FHA and conventional loans work best for different borrower profiles. FHA loans are often better for borrowers with lower credit scores, limited savings, or a history of credit issues, according to Fannie Mae and HUD guidelines. FHA financing allows a down payment as low as 3.5%, but mortgage insurance is required. A conventional loan may cost less for borrowers with stronger credit.
It may allow private mortgage insurance to be canceled after certain requirements are met. Neither option is automatically better. Compare your automated underwriting findings, interest rate, APR, mortgage insurance, cash needed to close, and total long-term cost before choosing a loan.
Who Sets FHA and Conventional Mortgage Guidelines?
FHA and conventional loans follow different rulebooks. Understanding who creates and applies these rules helps explain why a borrower may qualify with one lender but not another.
HUD and the Federal Housing Administration Set FHA Guidelines
The Federal Housing Administration operates under the U.S. Department of Housing and Urban Development. HUD establishes FHA loan requirements through federal regulations, the FHA Single Family Housing Policy Handbook 4000.1, and official Mortgagee Letters.
The FHA does not provide funds directly to individuals purchasing homes. FHA-approved lenders make the loans, and the FHA provides mortgage insurance that protects lenders against certain losses. HUD guidelines address matters such as:
- Down payment requirements
- Credit history
- Debt-to-income ratios
- Manual underwriting
- Mortgage insurance
- Property standards
- Occupancy requirements
- Gift funds and seller contributions
Fannie Mae and Freddie Mac Set Conventional Loan Requirements
Most conforming conventional mortgages follow the eligibility requirements established by Fannie Mae or Freddie Mac. These government-sponsored enterprises purchase qualifying mortgages from approved lenders but do not make home loans directly to consumers.
Fannie Mae publishes its requirements in the Selling Guide and evaluates many loan applications through Desktop Underwriter, commonly called DU. Freddie Mac publishes its requirements in the Single-Family Seller/Servicer Guide. It uses the Loan Product Advisor (LPA) for automated assessments.
The Federal Housing Finance Agency regulates Fannie Mae and Freddie Mac. Although the two enterprises have many similar requirements, their treatment of income, debt, credit events, reserves, and other risk factors may differ.
Automated Underwriting Systems Apply the Guidelines
DU and LPA evaluate the entire loan application rather than approve borrowers based on a single number. The systems review factors such as income, assets, credit history, monthly debts, loan-to-value ratio, property type, and occupancy.
An automated underwriting recommendation is not a final loan approval. The lender must verify the submitted information, satisfy all conditions in the findings, confirm that the property qualifies, and ensure that the loan meets all applicable rules.
Lenders May Add Their Own Requirements
The published Fannie Mae and HUD guidelines establish the basic requirements for agencies and programs. However, individual lenders may add stricter rules known as lender overlays. Examples may include a higher credit-score requirement, a lower maximum debt-to-income ratio, additional cash reserves, or restrictions following bankruptcy or foreclosure.
Private mortgage insurance companies may also impose requirements for conventional loans with less than 20% down payment. As a result, being eligible under FHA, Fannie Mae, or Freddie Mac rules does not guarantee approval from every lender. A borrower denied due to an overlay may still qualify with another lender that adheres to the underlying program guidelines.
Fannie Mae and HUD Guidelines at a Glance
The main difference between FHA and conventional financing is who establishes the loan requirements. HUD sets FHA loan policy, while Fannie Mae establishes guidelines for conventional mortgages it may purchase. The following overview highlights important differences borrowers should understand.
FHA Loan Guidelines
FHA loans are government-insured mortgages designed for eligible primary residences. Key HUD requirements include:
- Minimum down payment: Borrowers with a credit score of 580 or higher can qualify for a 3.5% down payment. Scores from 500 to 579 generally require at least a 10% down payment.
- Credit review: FHA may accommodate lower credit scores, past credit problems, and borrowers who need manual underwriting. However, lenders may impose higher minimum scores.
- Debt-to-income ratio: FHA does not set a universal DTI limit for all automatically underwritten loans. The FHA TOTAL Mortgage Scorecard evaluates the complete application. Manually underwritten loans follow published ratio limits and are subject to compensating factors.
- Mortgage insurance: FHA loans require both an upfront mortgage insurance fee and a monthly payment that includes an annual insurance premium. For most newer FHA loans, annual MIP lasts 11 years when the original LTV is 90% or lower, and for the remainder of the mortgage term when the original LTV exceeds 90%.
