What is FHA Loan in Canada?

FHA loan is a type of mortgage that is insured by the Federal Housing Administration (FHA) in the United States. However, some Canadian lenders also offer FHA-insured loans to Canadian borrowers. FHA loan is designed to help first-time homebuyers and low-to-moderate-income borrowers who may not qualify for conventional mortgages due to their credit score or down payment requirements.

Eligibility for FHA Loan in Canada

To be eligible for an FHA loan in Canada, you must meet the following criteria:

  • You must be a Canadian citizen or permanent resident.
  • You must have a minimum credit score of 580.
  • You must have a down payment of at least 3.5% of the purchase price.
  • You must have a debt-to-income ratio of no more than 43%.

Down Payment for FHA Loan in Canada

One of the main advantages of FHA loan is its low down payment requirement. While conventional mortgages typically require a down payment of at least 20%, FHA loan only requires a down payment of 3.5% of the purchase price. This means that if you are buying a home for $300,000, you only need to put down $10,500 as a down payment.

Mortgage Insurance for FHA Loan in Canada

Another important feature of FHA loan is its mortgage insurance requirement. FHA loan requires borrowers to pay an upfront mortgage insurance premium (MIP) of 1.75% of the loan amount, as well as an annual MIP that ranges from 0.45% to 1.05% of the loan amount. The purpose of mortgage insurance is to protect the lender in case the borrower defaults on the loan.


FHA loan is a popular mortgage option in Canada that offers low down payment and flexible credit score requirements. If you are a first-time homebuyer or a low-to-moderate-income borrower, FHA loan may be a good option for you. However, it is important to understand the eligibility criteria, down payment requirement, and mortgage insurance before applying for an FHA loan.