FHA Loans: Flexible Credit, Low Down, Real Guidance
Get the structure you need when you're building or rebuilding credit.
What Is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development (HUD). Because the FHA insures these loans against default, lenders can offer more flexible qualification standards—lower credit scores, smaller down payments, and higher debt-to-income ratios than conventional loans typically allow. This makes FHA loans an excellent choice for first-time homebuyers, those with limited savings, or borrowers rebuilding their credit after financial setbacks.
FHA loans require as little as 3.5% down if your credit score is 580 or higher. Even borrowers with scores between 500-579 can qualify with a 10% down payment. The trade-off is mortgage insurance: you'll pay an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount at closing, plus an annual mortgage insurance premium (MIP) that's divided into monthly payments. For most FHA loans with less than 10% down, MIP lasts for the life of the loan—though you can refinance to a conventional loan once you've built sufficient equity and improved your credit.
At West Capital Lending, Dana Peterson has helped hundreds of borrowers navigate FHA loans across Alabama, Arizona, Colorado, Florida, Idaho, Oklahoma, Pennsylvania, Tennessee, Virginia, and Washington. We'll walk you through the property standards, explain the insurance costs clearly, and help you determine whether FHA is your best path to homeownership—or if another program might save you money in the long run.
Who Should Consider an FHA Loan?
Eligibility Snapshot
Quick overview of FHA loan requirements
Credit & Income
- Minimum Credit Score: 580 (3.5% down) or 500 (10% down)
- Ideal Credit Score: 620+ for best terms and lender options
- Income Documentation: W-2s, pay stubs, tax returns (2 years)
- Debt-to-Income Ratio: Up to 50-57% (with compensating factors)
Down Payment & Insurance
- Minimum Down Payment: 3.5% (credit 580+) or 10% (credit 500-579)
- Upfront MIP: 1.75% of loan amount (can be financed)
- Annual MIP: 0.45-1.05% (divided into monthly payments)
- Occupancy: Primary residence only (1-4 units)
Understanding Rates, Fees & Costs
FHA loan interest rates are typically competitive with conventional rates, and sometimes even lower for borrowers with credit scores in the 580-680 range. However, the total cost of an FHA loan includes mortgage insurance that can significantly impact your monthly payment. The upfront mortgage insurance premium (UFMIP) of 1.75% is usually rolled into your loan amount, so you don't pay it out of pocket at closing—but it does increase your principal balance and the interest you'll pay over time.
Annual Mortgage Insurance Premium (MIP): Your annual MIP rate depends on your loan amount, loan-to-value ratio, and loan term. For most 30-year FHA loans with less than 10% down, MIP is 0.55% annually (divided into monthly payments). If you put down 10% or more, MIP drops off after 11 years. With less than 10% down, MIP lasts for the life of the loan—though you can refinance to a conventional loan once you have 20% equity and your credit has improved.
Seller Concessions: One major advantage of FHA loans is that sellers can contribute up to 6% of the purchase price toward your closing costs, compared to just 3% on most conventional loans. This can be a game-changer if you're cash-strapped but have enough for the down payment.
Closing Costs: Expect to pay 2-5% of the loan amount in closing costs, including appraisal ($500-$800), title insurance, escrow fees, recording fees, and prepaid items like property taxes and homeowners insurance. We'll provide a detailed Loan Estimate within three business days of application so there are no surprises.
How the FHA Loan Process Works
Discovery & Pre-Approval
1-3 daysWe'll review your credit, income, and down payment funds to determine your FHA eligibility. You'll receive a pre-approval letter that strengthens your offer and shows sellers you're a qualified buyer.
Property Search & Offer
VariesWork with your real estate agent to find a home that meets FHA property standards (safe, sound, and sanitary). Once your offer is accepted, we'll order the FHA appraisal, which includes a property inspection.
FHA Appraisal & Underwriting
10-14 daysThe FHA appraiser will assess the property's value and condition. If repairs are required, they must be completed before closing. Meanwhile, our processor submits your file to underwriting for conditional approval.
Clear to Close
3-7 daysOnce all conditions are satisfied (including any required repairs), underwriting issues final approval. We'll coordinate with the title company to schedule your closing appointment.