- Occupancy: The borrower generally must occupy the property as a principal residence. FHA financing is not intended for second homes or investment properties.
- Property requirements: The home must meet HUD’s minimum property requirements and be safe, sound, and secure.
Fannie Mae Conventional Loan Guidelines
Fannie Mae loans are conventional mortgages and are not insured by the federal government. Important requirements include:
- Minimum down payment: Eligible borrowers can buy a one-unit primary residence with just 3% down. The required down payment may be higher based on occupancy, property type, loan program, and underwriting findings.
- Credit review: Fannie Mae’s Desktop Underwriter does not apply a universal minimum credit score to DU loan casefiles. DU evaluates the borrower’s complete credit risk. As of April 2026, manually underwritten fixed-rate loans generally require at least a 620 credit score, while adjustable-rate mortgages generally require 640.
- Debt-to-income ratio: A DU-underwritten loan may permit a DTI ratio as high as 50%. Manually underwritten loans generally allow 36%, which may increase to 45% when the borrower meets specific credit and reserve requirements.
- Private mortgage insurance: PMI is generally required when the borrower makes a down payment of less than 20%. Unlike FHA mortgage insurance, conventional PMI may be canceled once the borrower meets applicable federal, investor, mortgage insurer, and loan servicer requirements.
- Occupancy: Depending on the transaction, conventional financing may be used for a primary residence, second home, or investment property.
- Property eligibility: Fannie Mae has separate requirements for condominiums, manufactured homes, two- to four-unit properties, investment properties, and other property types.
Borrowers can review the current requirements in the Fannie Mae Selling Guide, including its credit score rules and debt-to-income guidelines.
Agency Eligibility Does Not Guarantee Loan Approval
These Fannie Mae and HUD guidelines establish the program framework, but they do not guarantee approval. The lender must verify the borrower’s income, employment, assets, debts, credit history, occupancy, and property eligibility. Automated underwriting findings, private mortgage insurance requirements, and lender overlays may also affect the final decision.
The best loan is not always the program with the lowest down payment. Borrowers should compare the interest rate, APR, mortgage insurance, monthly payment, closing costs, cash needed at closing, and long-term cost of each available option.
Credit Score and Down Payment Requirements
Credit score and down payment requirements influence which mortgage programs are available to borrowers. However, meeting the minimum standards does not guarantee approval. The lender must still review the borrower’s income, debts, assets, credit history, property, and automated underwriting findings.
FHA Credit Score Requirements
Under current HUD guidelines, the minimum down payment for an FHA purchase loan depends partly on the borrower’s Minimum Decision Credit Score:
- A credit score of 580 or higher may allow a down payment as low as 3.5%.
- A credit score from 500 to 579 generally requires at least 10% down.
- A borrower with a credit score below 500 is not eligible for FHA-insured financing.
These are FHA program minimums—not promises of approval. Many lenders require a higher credit score because of lender overlays. Borrowers with lower scores may also need stronger compensating factors, such as stable income, cash reserves, limited payment shock, or a history of on-time rent payments.
Fannie Mae Credit Score Requirements
Fannie Mae treats automated and manually underwritten loans differently. Desktop Underwriter, commonly called DU, does not apply a universal minimum credit score to DU loan casefiles. Instead, DU evaluates the borrower’s full risk profile and issues an underwriting recommendation.
This does not mean that credit scores no longer matter. A borrower’s score may still affect:
- The DU underwriting recommendation
- The interest rate and loan-level pricing
- Private mortgage insurance eligibility and cost
- The required down payment or reserves
- Lender-specific overlays
For manually underwritten Fannie Mae loans, fixed-rate mortgages generally require at least a 620 credit score, while adjustable-rate mortgages generally require at least 640, subject to the loan’s other features and Fannie Mae’s Eligibility Matrix.
Conventional Loan Down Payment Requirements
Some eligible Fannie Mae purchase loans allow a down payment as low as 3%. Standard 97% LTV financing generally applies to a one-unit primary residence. It requires at least one borrower to be a first-time homebuyer. Fannie Mae’s HomeReady program may also permit up to 97% financing when the borrower and property meet its requirements.
A larger down payment may be required for:
- Two-to-four-unit properties
- Second homes
- Investment properties
- Adjustable-rate mortgages
- Manually underwritten loans
- Borrowers who do not meet 97% LTV program requirements
Can Gift Funds Cover the Down Payment?
