To qualify for an FHA loan, you generally need a credit score of at least 580 to put down 3.5%, or a score from 500 to 579 with 10% down, a debt-to-income ratio your lender can approve, steady income, and a home you will live in as your main residence. The loan must also fit under the FHA limit for your county, which for a one-unit home ranges from $541,287 to $1,249,125 for 2026. In exchange for those flexible rules, you pay FHA mortgage insurance: 1.75% upfront plus an annual premium that usually lasts as long as the loan.
The rest of this guide explains each requirement, what the mortgage insurance really costs next to a conventional loan with PMI, and when FHA is the wrong tool.
Key takeaways
- Credit score 580 or higher: 3.5% minimum down payment. Score 500 to 579: 10% down. Below 500: not eligible (HUD Handbook 4000.1, as of October 2026).
- Mortgage insurance is the main cost: 1.75% upfront plus 0.55% a year for most buyers putting down less than 5%, for the life of the loan unless you put down at least 10%.
- On a $350,000 home, the FHA payment in our example is $15.90 a month higher than a 3%-down conventional loan with an assumed 0.60% PMI rate, but cheaper than conventional when PMI would cost 1.00%.
- Lenders often approve FHA borrowers with higher debt-to-income ratios than conventional programs allow, especially through FHA’s automated scorecard.
- As of May 25, 2025, non-permanent residents are no longer eligible for FHA loans.
Credit score and down payment
FHA ties your minimum down payment to your credit score. Under HUD Handbook 4000.1, a borrower whose minimum decision credit score is 580 or higher can get maximum financing, which for a purchase means a loan of up to 96.5% of the home’s value, or 3.5% down. A score from 500 to 579 caps the loan at 90% of value, so you need 10% down. Scores below 500 are not eligible.
Those are FHA’s floors, not a promise. Individual lenders may set higher minimums, called overlays, and many do for scores near 500. If your score is in the 500s, ask each lender directly what minimum it uses before you pay for an appraisal.
If you have no credit score at all, FHA allows lenders to evaluate a nontraditional credit history, such as rent and utility payments, through manual underwriting. Expect more paperwork.
Your down payment can come from savings, a gift from a family member or another approved donor, or an approved down payment assistance program. Lenders will document where the money came from, so large unexplained deposits in the months before you apply can slow things down. If your score is close to a cutoff, see how to raise your credit score before buying a home.
Debt-to-income ratio
Lenders look at two ratios. The front-end ratio is your housing payment (principal, interest, taxes, insurance and mortgage insurance) divided by gross monthly income. The back-end ratio adds every other monthly debt payment, such as car loans, student loans and credit card minimums.
For loans that are manually underwritten, the handbook sets a baseline of 31% front-end and 43% back-end. Borrowers with a score of 580 or higher can go to 37/47 with one compensating factor (such as cash reserves or minimal payment increase), 40/40 with no discretionary debt, or 40/50 with two compensating factors. On a gross income of $8,000 a month, 31% is $2,480 for housing and 43% is $3,440 for all debts.
Most FHA loans are run through FHA’s automated TOTAL Mortgage Scorecard, which can approve higher ratios when the rest of the file is strong. FHA does not publish a single hard cap for those approvals, so the practical limit depends on your lender and your overall profile.
Other borrower requirements
- Occupancy: at least one borrower must move into the home within 60 days of closing and intend to live there for at least one year (Handbook 4000.1). FHA is not for investment properties.
- Steady income: lenders verify employment and income, typically covering the most recent two years, and look more closely at gaps, self-employment and variable pay.
- Residency: under Mortgagee Letter 2025-09, U.S. citizens, lawful permanent residents and citizens of Micronesia, the Marshall Islands and Palau are eligible. Non-permanent residents became ineligible for case numbers assigned on or after May 25, 2025.
- Past credit events: a Chapter 7 bankruptcy generally requires two years from discharge, and a foreclosure generally three years, before you can get an FHA loan, with exceptions for documented hardship.
- First-time status: not required. Repeat buyers can use FHA, though you are generally limited to one FHA-insured loan at a time, with exceptions such as a job relocation.
