Most first-time buyers searching for the types of mortgage programs available are really asking which option gets them into a home with the least cash and the most flexibility. The FHA answer is not a single loan. HUD insures several distinct programs, each built for a different job: buying, repairing, financing upgrades, buying a condo or a small multi-unit property, and refinancing.
FHA is also not reserved for first-time buyers, and it is not only a bad-credit product. Repeat buyers and homeowners with solid credit use it too. Duane Buziak, a mortgage broker with access to 500+ wholesale lenders, walks through the seven FHA programs below so you can match your situation to the right one before you apply. Every program shares the same mortgage insurance structure: an upfront premium (UFMIP) of 1.75% of the base loan, plus an annual premium (MIP) that varies by loan size, term, and loan-to-value (LTV) ratio.
1. FHA standard purchase loan (Section 203(b))
Section 203(b) is the foundation of the FHA lineup. With a credit score of 580 or higher, the minimum down payment is 3.5%. Scores of 500 to 579 can still qualify, but HUD requires 10% down. The program works because HUD insures the loan, so wholesale lenders can accept thinner down payments and a wider range of credit histories than their own guidelines would otherwise allow. Duane Buziak checks your credit tier through the NoTouch Credit Pull, a soft pull with no hard inquiry, so you learn where you stand without a score hit.
Here is an illustration, not a quote. Suppose a first-time buyer in Henrico County with a 640 score buys a $320,000 home with 3.5% down ($11,200). The base loan is $308,800. UFMIP of 1.75% adds $5,404, financed into a total loan of $314,204. At an assumed 6.25% on a 30-year term:
- Principal and interest: about $1,935 per month
- Annual MIP at the 0.55% tier (applied when LTV exceeds 95%): about $142 per month in year one
- Property tax at Henrico’s $0.85 per $100 (henrico.us) on $320,000: $2,720 per year, about $227 per month
- Homeowner’s insurance, assumed at $1,500 per year: $125 per month
The total comes to roughly $2,429 per month. The 0.55% tier applies to base loans at or below $726,200 on terms longer than 15 years with LTV above 95%. The full annual MIP range runs from 0.15% to 0.75% depending on those factors (HUD Mortgagee Letter 2023-05 and Handbook 4000.1). For a deeper walkthrough of these rules, see our guide to FHA mortgage insurance requirements.
The most common mistake is leaving annual MIP out of the monthly budget, or assuming it ends after 11 years. With less than 10% down, it lasts for the life of the loan. Only a down payment of 10% or more shortens it to 11 years.
- Confirm your credit tier through a soft-pull review.
- Gather two years of income documents and recent bank statements.
- Get a pre-approval from Duane Buziak.
- Shop homes under your county’s FHA limit. The 2026 one-unit range runs from a $541,287 floor to a $1,249,125 ceiling (HUD Mortgagee Letter 2025-23, hud.gov). Confirm your county’s figure there.
- Order the FHA appraisal once you have a contract.
Measure total monthly payment (PITI plus MIP) against your debt-to-income ratio, and track the cash needed at closing. Duane Buziak builds no-out-of-pocket closing options into the quote where seller credits or lender credits allow.
2. FHA 203(k) rehabilitation loan
The 203(k) rolls the purchase price and the repair budget into one mortgage. The repair money is held in escrow and released in draws as work is inspected. That structure solves a real problem: a standard loan is sized to the home’s current condition, so a dated house needing work often forces a buyer into a second, costlier renovation loan. The 203(k) bases the loan on the home’s value after improvements, so one closing covers both. It is not only for fixer-uppers. Owners also use it for a single big-ticket item such as a roof or a failing HVAC system.
Consider a labelled illustration. A buyer finds a 1990s house with a worn roof and an original kitchen. Instead of buying with one loan and borrowing again for renovation, the buyer finances the purchase, the roof, and the kitchen update in a single 203(k) loan with one payment.
The program has two versions. The Limited version covers smaller, non-structural projects under a HUD cost cap. The Standard version handles larger or structural work, requires at least $5,000 in repairs, and involves a HUD-approved consultant. Confirm the current Limited cap with Duane Buziak, since HUD adjusts these figures.
- Choose Limited or Standard based on the scope of work.
- Collect written bids from licensed contractors who work with 203(k) projects.
- For Standard, engage the HUD consultant to write the work plan.