Both FHA and certain conventional loans permit eligible gift funds, grants, and approved down payment assistance. The source of the funds must be permitted under the applicable program, and the lender must document the source of the funds.
For an eligible one-unit primary residence, Fannie Mae may allow all funds needed to close to be provided as an acceptable gift. Different borrower contribution requirements may apply to two- to four-unit homes, second homes, and other transactions. Fannie Mae provides additional details in its personal gift-fund guidelines.
FHA also permits the minimum required investment to come from approved sources, including eligible gifts and assistance programs. A seller may help with permitted closing costs, but the seller cannot provide the borrower’s required down payment.
Minimum Eligibility Is Not the Same as Loan Approval
The Fannie Mae and HUD guidelines establish the basic credit score and down payment rules. Automated underwriting, mortgage insurance requirements, property type, occupancy, lender overlays, and the borrower’s complete financial profile determine whether the loan can be approved.
Borrowers should not assume that the loan with the smallest down payment will have the lowest cost. Compare the interest rate, APR, mortgage insurance, monthly payment, closing costs, cash needed to close, and total cost before choosing between FHA and conventional financing.
AUS Approval and Debt-to-Income Ratios
A borrower’s debt-to-income ratio, or DTI, compares monthly debt payments with gross monthly income before taxes and other deductions. Lenders use this percentage to determine whether the borrower may reasonably manage the proposed mortgage payment and existing debts.
The basic calculation is:
Total monthly debt payments ÷ gross monthly income × 100 = DTI ratio
For example, a borrower with $2,500 in total monthly obligations and $6,000 in gross monthly income has a DTI ratio of approximately 41.7%.
How Automated Underwriting Systems Evaluate DTI
Most FHA and conventional loan applications are evaluated through an automated underwriting system, commonly called AUS. The system reviews the complete application, including:
- Credit history
- Monthly income and debts
- Proposed housing payment
- Down payment
- Cash reserves
- Loan-to-value ratio
- Property type and occupancy
- Recent bankruptcies, foreclosures, or late payments
AUS does not evaluate DTI in isolation. A borrower with a higher DTI may receive an approval recommendation when other parts of the application reduce the overall risk. A lower DTI, however, does not guarantee approval when the file contains serious credit, income, asset, or eligibility problems.
FHA TOTAL Mortgage Scorecard and DTI Ratios
FHA applications are commonly evaluated through an AUS connected to FHA’s TOTAL Mortgage Scorecard. HUD does not publish a universal maximum DTI ratio for every FHA loan receiving an automated approval. TOTAL evaluates the entire borrower profile and may return an Accept or Refer recommendation.
An Accept finding generally means the loan may proceed without a full manual underwriting review unless HUD requires a manual downgrade. A Refer finding means an FHA Direct Endorsement underwriter must manually review the loan.
AUS findings are recommendations—not final approvals. The lender must verify the information entered into the system and confirm that the borrower, property, and loan meet all HUD requirements.
FHA Manual Underwriting DTI Limits
When an FHA loan requires manual underwriting, published ratio limits and compensating-factor requirements apply. The standard maximum ratios are generally 31% for housing payments and 43% for total monthly debt.
HUD may permit higher ratios for borrowers with documented compensating factors:
- Up to 37% housing DTI and 47% total DTI with at least one acceptable compensating factor
- Up to 40% housing DTI and 40% total DTI when the borrower has no discretionary debt
- Up to 40% housing DTI and 50% total DTI with at least two acceptable compensating factors
Possible compensating factors include verified cash reserves, limited payment shock, additional income not used in the qualification, and significant residual income. The required factors depend on the proposed ratios and must satisfy HUD’s documentation standards.
Fannie Mae DU Debt-to-Income Limits
Fannie Mae uses Desktop Underwriter, or DU, to evaluate conventional loan applications. Under current Fannie Mae and HUD guidelines, the two programs treat DTI differently.
For a Fannie Mae loan evaluated through DU, the maximum permitted total DTI ratio is generally 50%. A 50% DTI does not guarantee an Approve/Eligible recommendation. DU evaluates DTI together with the borrower’s credit profile, reserves, loan-to-value ratio, property type, occupancy, and other risk factors.
For a manually underwritten Fannie Mae loan, the maximum total DTI ratio is generally 36%. It may increase to 45% when the borrower meets the applicable credit score and reserve requirements in Fannie Mae’s Eligibility Matrix. Certain transactions may have different or more restrictive limits.
