FHA Loan Requirements Explained

What is an FHA loan?

An FHA loan is a mortgage insured by the Federal Housing Administration. The lender is still a private bank, but the FHA insures the loan against default — so lenders accept lower credit scores and down payments than they would for a conventional loan.

FHA loans are designed for first-time and lower-down-payment buyers. They're available to almost anyone who meets the requirements — no income limits, no first-time-buyer rule.

Credit score requirements

• 580+ credit score: 3.5% down payment allowed
• 500–579 credit score: 10% down payment required
• Below 500: not eligible for FHA

Many lenders set their own overlays at 620 or higher even for FHA loans. Shop around — minimums vary.

Down payment requirements

The big draw of FHA loans is the low down payment:

• 3.5% down with 580+ credit score
• Down payment can be a gift from family
• Down payment assistance programs are widely accepted
• Sellers can contribute up to 6% toward closing costs

Debt-to-income limits

• Front-end DTI (housing): typically up to 31%
• Back-end DTI (total debt): typically up to 43%
• Lenders may allow up to 50% DTI with strong compensating factors (cash reserves, large down payment, high credit score)

Mortgage insurance (MIP)

All FHA loans require mortgage insurance — both upfront and monthly:

• Upfront MIP: 1.75% of the loan, financed into the loan amount
• Annual MIP: 0.55% of the loan balance, paid monthly
• MIP lasts the life of the loan (with <10% down) — you'd need to refinance to remove it

Income and employment requirements

• Two years of stable employment, ideally with the same employer or in the same field
• Verifiable income (W-2s, tax returns, pay stubs)
• Self-employed: typically 2 years of tax returns
• No minimum income requirement

Property requirements

Not every home qualifies for an FHA loan:

• Must be your primary residence (no investment properties)
• 1–4 unit dwelling (single-family, duplex, triplex, fourplex)
• Must pass an FHA appraisal (no major safety/structural issues)
• Loan amount must be within county FHA limits ($498,257 in most counties for 2026)

What can disqualify you

• Recent bankruptcy: typically 2-year wait after Chapter 7, 1 year after Chapter 13
• Foreclosure: 3-year wait
• Federal student loan default or unpaid federal debt
• Falsified income or asset documentation
• DTI above 50% with no compensating factors

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