FHA loans are the single most accessible mortgage product in the United States. They’re designed for buyers who might not qualify for a conventional loan — whether that’s because of lower credit, a smaller down payment, or income that’s harder to document. The tradeoff is extra mortgage insurance, but for millions of first-time buyers, an FHA loan is the difference between renting and owning.
Curious if an FHA loan fits your budget? Plug your numbers into our free home affordability calculator — it handles FHA scenarios automatically, including the upfront MIP and monthly mortgage insurance.
What is an FHA loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, a part of the US Department of Housing and Urban Development (HUD). The government doesn’t actually lend you the money — private lenders do — but the FHA guarantees a portion of each loan, which makes lenders willing to approve buyers they’d otherwise turn down.
That guarantee is why FHA loans offer lower down payments, more flexible credit standards, and higher DTI limits than conventional loans. It’s also why they require FHA mortgage insurance premium (MIP) — which is how the government funds the program.
FHA loan requirements at a glance
| Requirement | FHA rule |
|---|---|
| Minimum credit score | 580 for 3.5% down; 500–579 for 10% down |
| Minimum down payment | 3.5% |
| Maximum DTI | Up to 50% with strong compensating factors |
| Employment history | 2 years verified |
| Residency | Primary residence only |
| Loan limits | $524,225 – $1,209,750 (2026, varies by county) |
| Mortgage insurance | Upfront MIP (1.75%) + monthly MIP |
| Property condition | Must pass FHA appraisal standards |
Who qualifies for an FHA loan?
1. Credit score: as low as 500
This is the headline. Most conventional loans require a 620+ FICO score. FHA loans go much lower:
- FICO 580 or higher → 3.5% down payment (the most common FHA scenario)
- FICO 500–579 → 10% down payment (still available, but harder to find willing lenders)
- FICO below 500 → not eligible
Note: many FHA-approved lenders set their own “overlays” — internal credit score minimums higher than HUD’s rules. It’s common to see lenders require 600 or 620 even for FHA loans. Shop around.
2. Down payment: as low as 3.5%
The minimum FHA down payment is 3.5% of the purchase price if your credit score is 580 or higher. On a $300,000 home, that’s $10,500 — versus $60,000 for a 20% conventional down payment. You can use:
- Your own savings
- A gift from a family member, employer, or qualifying nonprofit
- Down payment assistance programs (many states offer these)
- Retirement account withdrawals (with tax implications)
For help figuring out how much cash you’ll need in total, see our guide on how much down payment you need.
3. Debt-to-income ratio: up to 50%
FHA loans are more flexible than conventional loans on DTI. The guideline is:
- Front-end DTI (housing only): up to 31% of gross monthly income
- Back-end DTI (all debt including mortgage): up to 43%, or up to 50% with compensating factors
“Compensating factors” can include a larger down payment, significant cash reserves, a high credit score, or a long stable employment history. Learn more in our guide to debt-to-income ratio.
4. Employment and income history
FHA wants to see two years of stable employment — but it doesn’t have to be at the same job. Career progression within the same field counts. Gaps are okay if you can document them (school, medical leave, family care). Self-employed buyers need two years of tax returns showing consistent income.
Importantly, there’s no minimum or maximum income requirement. FHA loans aren’t limited to low-income buyers — they’re about risk, not income level. High earners with lower credit can absolutely use FHA financing.
5. Property must be your primary residence
FHA loans can only be used to buy a home you plan to live in. You must:
- Move in within 60 days of closing
- Live in the home as your primary residence for at least one year
- Not use the loan for investment properties, second homes, or house flipping
You can buy a 1–4 unit property (duplex, triplex, fourplex) with an FHA loan as long as you live in one of the units. It’s a classic “house hacking” strategy used by first-time investors.