FHA mortgage insurance: upfront and annual
Every FHA purchase loan carries an upfront mortgage insurance premium of 1.75% of the base loan amount. Most borrowers add it to the loan rather than paying cash. The annual premium is billed monthly. The rates below come from HUD Mortgagee Letter 2023-05, which took effect for loans endorsed on or after March 20, 2023. As of October 2026, no later HUD mortgagee letter had changed these forward-mortgage rates.
| Loan term | Down payment (LTV) | Annual MIP, standard loan amount | Annual MIP, above threshold | How long it lasts |
|---|---|---|---|---|
| More than 15 years | Less than 5% (LTV above 95%) | 0.55% | 0.75% | Life of loan |
| More than 15 years | 5% to under 10% (LTV above 90% to 95%) | 0.50% | 0.70% | Life of loan |
| More than 15 years | 10% or more (LTV 90% or less) | 0.50% | 0.70% | 11 years |
| 15 years or less | Under 10% (LTV above 90%) | 0.40% | 0.65% | Life of loan |
| 15 years or less | 10% or more (LTV 90% or less) | 0.15% | 0.15% to 0.40% | 11 years |
The duration column matters more than the rate. If you put down less than 10% on a 30-year FHA loan, the annual premium never drops off on its own. The usual way out is to refinance into a conventional loan once you have enough equity. With 10% or more down, the premium stops after 11 years.
2026 FHA loan limits
FHA limits are set by county and are tied to the conforming loan limit that the Federal Housing Finance Agency sets for 2026 ($832,750 for a one-unit home in most areas). For FHA case numbers assigned on or after January 1, 2026, HUD set these limits:
| Property type | Floor (low-cost areas) | Ceiling (high-cost areas) |
|---|---|---|
| One unit | $541,287 | $1,249,125 |
| Two units | $693,050 | $1,599,375 |
| Three units | $837,700 | $1,933,200 |
| Four units | $1,041,125 | $2,402,625 |
Look up your county’s exact figure on HUD’s FHA mortgage limits page before you shop, because many counties sit between the floor and the ceiling. Two- to four-unit homes qualify as long as you live in one of the units.
Property requirements
The home must pass an FHA appraisal, which checks value and also whether the property meets HUD’s minimum property requirements for safety, security and soundness. Typical problems that must be fixed before closing include peeling paint on older homes, missing handrails, a roof near the end of its life, exposed wiring and broken heating systems. Condominiums must be in an approved project or meet single-unit approval rules.
HUD asked for public comment in May 2026 on modernizing these property standards, but as of October 2026 no change had taken effect, according to HUD’s handbook page. If you are buying a home that needs major work, ask about the FHA 203(k) rehabilitation loan instead of a standard FHA loan.
Worked example: FHA vs. conventional on a $350,000 home
Inputs: a $350,000 purchase and a 30-year fixed rate of 7.40% for both loans, the Freddie Mac PMMS average for the week of October 15, 2026. That survey tracks conventional loans, so using it for FHA is an assumption; actual FHA quotes are often somewhat different. Payments shown are principal, interest and mortgage insurance only.
- FHA, 3.5% down: $12,250 down. Base loan $337,750 plus $5,910.63 upfront MIP financed, for a total loan of $343,660.63. Principal and interest are $2,379.44, and the first month’s annual MIP at 0.55% is $156.84, for $2,536.28.
- Conventional, 3% down: $10,500 down and a $339,500 loan. Principal and interest are $2,350.63. PMI is priced by private insurers based largely on credit score, so the table tests three assumed annual rates. PMI ends automatically after payment 156 (13 years), when the scheduled balance falls to 78% of the original value.
| Loan | First-month payment | Mortgage insurance, first 5 years | Mortgage insurance, first 10 years | Mortgage insurance, full term |
|---|---|---|---|---|
| FHA 3.5% down (0.55% MIP + 1.75% upfront) | $2,536.28 | $15,122.55 | $23,710.59 | $44,033.79 |
| Conventional 3% down, PMI 0.30% (assumed) | $2,435.51 | $5,092.80 | $10,185.60 | $13,241.28 |
| Conventional 3% down, PMI 0.60% (assumed) | $2,520.38 | $10,185.00 | $20,370.00 | $26,481.00 |
| Conventional 3% down, PMI 1.00% (assumed) | $2,633.55 | $16,975.20 | $33,950.40 | $44,135.52 |
The pattern is the useful part. With strong credit, which tends to earn the lowest PMI pricing, conventional is cheaper every month and far cheaper over time because PMI goes away. With weaker credit, where PMI pricing climbs, FHA’s flat pricing can win on the monthly payment, and it often wins on approval odds. Many FHA borrowers plan to refinance into a conventional loan after a few years of payments and credit rebuilding, which cuts the life-of-loan MIP short.
