FHA Loan Requirements: FHA Loans Explained

What Are FHA Loans?

FHA loans are mortgages provided by private lenders and insured by the FHA, which is part of the U.S. Department of Housing and Urban Development (HUD). This means that if a borrower defaults on an FHA-backed loan, the FHA will reimburse the lender for the loan’s unpaid principal balance.

Because FHA-approved lenders are taking less risk when they fund an FHA loan, they can offer this type of mortgage to borrowers with lower credit scores or who have little savings for a down payment. FHA loans are especially popular with first-time homebuyers.

FHA Loan Requirements

FHA mortgage requirements can vary by lender, but the basic FHA mortgage loan requirements include:

Credit Score and Down Payment

To qualify for an FHA loan with a down payment of 3.5%, you generally need a credit score of 580 or higher. If your credit score is between 500 and 579, you can qualify for an FHA loan, but you’ll need to make a down payment of at least 10%.

Income Requirements

There is no minimal income requirement for an FHA mortgage. It is up to individual lenders to determine whether your total income is sufficient. Borrowers should expect to provide documentation such as recent pay stubs, W-2 statements, and bank statements.

Debt-to-Income (DTI) Ratio

Besides your credit score and income, lenders will look at your debt-to-income ratio, or DTI ratio, which compares your monthly debt payments with your monthly gross income. DTI requirements differ based on your credit score and other factors, but generally, if you have a credit score between 500 and 579, the FHA requires a DTI ratio below 43%. For applications underwritten through Fannie Mae’s Desktop Underwriter, the maximum DTI ratio is 50%.

Property Requirements

You can only use FHA home loans to buy a home that you intend to be your primary residence. You can buy a one- to four-unit property, but you must live in one of the units. You can’t purchase it solely as an investment property, and it can’t be a second home. Additionally, you must occupy the property within 60 days of closing.

When you find the home you want to purchase, an FHA-approved professional must appraise the property. The appraisal assesses the property’s market value, makes sure it’s safe, and ensures it meets minimum standards.

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FHA Loan Limits

Each year, the FHA updates its guidelines on the maximum amount you can borrow based on housing costs and the cost of living in your region. The value of the property you plan to purchase (which your appraisal determines) must fall below the limits set for your area.

The table below outlines the 2026 FHA loan limits.

FHA loan limits	Most areas	High-cost areas	Alaska, Hawaii, Guam, and the U.S. Virgin Islands
One unit	$541,287	$1,249,125	$1,873,687
Two units	$693,050	$1,599,375	$2,399,050
Three units	$837,700	$1,933,200	$2,899,800
Four units	$1,041,125	$2,402,625	$3,603,925

If you’re curious about the loan limits in a specific area, you can search HUD’s FHA Mortgage Limits database.

How Does an FHA Loan Work?

A mortgage is a big commitment, so it’s important to carry out due diligence before deciding what type of financing to get. Here are some details about how FHA loans work.

Loan Length

You can choose a term (also known as a repayment period) of 15 or 30 years in which to pay off your FHA loan. If you want to pay it off faster and can afford a higher monthly payment, the shorter-term loan will save you interest and allow you to build home equity faster. The monthly payments on a longer loan will be more affordable.

Interest Rate

FHA loans can have a fixed or adjustable interest rate, though most borrowers choose fixed-rate mortgages, which have the same interest rate for the entire repayment period. Interest rates can be lower with FHA-insured mortgages than with conventional loans, but your financial profile, the characteristics of your loan, market conditions, and lender policies affect the rate you’re offered.

Down Payment

If you have a credit score of at least 580, FHA loans are available with down payments as low as 3.5%. This is a plus for buyers who can afford monthly payments but don’t have enough saved for a big down payment. Your lender can help you decide if a higher down payment is right for you and explain how it could affect monthly payments and other aspects of your loan.

Another plus: With conventional loan lenders, down payment rules can vary, but under FHA guidelines, 100% of your down payment can come from a no-strings-attached gift. You may also be able to combine a first-time homebuyer assistance program with an FHA loan to lower your out-of-pocket costs.

Mortgage Insurance

No matter how much you borrow or how large your down payment is, you’ll pay MIP if you take out an FHA loan. There are two FHA mortgage insurance premiums: upfront and annual.

The upfront MIP is 1.75% of the loan amount and can be paid at closing or rolled into the loan. Note that choosing to add it to your mortgage and pay it over time means paying interest on this cost and increasing your overall expense.

