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What to Know About FHA Mortgage Payments in 2025

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FHA loans remain one of the most popular choices for first-time homebuyers in 2025, with over 82.84% of FHA borrowers in 2024 being first-time buyers.

This popularity stems from FHA loans' flexible qualification requirements and low down payment options. Even with rising inflation, FHA loans remain a strong option for buyers with limited savings or lower credit scores.

Low Credit Score Option Depends on Your Lender

FHA loans are known for their low credit requirement; however, this can be somewhat of a misconception. While the Federal Housing Agency's (FHA) policy allows for credit scores as low as 500 (with a 10% down payment) and 580 (with 3.5% down or more), many lenders require a 620+ credit score. However, some lenders will accept lower scores if you have really strong compensating factors like low debt levels or large cash reserves.

Loan Limits Have Increased

FHA loan limits for 2025 adjust annually to keep up with rising home prices, ensuring borrowers have access to affordable financing. These limits vary by location, reflecting median home prices in each county and setting the maximum loan amount available through an FHA-backed mortgage.

Each year, the FHA updates loan limits based on shifts in the national conforming loan limit, which the Federal Housing Finance Agency (FHFA) determines using home price trends.

Higher-cost areas, like parts of California and New York, have significantly larger loan limits to reflect their more expensive housing markets, while lower-cost areas have lower caps.

FHA Mortgage Insurance Has Limited Ability For Cancellation

FHA mortgage insurance, known as the Mortgage Insurance Premium (MIP), still has limited cancellability, so looking into a conventional loan may be worthwhile. If you are looking for a low-down payment option, Fannie Mae's HomeReady and Freddie Mac's Home Possible offer conventional loans with a 3% down payment minimum. However, you'll need to meet their income limits, which require borrowers to be within 80% of the area's median income.

Tips to Lower Your FHA Loan Payment

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If you calculate your monthly mortgage payment for an FHA loan and it is not as low as you hoped for, there are a few things you can do to lower it:

1. Extend your loan term

If you plan to live in the home long-term, extending your loan term from 15 to 30 years can help lower your monthly FHA loan payments. Keep in mind that the loan will accumulate more interest over a longer term.

2. Avoid paying FHA MIP for longer than required

If you put at least 10% down on your FHA loan, you are only required to pay MIP for 11 years of your loan. Otherwise, MIP will last for the life of your loan unless you refinance to a conventional loan down the line.

3. Make a larger down payment

A higher down payment means you're borrowing less money, which directly reduces the monthly payment's principal and interest portion. If you put down at least 10%, your annual MIP lasts only 11 years instead of the life of the loan (for down payments under 10%). This can lead to significant savings over time.

Additionally, some lenders may offer slightly better rates to borrowers with lower loan-to-value (LTV) ratios, which a larger down payment creates.

Lastly, since property taxes and homeowners insurance are often based on home value and loan amount, a smaller loan balance can result in slightly lower escrow payments.

4. Get pre-approved with different lenders

It's important to compare FHA lenders to have the best chance of securing a low interest rate. FHA lenders have different requirements and rates, so make sure to do your research.

Some lenders also offer special FHA loan programs, such as down payment assistance or closing cost credits for first-time buyers. Be sure to ask about any available incentives that could lower your upfront costs.