- Close on the combined loan.
- Draw funds as each phase passes inspection.
The typical failure is underestimating costs and timelines. Older homes hide problems behind walls, and an unapproved contractor can stall the draw schedule. Build in a contingency reserve (the Standard version requires one) and confirm each contractor’s eligibility before you sign. If you are comparing this route with building from scratch, our FHA new construction mortgage process guide shows how that path differs.
Measure final repair cost against the original bid, and compare the as-completed value to the total loan amount. If the gap narrows or the cost overruns exceed your contingency, the project needs attention before the next draw.
3. FHA streamline refinance
The Streamline is the shortest path for a borrower who already holds an FHA loan. Because HUD already insures the loan, documentation is reduced: typically no new appraisal and no full income re-verification. The tradeoff is the net tangible benefit test, which requires the refinance to measurably improve your position. For most same-term refinances, that means the combined principal, interest, and MIP payment must fall by at least 5%. Seasoning applies too: generally at least 210 days since closing and six payments made.
An illustration with assumed numbers. A homeowner closed an FHA loan in 2023 and now owes $270,000 at 7.25% on a 30-year schedule, a principal and interest payment of about $1,842. Rates have since fallen to an assumed 6.25%, which puts the same balance at about $1,662. That is roughly $180 less per month, close to a 10% drop before MIP effects. If closing costs are $4,500, the break-even is about 25 months ($4,500 divided by $180).
- Confirm your current loan is FHA-insured.
- Check the seasoning requirements against your closing and payment dates.
- Request a payment-comparison quote that shows old and new payments side by side.
- Verify the net tangible benefit.
- Close, and confirm the old loan is paid off.
The common mistake is rolling closing costs into the balance without computing break-even. A lower payment can mask a larger loan, and if you sell before the break-even month, the refinance cost you money. Duane Buziak uses Dare to Compare pricing across wholesale lenders so the rate and fees are tested, not assumed. You can also review ways to reduce mortgage closing costs before you commit to a refinance quote.
Measure monthly savings and break-even months. If you expect to move within that window, skip the refinance or ask for a version with no-out-of-pocket closing options priced into the rate.
4. FHA cash-out refinance
Where the Streamline lowers a payment, the cash-out refinance converts equity into usable money. It requires full documentation: income, credit, and a new appraisal. The borrower must have owned and occupied the home for at least 12 months, with a clean recent payment history, and the new loan is capped at 80% LTV. The cap protects you as much as the insurer: it keeps meaningful equity in the home after the cash is taken out.
Here is a labelled illustration. A borrower owns a $300,000 home with a $210,000 balance, or $90,000 in equity. They pull out $25,000 to clear credit card debt. The new base loan is about $235,000 before costs, comfortably under the 80% cap of $240,000. If the cards carried about $750 per month in combined minimums, and the extra $25,000 on the mortgage adds roughly $154 per month at an assumed 6.25%, the borrower sheds about $600 per month in obligations. Remaining equity lands near $60,000 before closing costs.
- Order the appraisal to establish value.
- Verify 12 months of occupancy and payment history.
- Calculate the maximum loan at 80% LTV.
- Underwrite the file with full income and credit review.
- Close and pay off the targeted debts directly at closing.
The classic mistake is running the card balances up again. The consolidation works only if the cleared cards stay near zero, because you will then owe both the larger mortgage and the new charges. Consider closing or locking the accounts you no longer need. If revolving balances are what you are trying to fix, our guide on qualifying for an FHA mortgage with credit card debt covers how lenders view that debt.
Measure combined monthly debt payments before and after, and track remaining equity. If the monthly relief is small, the longer repayment on the consolidated debt may cost more in total interest than it saves.
5. FHA energy efficient mortgage (EEM)
The EEM lets you finance energy improvements into the FHA loan itself, whether you are buying or refinancing. The logic is simple: if the upgrades cut utility bills by more than they add to the mortgage payment, the home costs less to run. Because lenders can count part of that expected savings when qualifying, it can also help a borrower stretch a budget. The key condition is an energy assessment that shows the improvements are cost-effective. Without one, nothing qualifies automatically.
Consider an illustration with assumed figures. A buyer plans to add attic insulation and replace an aging heat pump, a combined project of $9,000. Financed at an assumed 6.25% over 30 years, that adds about $55 per month to the payment. If the assessment projects utility savings of $70 per month, the buyer comes out about $15 ahead monthly, plus a more comfortable house.