Which Debts are Counted in the DTI Calculation?
Depending on the applicable loan rules, the lender may include:
- The proposed principal and interest payment
- Property taxes
- Homeowners insurance
- FHA mortgage insurance or conventional PMI
- Homeowners association dues
- Minimum credit card payments
- Auto and installment loan payments
- Student loan obligations
- Other mortgage or rental payments
- Child support, alimony, or maintenance obligations
- Certain business debts are paid personally by the borrower
The lender must also determine whether a debt may be excluded under the applicable program. Paying off or excluding a debt requires proper documentation and may affect the borrower’s cash needed to close.
AUS Approval Is Not Final Loan Approval
An Approve/Eligible or Accept finding is an important step, but it is not a commitment to lend. The underwriter must verify the income, assets, debts, credit history, occupancy, and property information used by the AUS. New debts, reduced income, additional credit inquiries, or a higher housing payment may require resubmitting the loan.
Lender overlays may also set a lower maximum DTI than the agency permits. Borrowers with a higher DTI should avoid opening new accounts, increasing credit card balances, changing jobs, or financing major purchases before closing.
FHA Mortgage Insurance Versus Conventional PMI
Mortgage insurance protects the lender, but FHA and conventional loans handle it differently.
FHA loans generally require a 1.75% upfront mortgage insurance premium, which may be financed, plus an annual MIP included in the monthly payment. For most FHA loans, annual MIP lasts 11 years when the original loan-to-value ratio is 90% or lower. If the original LTV exceeds 90%, MIP generally remains for the loan term.
Conventional loans generally require private mortgage insurance when the LTV exceeds 80%. PMI cost depends on factors such as credit score, down payment, loan type, and insurer. Borrowers can request cancellation of borrower-paid PMI when their loan balance reaches 80% of the home’s original value, provided other conditions are met. It typically terminates automatically when the scheduled balance reaches 78%, provided the loan is current.
Conventional PMI through Fannie Mae and HUD allows easier cancellation than FHA financing, which is often easier for borrowers with low credit scores or minimal down payments. Compare the full monthly payment and long-term insurance cost—not only the interest rate.
Collections, Charge-Offs, Judgments, and Tax Debt
Unpaid debts do not always prevent mortgage approval, but their treatment depends on the loan program and account type.
Under FHA guidelines:
- Collections: If nonmedical collections total $2,000 or more, the lender generally must document payoff, use an approved payment arrangement, or count 5% of the balance as a monthly debt. Medical collections and charge-offs are excluded from this calculation.
- Charge-offs: These accounts generally do not have to be paid, but the underwriter must evaluate the borrower’s overall credit history.
- Judgments: A judgment generally must be paid unless the borrower has a valid payment agreement and has made the required payments on time.
- Tax liens: An unpaid tax lien may be acceptable with a valid repayment agreement, documented timely payments, inclusion of the payment in DTI, and confirmation that the FHA mortgage will hold the required lien position.
Fannie Mae’s DU generally does not require collections or non-mortgage charge-offs to be paid for a one-unit primary residence. Different payoff thresholds apply to multi-unit homes, second homes, and investment properties. Open judgments and outstanding liens generally must be paid by closing. An IRS installment agreement can be accepted if properly documented, and no federal tax lien is recorded in the county where the property is located.
Because Fannie Mae and HUD guidelines treat these debts differently, borrowers should have each account reviewed before paying it.
How FHA and Conventional Loans Count Student Debt
Student loans are included in the borrower’s debt-to-income ratio, but FHA and conventional loans calculate the payment differently.
Under FHA guidelines, the lender generally uses the monthly payment shown on the credit report or, when greater than zero, an acceptable documented payment. If the reported payment is zero, the lender generally uses 0.5% of the outstanding student loan balance as the monthly obligation.
For a Fannie Mae conventional loan, the lender may use the payment shown on the credit report or recent student loan documentation. A $0 payment can be used if the borrower is in an income-driven repayment plan. For deferred loans or loans in forbearance, the lender generally uses either 1% of the outstanding balance or a fully amortizing payment based on the documented repayment terms.
Because Fannie Mae and HUD guidelines calculate student debt differently, the same borrower may have a different DTI ratio under each program. Review the loan status and repayment documents before deciding which mortgage offers better qualification.
Waiting Periods After Bankruptcy and Foreclosure
Waiting periods depend on the loan program, type of credit event, and completion or discharge date.
