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Get Into a Home with a Low Down Payment Using an FHA Loan

FHA loans make homeownership more accessible — with flexible credit requirements and down payment options as low as 3.5%. A great fit for first-time buyers and those rebuilding their financial footing.

Saving up for a large down payment is one of the biggest obstacles standing between many buyers and their first home. If that sounds familiar, an FHA loan may be worth exploring.


Backed by the Federal Housing Administration, FHA loans are designed to open the door to homeownership for buyers who might not qualify for conventional financing. Lower down payment requirements, more flexible credit guidelines, and broader eligibility make them one of the most widely used loan programs in the country.



At Preferred Mortgage, we help buyers throughout California understand whether an FHA loan is the right fit for their goals — and guide them through every step of the process.

What Is an FHA Loan?

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development. Because the FHA insures the loan, lenders can offer more flexible qualification standards than they typically would with a conventional mortgage.


This means buyers with lower credit scores, limited savings, or less conventional financial profiles may still be eligible to purchase a home. The borrower pays for mortgage insurance as part of the loan, which is what allows lenders to take on that added flexibility.



FHA loans can be used to purchase a primary residence or to refinance an existing home loan. They are available through approved lenders like Preferred Mortgage — not directly through the government.

A fixed-rate mortgage offers several advantages for homebuyers who want financial stability and long-term predictability.


01 - Consistent Monthly Payments
Because the interest rate never changes, your principal and interest payment remains the same throughout the loan term. This helps make budgeting simple and predictable.


02 - Protection From Rising Interest Rates
Once your rate is locked in, increases in market interest rates will not affect your loan. Your payment stays exactly the same regardless of economic changes.


03 - Long-Term Financial Planning
Stable mortgage payments allow homeowners to plan for the future with greater confidence, making it easier to manage expenses and savings goals.


04 - Simple and Easy to Understand
Fixed-rate loans are straightforward and transparent. You know exactly what your payment will be and how long it will take to pay off the loan.

How FHA Loans Work

FHA loans function similarly to conventional mortgages in most ways. You borrow money from an approved lender, repay the loan over time through monthly payments, and build equity in your home as you pay down the balance.

What makes FHA loans different is the insurance backing. Because the FHA insures the loan against default, lenders are able to approve borrowers who might otherwise not qualify. In exchange, borrowers pay a mortgage insurance premium, which is built into the loan.


Here's a simplified breakdown of how FHA loans are structured:


  • Down payment: Eligible borrowers may qualify with a down payment as low as 3.5% of the purchase price, depending on their credit score
  • Credit requirements: FHA guidelines allow for lower minimum credit scores compared to most conventional loan options
  • Loan limits: The maximum loan amount varies by county and is updated periodically by HUD; your loan professional can confirm current limits for your area
  • Mortgage insurance: FHA loans require both an upfront mortgage insurance premium (MIP) and an ongoing annual premium paid monthly
  • Loan terms: FHA loans are available in fixed-rate and adjustable-rate formats, commonly in 15- and 30-year terms
Benefits of An FHA Loan
  • Lower Down Payment Requirements
    Qualified buyers may be able to put as little as 3.5% down — significantly less than what many conventional loans require. This makes homeownership a realistic option for buyers who are still building their savings.
  • More Flexible Credit Qualification
    FHA loans are designed to work for buyers across a wider range of credit backgrounds. If your credit score isn't where you'd like it to be, an FHA loan may still be within reach.
  • Competitive Interest Rates
    Because FHA loans are government-backed, they often come with competitive interest rates that can make monthly payments more manageable over time.
  • Gift Funds Allowed
    FHA guidelines allow borrowers to use gift funds from eligible sources — such as family members — toward their down payment and closing costs.
  • Refinance Options Available
    FHA loans aren't just for purchases. Existing homeowners can also use FHA programs to refinance, potentially lowering their rate or accessing equity in their home.

A fixed-rate mortgage offers several advantages for homebuyers who want financial stability and long-term predictability.


01 - Consistent Monthly Payments
Because the interest rate never changes, your principal and interest payment remains the same throughout the loan term. This helps make budgeting simple and predictable.


02 - Protection From Rising Interest Rates
Once your rate is locked in, increases in market interest rates will not affect your loan. Your payment stays exactly the same regardless of economic changes.


03 - Long-Term Financial Planning
Stable mortgage payments allow homeowners to plan for the future with greater confidence, making it easier to manage expenses and savings goals.


04 - Simple and Easy to Understand
Fixed-rate loans are straightforward and transparent. You know exactly what your payment will be and how long it will take to pay off the loan.

Important Considerations

FHA loans offer a lot of advantages, but there are a few things buyers should understand going in.

Mortgage Insurance Premium (MIP)


All FHA loans require mortgage insurance, which protects the lender in the event of a default. This comes in two forms:


  • Upfront MIP: A one-time premium typically financed into the loan at closing
  • Annual MIP: An ongoing premium paid monthly as part of your mortgage payment


Unlike some conventional loan programs where private mortgage insurance (PMI) can be removed after you've built enough equity, FHA mortgage insurance may remain for the life of the loan in some cases. How long you pay it depends on your loan term and the size of your down payment.

Primary Residence Requirement


FHA loans are intended for owner-occupied homes only. The property must be your primary residence, and you are generally required to move in within a short window of time after closing. FHA loans cannot be used to purchase investment properties or second homes.

Property Standards


The home you purchase with an FHA loan must meet minimum property standards set by the FHA. An FHA-approved appraiser will evaluate the property as part of the loan process. Homes that need significant repairs or do not meet these standards may not be eligible.

Loan Limits


FHA loan limits are set by county and updated periodically. High-cost areas like many parts of California have higher limits than lower-cost areas. Your Preferred Mortgage loan professional can confirm the current limits that apply to your situation.

Who May Be A Good Fit for An FHA Loan?

FHA loans aren't one-size-fits-all, but they tend to be a strong option for buyers in specific situations.


You may be a good candidate for an FHA loan if:


  • You're buying your first home and haven't had time to save a large down payment
  • Your credit score is lower than what many conventional loans require
  • You're self-employed or have non-traditional income that's harder to document
  • You've experienced past credit challenges such as a bankruptcy or foreclosure and are working to rebuild
  • You want a more accessible path to homeownership without waiting years to save up


FHA loans can also make sense for experienced buyers in competitive markets where keeping more cash in hand at closing is a strategic advantage.

Our team is here to help you figure out whether an FHA loan is the right move for your situation. We'll walk you through the requirements, help you understand your eligibility, and compare your options side by side — so you can move forward with confidence.



Whether you're buying your first home or exploring your refinance options, we're ready to help you take the next step.

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