How FHA compares with other low-down-payment loans
| Feature | FHA | Conventional 3% down | VA | USDA guaranteed |
|---|---|---|---|---|
| Minimum down payment | 3.5% (580+ score); 10% (500-579) | 3% (97% LTV) | None with full entitlement | None |
| Who qualifies | Any eligible buyer for a primary home | At least one first-time buyer, unless using an affordable-lending program | Eligible veterans, service members, some surviving spouses | Buyers in eligible rural areas with income at or below 115% of area median |
| Upfront fee | 1.75% upfront MIP | None | Funding fee 1.25% to 3.3% (some exempt) | 1.00% guarantee fee |
| Ongoing insurance | 0.15% to 0.75% a year; often life of loan | PMI, priced by insurer; cancellable | None | 0.35% a year |
| Credit minimum in program rules | 500 | Set by lender and automated underwriting | None in VA rules; lenders set one | None in program rules; lenders set one |
If you have military service, compare FHA with a VA loan first; see how to apply for a VA home loan.
Steps to get an FHA loan
- Pull your credit reports and scores and fix errors at least a few months before you apply.
- Add up your monthly debts and estimate your debt-to-income ratio at the price you have in mind.
- Check the FHA limit for your county and settle on a price range that fits under it.
- Get Loan Estimates from at least three FHA-approved lenders on the same day and compare rate, points, lender fees and any credit-score overlays.
- Get preapproved, then make an offer. Ask your agent to flag obvious condition issues an FHA appraiser would catch.
- Order the appraisal and handle any required repairs before closing. Budget for closing costs, which you can partly cover with seller concessions; see how to estimate and lower closing costs.
- Close, then set a reminder to review refinancing options once your loan-to-value ratio drops near 80%.
When an FHA loan is a bad idea
- Your credit score is high. With a score that earns low PMI pricing, a conventional loan usually costs less each month and over time, as the example shows.
- You plan to stay a long time without refinancing. Life-of-loan MIP keeps adding up. If you can’t count on refinancing later, because rates or home values might not cooperate, that cost is real.
- The home needs significant repairs. A standard FHA appraisal can stall a sale over condition issues. Consider a renovation loan or a different property.
- You are buying in a competitive market. Some sellers prefer conventional offers because of appraisal requirements. A larger down payment on a conventional loan may make your offer stronger.
- The price is near your county limit. FHA will not insure above the limit, so you would need to bring the difference in cash or use another loan type.
Frequently asked questions
Do I have to be a first-time homebuyer to get an FHA loan?
No. FHA is open to repeat buyers. What matters is that the home will be your primary residence and that you meet the credit, income and property rules.
Can I remove FHA mortgage insurance?
If you put down at least 10%, annual MIP ends after 11 years. With less than 10% down, it lasts for the life of the loan, so the common path is refinancing into a conventional loan once you have about 20% equity.
Can a gift cover my whole FHA down payment?
Yes, gifts from approved donors such as relatives can cover the entire minimum down payment. The lender will need a gift letter and records showing the money moving from the donor’s account to yours.
Is the 1.75% upfront premium refundable?
Partly, in one situation. If you refinance into another FHA loan within three years, part of the upfront premium is credited toward the new loan’s premium; ask the lender for the exact figure. It is not refunded if you refinance into a conventional loan or sell.
What debt-to-income ratio do I need for FHA?
The manual underwriting baseline is 31% for housing and 43% for total debt, rising to as much as 40/50 with compensating factors. Automated approvals can go higher, but lenders decide case by case.
Sources
- HUD, Single Family Housing Policy Handbook 4000.1 (credit score and LTV, DTI ratios, occupancy, waiting periods, property requirements), accessed Oct 2026
- HUD, Mortgagee Letter 2023-05: Reduction of FHA Annual Mortgage Insurance Premium Rates (annual MIP table and durations), accessed Oct 2026
- HUD, Federal Housing Administration Announces 2026 Loan Limits (2026 floor and ceiling), accessed Oct 2026
- HUD, Mortgagee Letter 2025-09: Revisions to Residency Requirements, accessed Oct 2026
- HUD, FHA single family policy changes announced June 2026 (no MIP or credit-rule changes), accessed Oct 2026
- FHFA, Conforming Loan Limit Values for 2026, accessed Oct 2026
- Freddie Mac, Primary Mortgage Market Survey (30-year fixed average, week of Oct 15, 2026), accessed Oct 2026
- CFPB, When can I remove private mortgage insurance (PMI) from my loan?, accessed Oct 2026
- Fannie Mae, Eligibility Matrix (Aug 5, 2026) (97% LTV and first-time buyer rule), accessed Oct 2026
- VA, VA funding fee and loan closing costs, accessed Oct 2026
- USDA Rural Development, SFH Guaranteed fee notice for fiscal year 2027, accessed Oct 2026
- USDA Rural Development, Single Family Housing Guaranteed Loan Program flyer (income limit, 0% down), accessed Oct 2026
Figures are as of October 2026. This article is general education, not individualized financial, tax or legal advice.