- Order an energy assessment from a qualified provider.
- Confirm which improvements are eligible under the report.
- Include the approved costs in the loan amount.
- Complete the work after closing.
- Document completion so the funds can be released.
The mistake to avoid is assuming any upgrade qualifies. New countertops will not count, and neither will a heat pump the assessment does not recommend. Settle the list with the assessor and Duane Buziak before you commit to a contractor.
Measure projected utility savings against the added monthly loan cost. Then, after a year in the home, compare actual bills to the assessment. If real savings fall well short, you have useful information for the next project, and for any resale conversation.
6. FHA condo financing
The mistake comes first here, because it is the one buyers actually make. They fall for a condo, write an offer, and only then learn the project is not on the HUD-approved list. FHA does not insure loans on units in unapproved projects, so the buyer must switch properties or ask whether the unit qualifies for single-unit approval, a separate process available in some circumstances. Approval matters because HUD evaluates the whole building: financial health of the association, reserves, and the share of owner-occupied units (HUD generally looks for a majority).
Here is a labelled illustration. A buyer loves a one-bedroom downtown, goes under contract, and discovers the building’s approval lapsed. The contract timeline now competes with a project review. Had the buyer checked first, the search would have shifted to approved buildings within a week.
- Search the HUD approved condo list for the project before touring.
- Ask Duane Buziak to verify current status, since approvals can expire.
- Request the HOA budget, reserve information, and owner-occupancy mix.
- Make an offer only after approval is confirmed, or make it contingent on approval.
The pitfall to avoid is treating approval as a formality. A building with heavy investor ownership, special assessments, or thin reserves can fail review even if the unit itself is immaculate.
Measure two things. First, the project’s approval status and its expiration timing. Second, HOA dues as a share of the total monthly payment. Dues count toward your debt-to-income ratio, so a high fee shrinks the loan you can qualify for even when the price looks manageable.
7. FHA loan for multi-unit homes (2-4 units)
FHA allows owner-occupied purchases of properties with up to four units, all at the same low down payment structure as a single-family home. The rule that makes it work is occupancy: you live in one unit and rent the others. That is why it is an owner-occupant tool, not an investor product. Projected rent from the other units can count toward qualifying, but only a portion of it, since lenders discount for vacancy.
An illustration: a buyer purchases a duplex, moves into one unit, and uses the appraiser’s market rent schedule for the second unit to help qualify. The rent offsets part of the housing payment on paper and, once the tenant is in place, in practice.
- Confirm the price fits within your county’s limit for the unit count. Limits rise with each additional unit (hud.gov).
- Get the rent schedule from the appraisal.
- Document cash reserves. Three- and four-unit properties carry stricter reserve and self-sufficiency requirements.
- Move in within the required timeframe, generally 60 days of closing, and plan to stay at least a year.
The common mistake is overestimating rental income and ignoring vacancy, repairs, and turnover. A unit that sits empty for two months still has a mortgage payment attached. Budget as if rent will not arrive every month. Buyers who want to stretch their cash further can also look at down payment assistance programs that stack with FHA.
Measure rental income as a share of the full housing payment, and measure cash reserves after closing. A healthy cushion matters more here than on a single-family purchase, because one vacancy or one boiler failure lands on you directly.
Sorting the seven programs into three paths
The programs fall into three groups. Purchase paths: the standard 203(b), condo financing, and the 2-4 unit loan. The repair path: the 203(k) for renovation and the EEM for energy upgrades. Refinance paths: the Streamline to lower a payment and the cash-out to convert equity.
If you are buying and unsure where to start, start with the standard purchase loan. If you already hold an FHA loan, start with the Streamline. Either way, Duane Buziak, a broker and not a lender, can compare pricing across 500+ wholesale lenders with Dare to Compare, check your credit through the NoTouch Credit Pull with no hard inquiry, and structure no-out-of-pocket closing options where they fit. Ready to take the first step toward homeownership with an FHA loan tailored to your needs? Schedule your free consultation today and discover how our award-winning team can help you navigate the path to your new home with competitive rates and expert guidance. Reach FHA Mortgages by Duane Buziak at 804-212-8663 for an eligibility review.
