GLOSSARY — REAL ESTATE TERMS
FHA Loan
An FHA loan is a mortgage insured by the Federal Housing Administration, allowing qualified buyers to purchase with a down payment as low as 3.5% and more flexible credit requirements than most conventional loans.
How FHA loans work
The FHA doesn't lend money directly -- it insures loans made by approved lenders, which reduces the lender's risk and allows more flexible qualifying standards: down payments as low as 3.5% and credit scores as low as 580 for that minimum down payment.
The trade-off: mortgage insurance
FHA loans require both an upfront mortgage insurance premium and an ongoing annual premium, which in most cases lasts for the life of the loan unless the buyer refinances into a conventional loan later. This is the main cost trade-off against the lower down payment and more flexible credit standards.
WHAT TO CHECK BEFORE CHOOSING AN FHA LOAN
- Confirm the FHA loan limit for the specific county you're buying in
- Ask your lender to compare total cost against a conventional loan with PMI
- Verify the property (especially a condo) is on the FHA-approved list
- Ask how long mortgage insurance would last given your planned down payment
Are FHA loan limits the same everywhere in California?
No -- FHA loan limits are set county by county based on local home prices, so limits in Los Angeles and Orange County are meaningfully higher than in lower-cost counties.
Can I use an FHA loan for any type of home?
The property must meet FHA minimum property standards, and condos must be on the FHA-approved project list -- not every condo building qualifies.
Is mortgage insurance permanent on an FHA loan?
In most cases with less than 10% down, annual mortgage insurance lasts for the life of the loan. Refinancing into a conventional loan later is the common way to remove it once enough equity has built up.