Is Now the Right Time to Take an FHA Loan?
- Author: Margaret Hills
- Posted: 2025-09-23
Almost 20% of mortgage applications are for FHA loans.
What Is an FHA Loan?
An FHA loan is insured by the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development. The FHA doesn't lend money directly—instead, it guarantees the loan.
If you can't make your payments, the government helps pay back the lender. This makes lenders more willing to offer loans to people who might not qualify for other types.
FHA loans are popular with first-time buyers because they're easier to get than many other loans. You can apply for them through any FHA-approved lender.
Pros of Getting an FHA Loan Right Now
Lower Interest Rates:
Even though mortgage interest rates have gone up recently, FHA loans usually have lower rates than conventional loans.
For example, in September 2025, the average FHA loan rate was 5.96%, while conventional loans were at 6.40%. Over a 30-year loan, that can save you thousands of dollars.
Lower Credit Scores Accepted:
If your credit score isn't perfect, you may still be able to get an FHA loan. FHA loans may accept scores as low as 500 to 580, depending on your down payment. Conventional loans generally require at least 620.
Saving for a down payment can be tough, especially with rising prices. With an FHA loan, you may only need 3.5% down if your credit score is at least 580, or 10% down if your score is between 500 and 579.
Cons of Getting an FHA Loan Right Now
Stricter Debt-to-Income (DTI) Ratio Limits:
If you have a lot of debt, like credit cards, it could be harder to qualify for an FHA loan. Usually, your mortgage payment can't be more than 31% of your monthly income, and total debt payments can't be more than 43%. Some conventional loans offer higher limits.
Loan Amount Limits:
FHA loans have strict limits on how much you can borrow, depending on where you live. In 2025, most areas have a limit of $524,225 for a single-family home.
In some expensive markets, it can go up to $1,209,750. If you want to buy a more expensive home, you might need a conventional or jumbo loan.
No Overdue Federal Student Loans:
If you are behind on your federal student loan payments, you can’t qualify for an FHA loan until you bring those payments up to date.
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