Signing & Funding
1-2 daysYou'll sign your loan documents and receive the keys to your new home. The upfront MIP is added to your loan balance, and your monthly payments (including annual MIP) begin 30-45 days after closing.
Documents You'll Need
Income & Employment
- • Most recent 2 years W-2s
- • Most recent 30 days pay stubs
- • 2 years personal tax returns (all pages)
- • 2 years business tax returns (if self-employed)
- • Verification of Employment (VOE) form
Assets & Identity
- • Most recent 2 months bank statements (all pages)
- • Gift letter (if receiving gift funds from family)
- • Explanation for any large deposits
- • Government-issued photo ID
- • Social Security card
FHA vs. Conventional vs. VA
| Feature | FHA | Conventional | VA |
|---|---|---|---|
| Minimum Credit Score | 580 (500 with 10% down) | 620 (680+ ideal) | No minimum (lender overlays apply) |
| Minimum Down Payment | 3.5% | 3-5% | 0% |
| Mortgage Insurance | Upfront + annual MIP (often permanent) | PMI if <20% down (removable) | Funding fee (can be financed) |
| Property Standards | Strict (safety/livability) | Flexible | Moderate (safety/sanitation) |
| Seller Concessions | Up to 6% | Up to 3-9% (varies) | Up to 4% |
| Best For | Lower credit, smaller down payment | Strong credit, standard income | Veterans, active military, eligible spouses |
Not sure which program fits? Contact Dana for a personalized comparison.
Pro Tips & Common Mistakes
Plan to refinance once your credit improves. Many FHA borrowers use the program as a stepping stone. After 12-24 months of on-time payments and credit building, you can refinance to a conventional loan, eliminate MIP, and potentially lower your rate.
Ask about FHA Streamline Refinance. If you already have an FHA loan and rates have dropped, you may qualify for a streamline refi with no appraisal, minimal documentation, and no credit check. It's one of the easiest ways to lower your payment.
Common Mistake: Ignoring property condition. FHA appraisers are strict about safety and livability. Peeling paint, broken windows, or faulty handrails can delay or kill your deal. Have your agent check for obvious issues before making an offer.
Common Mistake: Not accounting for MIP in your budget. Many first-time buyers focus only on the down payment and forget that MIP adds $100-$300+ to their monthly payment. Always calculate your total monthly housing cost before committing.
Serving FHA Borrowers Across 10 States
Dana Peterson is licensed to originate FHA loans in Alabama, Arizona, Colorado, Florida, Idaho, Oklahoma, Pennsylvania, Tennessee, Virginia, and Washington. FHA loans are particularly popular in markets with lower home prices and first-time buyer activity. For example, in Tennessee and Alabama, FHA loans often make up 30-40% of purchase transactions, while in higher-cost markets like Colorado and Washington, they're a great option for buyers who need flexibility on credit and down payment.
Each state has unique considerations: Florida's condo market requires FHA project approval, while Arizona's desert climate means appraisers pay close attention to HVAC systems and roof condition. Our multi-state expertise ensures you're prepared for regional nuances and lender overlays that vary by location.
What Our Clients Say
John Sarnecky
24 October 2025
Excellent service with West Capital Funding, Irvine California. Randy Mathis is at the top of the loan business. He saved us a lot of money by getting...
Kimberly Bell
24 October 2025
Eddie at WCL made our re-fi as painless as possible. He is patient, very nice, and extremely helpful. And did it all with a great sense of humor!
Alex Kissling
22 October 2025
Jon was great to work with on the refi of our property. Our situation wasn't straightforward, but Jon listened to what we were looking for, was able t...
Shawn Landreth
22 October 2025
WCL is super easy to work with and has options that work for whatever your needs, and at whatever timing you need!
Holly Pulido
22 October 2025
Sean and his team, Ryan are the kindest communicators. It wasn't checking boxes on next steps, it was from the perspective of the loan applicant that...
Cheverlyn C
21 October 2025
Austin was able to help me with both a refi and a HELOC. We did the refi on our primary to lower the rate and then we got cash out from our investment...
Virginia Donoso
21 October 2025
I'm so happy and grateful to have found someone like Robert Martin, who guided me through this entire process. This was something completely foreign t...
