500–579 qualifies with 10% down. FHA is significantly more forgiving than conventional — but a higher score still gets you a better rate, and we will tell you the exact breakpoints that matter for your scenario.
📊 Debt-to-Income Ratio
FHA allows back-end DTI up to 56.99% — the most lenient of any standard mortgage program. This is the deciding factor for many buyers who have student loans, car payments, or other existing monthly obligations. Conventional typically caps at 45–50%.
🏭 Mortgage Insurance (MIP)
FHA requires mortgage insurance regardless of down payment. Upfront MIP of 1.75% rolled into the loan, plus annual MIP of 0.55% paid monthly. If you put less than 10% down, MIP stays for the life of the loan — this is the most important cost difference vs. conventional.
🏠 Property Requirements
The property must meet FHA minimum property standards — safe, sound, and secure. Single family homes, 2-4 unit properties (if you occupy one unit), FHA-approved condos, and manufactured homes all qualify. We verify condo approval before you make an offer.
💰 Loan Limits
FHA loan limits are set by county and updated annually. The 2025 baseline is $524,225 for a single family home in most counties, with higher limits in high-cost markets. We will tell you the exact limit for the county you are buying in before you start shopping.
⚠ The Honest FHA Conversation — What Most Lenders Won't Tell You
FHA is the most lenient mortgage program on the market right now — and that leniency is genuinely valuable for the right buyer. But it comes with real trade-offs that are worth understanding clearly before you commit.
The MIP for life issue. If you put less than 10% down on an FHA loan, mortgage insurance stays for the entire life of the loan — there is no automatic cancellation at 20% equity like there is with conventional PMI. The only way out is to refinance into a conventional loan once you have built enough equity. That is an additional transaction with additional costs.
The DTI concern. FHA allows debt-to-income ratios up to 56.99% on the back end. That means a buyer can qualify for a mortgage that consumes nearly 57 cents of every dollar they earn before taxes. That is technically legal and FHA allows it — but it leaves almost no financial cushion for unexpected expenses, job disruption, or rate adjustments. We will always show you what that payment looks like against your actual budget before you commit.
The post-2021 equity concern. Buyers who purchased with FHA loans in 2021 and 2022 — at or near peak prices in many markets — are in a challenging position today. Home values have declined 10–20% in some markets, putting many of these buyers in a negative equity position. FHA's low down payment structure means there was very little equity buffer to absorb that decline. This is not a reason to avoid FHA — but it is a reason to think carefully about the market you are buying in, the price you are paying, and your timeline for staying in the home.
We will always run FHA side by side with conventional so you can see the real numbers — total monthly cost, total mortgage insurance paid over time, and what each option looks like over 5, 10, and 30 years.
🏠 FHA Loan
🏠 Conventional Loan
The Zero Junk Fee Difference on FHA Loans
FHA loans already carry an upfront MIP of 1.75% and ongoing monthly MIP — built-in costs you cannot avoid. What you can avoid are junk fees: processing fees, underwriting fees, administrative charges that most lenders add on top of the required FHA costs.
We have not charged junk fees since 2007. On an FHA loan, that discipline matters even more — because you are already paying MIP, every dollar saved on lender fees directly improves the value of your loan. What you see on your Loan Estimate is what you pay at closing.
FHA loans are available across all four states we serve. Whether you are buying in Metro Detroit, the Sarasota-Bradenton corridor, the Phoenix East Valley, or the Dallas-Fort Worth metro, we navigate the FHA process from pre-approval to closing with the same experienced team and zero junk fees in every market.
FHA loan limits and property standards can vary by county — and in high-cost markets like Sarasota County, Manatee County, and parts of the Phoenix metro, loan limits are set higher than the national baseline. We will tell you the exact limit for your county before you start shopping.
Can I use an FHA loan to buy a second home or investment property?
No — FHA loans are for primary residences only. You must occupy the property within 60 days of closing and intend to live there as your primary home. If you are buying a second home or investment property, a conventional loan is the right path. We will walk you through both options.
How long does FHA mortgage insurance last?
If you put less than 10% down, FHA mortgage insurance stays for the life of the loan — it does not automatically cancel when you reach 20% equity the way conventional PMI does. If you put 10% or more down, MIP falls off after 11 years. Many borrowers refinance into a conventional loan once they have built enough equity to eliminate MIP. We will run that break-even calculation for you upfront so you know what the exit looks like.
Can I get an FHA loan after a bankruptcy or foreclosure?
Yes — FHA has waiting periods rather than hard disqualifications. Typically 2 years after a Chapter 7 bankruptcy discharge and 3 years after a foreclosure, with re-established credit. Chapter 13 may be possible sooner with trustee approval and on-time payment history. We will look at your specific situation and tell you exactly where you stand.
Is the FHA interest rate lower than conventional?
FHA rates are often similar to or slightly lower than conventional rates — but the mortgage insurance premium adds significantly to your total monthly cost. The all-in monthly payment is what matters, not just the rate. We will show you both options side by side with the full payment picture so you can make a true apples-to-apples comparison.
What DTI ratio does FHA allow?
FHA allows back-end debt-to-income ratios up to 56.99% — the most lenient of any standard mortgage program. This is often the deciding factor for buyers with student loans, car payments, or other existing obligations. However, qualifying for a payment and being able to comfortably afford it are two different things. We will always show you what that payment looks like against your real monthly budget — not just whether the ratio clears the threshold.
What types of properties can I buy with an FHA loan?
FHA loans can be used for single-family homes, 2-4 unit properties if you live in one unit, FHA-approved condos, and manufactured homes. The property must meet FHA minimum property standards. Condo projects require FHA project approval, which we verify before you make an offer so there are no surprises late in the transaction.
Should I choose FHA or conventional?
It depends on your credit score, down payment, debt-to-income ratio, and how long you plan to stay in the home. For buyers with 620+ credit and a down payment of 5%+, conventional often costs less over time because PMI cancels at 20% equity. For buyers with lower credit scores, higher DTI, or limited down payment, FHA may be the only or best path. We run both scenarios for every client so you can see the real numbers and make an informed decision.
We will pull your options, run FHA and conventional side by side, and give you a straight answer — including the honest conversation about MIP for life and what your all-in monthly payment actually looks like. No pressure, no obligation. Same-day pre-approvals in most cases.
Get Your Free Pre-ApprovalOr call or text Kirk or Ken directly at (248) 459-5511
First Commerce Financial | Licensed Independent Mortgage Broker | NMLS #137512 | AZ MB #1001354 | Licensed in Michigan, Florida, Arizona, and Texas | Not affiliated with or acting on behalf of FHA or the Federal Government | Ken Turkington NMLS #137873 | Kirk Chivas NMLS #160828