Annual premiums depend on your loan amount, your down payment, and the length of your loan. Currently, the annual MIP rate for new homebuyers is 0.15% to 0.75% of the total loan amount, and most borrowers can expect to pay around 0.55%.

If you get a 30-year FHA loan and your down payment is less than 10%, you’ll be paying the MIP for as long as you have the loan. (Some FHA borrowers refinance to a conventional loan, allowing them to eliminate the monthly MIP.) If you put down at least 10%, you’ll pay the MIP for 11 years.

Types of FHA Loans

The FHA’s main home loan program is the basic home mortgage loan, or 203(b) loan. Most FHA loans are fixed-rate, but the Section 251 Adjustable-Rate Mortgage program offers variable interest rates that stay the same for an introductory period and then fluctuate annually.

FHA loans also include the rehabilitation mortgage, or 203(k) loan, which enables you to combine mortgage and remodeling costs into a single loan. The limited 203(k) loan allows up to $75,000 for minor improvements and non-structural projects, while the maximum amount provided by the standard version depends on your county’s FHA loan limits and is designed for more extensive jobs.

There’s also the Home Equity Conversion Mortgage, which is a reverse mortgage for those over the age of 62, and an Energy Efficient Mortgage for borrowers who want to buy an energy-efficient home or finance energy-efficient improvements. Streamline Refinancing is an option for existing FHA borrowers who want to refinance their loans with limited credit documentation and underwriting.

How Is an FHA Loan Calculated?

If you know the home price, down payment amount, loan term, and interest rate, you can use an online FHA Loan Calculator to estimate your basic FHA loan payment. (You can also play around using different numbers.)

For example, let’s say your home purchase price is $300,000, your down payment is $10,500 (3.5%), the loan term is 30 years, the interest rate is 6.00%, your upfront MIP is $5,066, and your annual MIP is $133. In this scenario, your monthly payment (without homeowners insurance premiums, Homeowners Association (HOA) fees, property taxes, etc.) would be about $1,745. The total cost of the mortgage would be approximately $633,354, and the total interest paid would be $343,854.

How Much Can You Borrow With an FHA Loan?

A few different factors will go into determining the actual amount you can borrow with an FHA loan, including:

•   Down payment: If you qualify for the minimum down payment for an FHA loan of 3.5%, you may be able to borrow up to 96.5% of the purchase price of a home.

•   Loan limits: As mentioned above, there are preset loan maximums based on housing costs in your region. While these limits are adjusted to reflect costs in various parts of the U.S., they may not be as high as those on a conventional loan.

•   Financial factors: Lenders will also look at your credit score, income, and DTI ratio when deciding how much you can borrow. The standard FHA DTI maximum is 43%, but you may be allowed to borrow more if you have compensating factors, such as a credit score of at least 580 and you meet additional qualifications.

How to Apply for an FHA Loan

The process of applying for an FHA loan is much like getting a conventional loan. But remember that although the federal government backs this loan program, it doesn’t provide the funds. So, your first step is to find an FHA-approved lender that can offer you a loan that fits your needs. You can search for a lender on the HUD website or do some research to compare lenders and their terms. Consulting an FHA loan buyer’s guide can be helpful.

When you find a lender, you’ll have to file a formal application and provide information about yourself and the home you hope to buy.

If you meet the requirements set by your lender and the FHA, you can expect to be approved for your loan. You’ll go through the closing process, pay any closing costs, and receive the keys to your home.

Pros and Cons of an FHA Loan

For borrowers who might otherwise struggle to qualify for a home loan, an FHA-insured mortgage can be a solid option because the financial requirements are generally more lenient than for conventional loans. But before taking out an FHA loan, it’s important to understand the benefits and downsides:

Who Should Get an FHA Loan

Homebuyers with mediocre credit or a minimal amount saved for a down payment may be good candidates for an FHA loan. First-time homebuyers may find that an FHA loan is one of their only chances to get into the housing market.

How to Use an FHA Loan

You can use an FHA loan to buy, build, improve, or refinance the home you plan to live in. After purchasing a home with this loan, you make monthly mortgage payments just as you would with a conventional loan.

FHA Loan Examples

Here are a couple of examples of how an FHA loan might work for some hypothetical homebuyers.