FHA Waiting Periods
FHA guidelines generally require:
- Chapter 7 bankruptcy: Two years after discharge. Limited exceptions may apply after 12 months when documented extenuating circumstances caused the bankruptcy.
- Chapter 13 bankruptcy: Borrowers may qualify during repayment after making at least 12 months of on-time plan payments and receiving written court approval.
- Foreclosure, deed-in-lieu, or short sale: Generally three years after the event, with limited exceptions for documented extenuating circumstances.
Fannie Mae Waiting Periods
Fannie Mae generally requires:
- Chapter 7 or Chapter 11: Four years after discharge or dismissal.
- Chapter 13: Two years after discharge or four years after dismissal.
- Foreclosure: Seven years after completion.
- Short sale or deed-in-lieu: Four years after completion.
Under current Fannie Mae and HUD guidelines, qualifying exceptions may shorten certain waiting periods, but lender overlays may be stricter. Borrowers must also rebuild acceptable credit and meet all income, asset, and underwriting requirements.
Occupancy, Property Type, and Non-Occupant Borrowers
Occupancy and property type can change the down payment, loan limits, reserves, and underwriting requirements.
FHA Occupancy and Property Rules
FHA financing is generally limited to a borrower’s principal residence. At least one borrower must intend to live in the home. Eligible properties may include one- to four-unit homes, approved condominiums, and qualifying manufactured homes. When buying a multi-unit property, the borrower must occupy one unit.
Conventional Occupancy Options
Fannie Mae conventional loans may finance a:
- Principal residence
- Second home
- One-to-four-unit investment property
Second homes and investment properties normally require larger down payments and additional reserves. Condominiums, manufactured homes, and multi-unit properties must also meet separate eligibility standards.
Using a Non-Occupant Borrower
A non-occupant borrower signs the loan but does not live in the property. Their income and credit may help the occupying borrower qualify.
Under FHA rules, maximum financing may be available when the non-occupant borrower is a family member. It may also be available for an unrelated person who can document a longstanding, substantial family-type relationship with the occupying borrower. Otherwise, FHA generally limits the loan to 75% LTV. Additional restrictions apply to multi-unit properties.
Fannie Mae allows non-occupant borrowers on qualifying principal-residence transactions. Desktop Underwriter evaluates every borrower’s income, assets, debts, and credit. DU loans involving a non-occupant borrower may allow up to 95% LTV. In comparison, manually underwritten loans are generally limited to 90% LTV.
Because Fannie Mae and HUD guidelines differ, borrowers should confirm the occupancy, property type, and non-occupant borrower structure before making an offer.
Which Loan May Cost Less?
Neither FHA nor conventional financing is always cheaper. The lower-cost option depends on the borrower’s credit, down payment, mortgage insurance, interest rate, closing costs, and expected time in the home.
An FHA loan may cost less upfront for a borrower with a lower credit score because FHA pricing is often less sensitive to credit. However, FHA loans require an upfront mortgage insurance premium and annual MIP. Conventional financing may cost less for borrowers with stronger credit because private mortgage insurance can be lower and may eventually be canceled.
Under current Fannie Mae and HUD guidelines, borrowers should compare:
- Interest rate and APR
- Monthly principal, interest, and mortgage insurance
- Discount points and lender fees
- Cash needed to close
- Five-year borrowing cost
- When—or whether—mortgage insurance can end
Request comparable Loan Estimates for both programs. Page 3 shows the APR and the estimated cost during the first five years. The CFPB recommends comparing these figures rather than choosing a loan based solely on its interest rate or down payment.
Documented FHA Versus Conventional Approval Example
The following hypothetical example illustrates how a lender may compare the two programs using verified financial documents. It is not a guaranteed approval or an actual borrower file.
A borrower purchasing a $300,000 primary residence has:
- A 640 credit score
- $7,000 in gross monthly income
- $950 in monthly debt payments
- Verified funds for the down payment and closing expenses
- Stable employment documented with pay stubs, W-2s, and tax records
After reviewing the credit report, bank statements, income documents, and automated underwriting findings, the lender determines that both programs may be available. However, the FHA option produces a lower estimated monthly payment because conventional PMI is more expensive at the borrower’s current credit score. The lower payment also improves the borrower’s DTI ratio.
