Alloy Mortgage

Loan programs

FHA loans: a low down payment with room for real life

The government-insured loan built for buyers who need a smaller down payment or a little more flexibility with credit. Here is how it works, what it costs, and when it is the right call.

A young couple holding up their new house keys in the living room of their first Colorado home, with moving boxes and the mountains visible through the window

An FHA loan is a mortgage insured by the Federal Housing Administration. The insurance protects the lender, which lets the lender approve buyers with smaller down payments and more flexible credit standards than a conventional loan typically allows.

FHA is not just a first-time buyer loan. Repeat buyers, people rebuilding after a credit event, and buyers who simply want to keep more cash on hand after closing all use it. The question is never whether FHA is a good loan in the abstract. It is whether the FHA math beats the conventional math for your specific file, and we price you both.

  • Down payment: 3.5% of the purchase price with a credit score of 580 or above.
  • Credit flexibility: qualifying standards are often more forgiving than conventional, and scores from 500 to 579 may qualify with 10% down.
  • Gift funds: the entire down payment can be a gift from family, an employer, or an approved assistance program.

What FHA actually requires

The core requirements are simpler than most buyers expect. You need a credit score of 580 or above to use the 3.5% down option, a steady qualifying income, and a property that passes an FHA appraisal. That appraisal checks value the way any appraisal does, plus a basic review of the home's condition.

Debt to income standards on FHA tend to run more generous than conventional, which matters if you have student loans, a car payment, or a child care bill that eats into what a conventional lender can approve.

  • 3.5% down with a 580 minimum credit score.
  • 10% down possible with scores between 500 and 579.
  • Down payment and closing costs can come from gifts or approved assistance programs.
  • Non-occupant co-borrowers, like a parent on the loan, are allowed.

The cost side: mortgage insurance on FHA

FHA loans carry two forms of mortgage insurance. There is an upfront premium of 1.75% of the loan amount, which is almost always financed into the loan rather than paid in cash, and an annual premium that is divided into your monthly payment.

The trade-off to understand: on most FHA loans today with less than 10% down, the annual mortgage insurance stays for the life of the loan. It does not fall off automatically the way private mortgage insurance does on a conventional loan. That is why the right answer for one buyer can be FHA on purchase, then a refinance to conventional once equity builds.

  • Upfront mortgage insurance: 1.75% of the loan amount, typically financed.
  • Annual mortgage insurance: divided into 12 monthly payments.
  • Conventional loans: private mortgage insurance can be removed later once you have enough equity.
  • We price both side by side so you see the true 5 year and 10 year cost of each.

FHA versus conventional: how we decide

A conventional loan wants a stronger credit profile and typically more down payment, but its mortgage insurance can be removed later, and pricing improves quickly as your score rises. FHA accepts a lower score and a smaller down payment but keeps its annual insurance in most cases.

For a buyer with a 740 credit score and 5% down, conventional almost always wins. For a buyer with a 620 score, or a strong income but thin credit history, or a down payment made possible by a family gift, FHA often wins on both approval odds and monthly payment. There is no universal answer, which is exactly why we shop both.

  • Strong credit, 5% or more down: conventional usually prices better.
  • Credit score in the low to mid 600s or thinner credit history: FHA often wins.
  • Down payment coming from a gift or assistance program: FHA accommodates both easily.
  • Higher debt to income ratio: FHA standards are usually more flexible.

FHA on condos and Colorado specifics

FHA financing works on single family homes, townhomes, approved condo projects, and 2 to 4 unit properties where you occupy one unit. That last one is a favorite strategy: buy a duplex, live in one side, and let the tenant's rent help you qualify.

Condos need either a project on FHA's approved list or, in some cases, a spot approval. We check the project status for you before you fall in love with a listing, because a condo that cannot be financed is not really an option, no matter how good the price looks.

  • Single family, townhomes, and FHA approved condo projects.
  • 2 to 4 unit properties when you live in one of the units.
  • Colorado loan limits are set by county, and the Front Range limits comfortably cover most entry level and move up purchases.
  • Pair FHA with Colorado down payment assistance to buy with very little of your own cash.

How we help

We will walk your file through both FHA and conventional pricing, look at Colorado down payment assistance programs you may qualify for, and tell you honestly which path gets you into the home with the payment and cash to close that fit your life.

Three questions and we'll help you find the right program and loan. Call or text 720-386-4071, or run our loan finder below and we will take it from there.

  • You: bring your goals, your timeline, and any credit questions you have.
  • Us: price FHA and conventional across our wholesale lender network.
  • You get: a clear recommendation with the real numbers, not a sales pitch.

What buyers ask about FHA loans

The short version of each answer. If yours is not here, call or text 720-386-4071 and ask.

Questions about your own numbers?

Call or text 720-386-4071, or start the application and we will follow up the same day. The conversation is free, and the math is yours to keep.

Get Pre-ApprovedCall or text 720-386-4071
Chat Now