6. Property must meet FHA standards
FHA appraisers don’t just estimate value — they also check that the home is safe, sound, and secure. The property must:
- Be structurally sound (no major roof, foundation, or electrical issues)
- Have working plumbing, heating, and electrical systems
- Be free of lead-based paint hazards (for pre-1978 homes)
- Have safe access, no major safety hazards
Fixer-uppers often fail FHA appraisal. If you want to buy a home that needs major work, consider the FHA 203(k) rehab loan, which rolls renovation costs into the mortgage.
What documents do you need to apply?
- Two years of W-2s and federal tax returns
- Recent pay stubs (last 30 days)
- Two months of bank statements for all accounts
- Photo ID and Social Security card
- Evidence of any gift funds (gift letter and donor statements)
- Explanation letters for credit issues, large deposits, or employment gaps
- Self-employed: profit-and-loss statement + two years of 1099s or business tax returns
FHA loan limits in 2026
FHA sets maximum loan amounts by county. In 2026, they range from $524,225 in low-cost areas to $1,209,750 in high-cost markets like Los Angeles, San Francisco, New York City, and Washington D.C. For a 1-unit property, you can look up your county limit on HUD’s website.
If the home you want exceeds the FHA limit, you’ll need a conventional or jumbo loan instead.
FHA mortgage insurance: the tradeoff
Here’s the cost of FHA’s flexibility: mortgage insurance. Unlike conventional PMI, FHA MIP has two parts:
Upfront MIP (UFMIP)
A one-time fee of 1.75% of the loan amount, paid at closing. On a $300,000 loan, that’s $5,250. It’s usually rolled into the loan rather than paid out of pocket.
Annual MIP
A monthly fee typically 0.45% to 1.05% of the loan amount per year, divided by 12. On a $300,000 loan at 0.55%, that’s $137.50/month. Learn more in our guide on PMI and mortgage insurance.
How long do you pay MIP?
- If down payment is less than 10% → MIP is paid for the life of the loan
- If down payment is 10% or more → MIP drops off after 11 years
This is the biggest reason to consider refinancing into a conventional loan once you hit 20% equity — to escape MIP entirely.
Pros and cons of FHA loans
Pros ✅
- Low credit score threshold (580 or even 500)
- Small 3.5% down payment
- Higher DTI limits than conventional
- Gift funds accepted for 100% of down payment
- No income ceiling
- Co-signers allowed
- Assumable (rare but valuable feature)
Cons ❌
- Mortgage insurance for the life of the loan (under 10% down)
- Primary residence only — no investment properties
- Strict property condition standards
- Loan limits lower than conventional in some areas
- Upfront MIP adds to the loan balance
Should you choose an FHA loan or a conventional loan?
Here’s a simple rule: if you can qualify for a conventional loan with 5% down and a 620+ credit score, compare the total monthly cost carefully — a conventional loan with PMI often beats FHA for buyers with good credit, because PMI drops off at 78% LTV while FHA MIP sticks around forever (or at least 11 years).
But if your credit is under 620, your down payment is under 5%, or your DTI is above 43%, FHA is almost always the better path. You can always refinance to conventional later when your credit and equity improve.
Save more on your FHA purchase with Beycome
No matter which loan type you choose, the buyer agent commission is baked into every home price. When you buy with the Beycome buyer program, we rebate up to 2% of the purchase price back to you at closing. On a $300,000 FHA purchase, that’s $6,000 — enough to cover your full down payment and still have cash left for closing costs.
See the full math with our affordability calculator, which includes FHA-specific inputs and the Beycome rebate.
Bottom line: FHA is built for real-world buyers
FHA loans aren’t the fanciest mortgage product on the market — but they’re the most accessible. If you’ve been told “no” by a conventional lender, don’t give up. FHA was literally built for buyers in your situation, and millions of people use them to become homeowners every year.
Not sure if FHA is right for you? Run the numbers on the Beycome affordability calculator — it’ll show you exactly what you can afford with different loan types and down payment scenarios.
Discover beycome title today!