The conventional loan may become more attractive if the borrower improves their credit, obtains lower-cost PMI, or plans to keep the home long enough to cancel PMI. Under current Fannie Mae and HUD guidelines, approval depends on the complete file—not on a single credit score or DTI ratio.
Before choosing, the borrower should compare same-day Loan Estimates showing the interest rate, APR, mortgage insurance, cash needed to close, monthly payment, and five-year borrowing cost.
How to Compare Loan Estimates
Request Loan Estimates for both FHA and conventional options using the same loan amount, down payment, and rate-lock period. Under current Fannie Mae and HUD guidelines, compare more than the interest rate. Review:
- Total monthly payment, including mortgage insurance
- APR and discount points
- Origination charges and lender credits
- Cash needed to close
- Whether the rate is locked
- Five-year borrowing cost on Page 3
- When mortgage insurance may end
Property taxes, homeowners’ insurance, and prepaid expenses are estimates and may not reflect differences between lenders. Focus closely on lender-controlled charges and ask about any major differences. The CFPB recommends comparing multiple Loan Estimates issued close together before selecting a loan.
Final Thoughts on Fannie Mae and HUD Guidelines
FHA and conventional loans serve different borrower profiles. FHA financing may be a strong option for borrowers with lower credit scores, higher debt-to-income ratios, or past credit problems. Conventional financing may cost less for borrowers with stronger credit, especially when private mortgage insurance can be canceled.
Under current Fannie Mae and HUD guidelines, the right choice depends on the complete application, automated underwriting findings, property, and loan terms. Compare same-day Loan Estimates showing the interest rate, APR, monthly payment, mortgage insurance, closing costs, and cash needed to close before making a decision.
Gustan Cho Associates can review both options and help borrowers understand which program may provide the best path to mortgage approval.
Frequently Asked Questions About Fannie Mae and HUD Guidelines
Are FHA Loans Only for First-Time Homebuyers?
- No. FHA loans are available to eligible first-time and repeat homebuyers. Borrowers must meet FHA requirements and generally use the property as their primary residence. However, some down payment assistance programs paired with FHA financing may have separate first-time buyer rules. HUD confirms that first-time buyer status is not required.
Why do Some Home Sellers Prefer Conventional Financing?
- Some sellers believe conventional buyers have stronger credit or that conventional appraisals are less likely to require repairs. However, the loan type alone does not determine whether a transaction will close smoothly. A fully underwritten FHA borrower may present a stronger offer than a conventional borrower with only a basic prequalification.
Is an FHA Appraisal Stricter Than a Conventional Appraisal?
- An FHA appraisal includes a property-value analysis and a review of HUD’s minimum property requirements. A conventional appraisal must also identify conditions affecting the home’s safety, soundness, structural integrity, value, or marketability. Neither appraisal replaces an independent home inspection. FHA appraisals may result in additional repair requirements when the property does not meet HUD standards. Fannie Mae also requires appraisers to report adverse property conditions.
Can a Seller Pay More Closing Costs with an FHA Loan?
- Sometimes. FHA permits interested parties to contribute up to 6% of the sales price toward eligible closing costs and other permitted expenses. Fannie Mae limits seller contributions based on occupancy and LTV. Conventional limits may range from 2% to 9%, depending on the transaction. Contributions cannot exceed the borrower’s actual eligible costs.
Does an FHA Loan Take Longer to Close than a Conventional Loan?
- Not necessarily. Closing time depends more on the lender, appraisal, property condition, title work, and how quickly documents are provided. An FHA loan could take longer if HUD-required repairs must be completed and inspected. A well-prepared FHA loan with an eligible property may close just as quickly as conventional financing.
Can I Switch from Conventional to FHA Before Closing?
- A borrower may be able to change loan programs before closing if the lender approves the new structure. The lender must rerun underwriting, verify FHA eligibility, update the disclosures, and determine whether another appraisal or additional documents are required. Changing programs may also affect the interest rate, mortgage insurance, seller contributions, closing costs, and scheduled closing date.
Can a Buyer Assume an Existing FHA Mortgage?
- FHA-insured forward mortgages are generally assumable, but the buyer usually must complete the servicer’s required creditworthiness review and qualify for the remaining loan obligation. The buyer must also cover any difference between the home’s purchase price and the unpaid mortgage balance. Most conventional loans are not assumable unless their documents specifically permit it.
This article about “Fannie Mae and HUD Guidelines on Conforming vs FHA Loans” was updated on August 7th, 2026.
