Can You Buy A Foreclosure With An FHA Loan?

Pros And Cons Of Buying A Foreclosure With An FHA Loan

There are both advantages and disadvantages to using an FHA loan to buy foreclosed homes. Let’s take a look at some of the most common pros and cons.



May find a good deal on a home

Must meet FHA property standards

Lower down payment

Sold as-is

Flexible qualifications

Competition with investors


FHA loans allow lower minimum credit scores and a lower down payment requirement to buy a home. Since foreclosed homes are typically priced lower than comparable homes for sale in the area, an FHA foreclosure purchase allows some house hunters the chance to buy a home that may otherwise be out of budget.


The downside to buying a foreclosed home with an FHA loan is that the property must meet strict criteria. One of the most important factors is that the home is safe. Since foreclosed homes are sold as is, it could be harder to qualify for an FHA loan if the home isn’t habitable. FHA 203(k) loans offer a way around this challenge, but the trade-off can be a higher interest rate.

There is also more competition with buying foreclosures since investors may be able to pay with cash, which is less risky for banks when compared to an FHA borrower, who will need a mortgage.

Even though FHA home loans are an affordable finance option, it’s important to budget for closing costs and general home maintenance.