Harold J
21 October 2025
Great people to work with
Janelle Carlson
21 October 2025
Excellent experience from start to finish. Super knowledgeable with an out of state purchase. Travis was very professional and quick to respond to all...
Amy Osborne
21 October 2025
Great experience with Daniel
James Cirillo
21 October 2025
Great lending institution and far superior experience vs the big banks, which are cumbersome, difficult, and inefficient. Carlos Duenas was my lender...
Justin Ryan Pokrywka
21 October 2025
Nate Ferrer was a pleasure to work with. He was a great communicator and found a loan program that worked for my unique situation. He always followed...
wendy Taylor
21 October 2025
The whole team did an outstanding job, I had a very complicated situation and everyone worked extra hard to accomplish the difficult task. Thank You E...
Rodney Smith
20 October 2025
Brian was great to work with. He was upfront and honest about the entire process. He is also extremely knowledgeable of the process. He was the first...
Mae Abad
20 October 2025
The service they provided me was exceptional. Brian and his team at West Capital Lending was very quick and efficient. My first time expwrience in ref...
Dan Dabasol
20 October 2025
Prompt, excellent and trust worthy. Always welcoming and open to any concerns and questions. He was confidently and thorough communicator. He will wor...
jose alvarez
20 October 2025
Scott ! Always has taken care of our Family and trusted him .
Shannon Merritt
20 October 2025
I had the absolute pleasure of working with Aaron Beck on the purchase of my home, and I can't recommend him highly enough. From start to finish, Aaro...
Jason Duncan
19 October 2025
Ryan was great, took very little time to complete application and Ryan was there every step of the way, I would highly reccommend this loan company!
Todd Stevenson
19 October 2025
Working with Jedd Lara and his team on securing our recent mortgage was an absolutely outstanding experience from start to finish. We went into the pr...
Deborah Weisberg
19 October 2025
Sam Rubio and Clare Lenza make a fantastic team! After months of working with them, they found the best Reverse Mortgage Program to suit my needs. Sam...
Netsy Rivera
17 October 2025
I can't be thankful enough for what Rafy Boulos from WCL did for me or my family. His professionalism and knowledge to help us, has changed our life 4...
Kahana Bigelow
17 October 2025
Thank you Garrett for making our refinance as easy and painless as possible!!! It really helped lesson our stress financially. The whole process as si...
Danielle Dingwall
17 October 2025
Daniel Becerril is amazing. My go to person
Imelda Hinojosa
17 October 2025
West Capital Lending, under the exceptional guidance of Jon Meer, provided the solution I needed. The process was expedient, communication great and c...
Zoila Coto
17 October 2025
I was very happy with Nathan, he is very responsive and made the process very easy. I would give him a 10 out of ten.
Rosalie Vejar
17 October 2025
Scott is knowledgeable and professional. He listens and is very attentive when asked questions. Hope to continue working with him again in the near fu...
Eli Sewell
16 October 2025
Abraham was extremely professional and was able to answer all of our questions and got us a loan tailored to our needs!!!!
Bobby Botelho
16 October 2025
In a world full of scams and distrusting people, we investigated Sam Zadeh and West Capital Lending prior to contacting him and noticed some great rev...
Marcy Zahm
16 October 2025
Aaron was incredible—walked us through the process, asked all of the right questions to get us the loan we needed quickly and painlessly. He is a pro...
Dana Coe
7 September 2025
Scott went above and beyond to tailor the loan product to my unique situation. A+++
Ready to Get Started with Your FHA Loan?
Let's discuss your situation and see if FHA is the right fit. Get your personalized rate quote today.
This is not a commitment to lend. All loans subject to credit approval and underwriting guidelines.
West Capital Lending is an Equal Housing Lender. This is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines, and acceptable collateral. Interest rates, terms, and program availability may change without notice. Not all applicants will qualify. Information is for educational purposes only and is not financial or legal advice.
Company NMLS: 1566096 | MLO NMLS: 173133 (Dana Peterson)
Address: 24 Executive Park, STE 250, Irvine, CA 92614
Licensed in: AL, AZ, CO, FL, ID, OK, PA, TN, VA, WA