Example 1: Joe and Ginny Smith — First-Time Homebuyers

The Smiths have been married for two years and want to purchase their first home. Both have good jobs and solid income potential for the future, but their credit scores (580 and 600, respectively) are lower than most lenders will accept for a conventional loan, and they have some student loan debt. They don’t have much saved to put a down payment on the $350,000 house they want to buy, but Ginny’s mom is gifting them $12,500 for that purpose. Here’s an estimate of how their FHA loan might break down if they have a 30-year mortgage at 6.50% interest:

  Home purchase price: $350,000

  Down payment amount: $12,500 (3.5%)

  Loan period: 30 years

  Interest rate: 6.50%

  Monthly payment amount (without taxes, homeowners insurance, HOA fees, etc.): $2,145

  Total interest paid: $440,593

  Total cost of mortgage before MIP: $778,093

  Upfront FHA MIP: $5,906 Monthly FHA MIP: $155 (paid for the life of the loan)

Example 2: Ben Jones — Longtime Renter Turned Homeowner

After declaring bankruptcy a few years ago and struggling to get his credit score up to 600, Ben is getting his financial life in order. He doesn’t mind living in a multifamily building, but he’s tired of paying rent, and he wants to invest in (and make the rules for) his own property. After inheriting some money, he has enough for a decent down payment (about $50,000), and he finds a duplex for $450,000. He wants to live in one half of the building and rent the other unit for income to help make his monthly payment, which is allowed with an FHA loan. Here’s an estimate of how Ben’s FHA loan would break down if he got a 30-year loan at 6.50% interest:

  Home purchase price: $450,000

  Down payment amount: $50,000 (11%)

  Loan period: 30 years

  Interest rate: 6.50%

  Monthly payment amount (without taxes, homeowner’s insurance, HOA fees, etc.): $2,542

  Total interest paid: $522,184

  Total cost of mortgage before MIP: $922,184

  Upfront FHA MIP: $7,000 Monthly FHA MIP: $183 (paid for 11 years)

How Much Does It Cost to Get an FHA Loan?

In addition to a down payment, homebuyers must also pay closing costs. FHA closing costs can vary significantly depending on the lender and location, but borrowers should plan to pay between 2% and 6% of the home’s purchase price.

You may be able to roll some of these costs into your overall loan amount to avoid paying them up front, but then you’ll pay interest on these charges. Some costs may be negotiable, and it can’t hurt to ask! You may even be eligible for a down payment assistance program that can help with closing costs, especially if you qualify as a first-time homebuyer.

FHA loan closing costs may include:

•   Upfront MIP (1.75% of the loan principal)

•   Lender fees, which may include an origination fee, a credit check fee, a rate lock or rate-lock extension fee, and points paid to reduce your interest rate

•   Third-party fees, which can include an appraisal fee, title search, and title insurance fees

•   Per diem interest, which is the interest a mortgage lender may charge for the days between your closing date and the first day of the billing cycle for your new home

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How to Find Competitive FHA Loan Rates

Because lenders’ rates and other terms can vary, it makes sense to shop around. You can check interest rates and other loan terms from various lenders online. It’s also important to pay attention to lender fees, which can add to the overall cost of your loan. Read lender reviews, and ask family, friends, or your real estate professional for their recommendations.

Getting prequalified or going through the mortgage preapproval process can also give you a good idea of the loan terms you’ll qualify for. And to get the most competitive loan offers, you’ll want to be sure your credit score, DTI ratio, and other personal financial details are in the best shape possible when you apply.

What Are FHA Loan Rates Expected to Do in 2026?

Mortgage rates can fluctuate for various reasons, including changes in broader market forces, the overall economy, and inflation. And though the Federal Reserve doesn’t set mortgage rates, when it raises or lowers its benchmark interest rate, it can influence the interest rate homebuyers pay.

So, if inflation continues to cool and mortgage rates drop in line with the 2025 cut in the federal funds rate, borrowing costs on many types of loans, including FHA mortgages, may drop — as many economists are predicting.

That doesn’t necessarily mean you should wait for rates to go down. If you’re ready to buy, you can find the home you want at a price you can afford, and you qualify for a mortgage, you may want to talk to a financial professional about what makes sense for you.

FHA Loan vs Conventional Loan

FHA and conventional mortgages have a few key differences that you’ll want to check out when you’re deciding which is right for you. Some points to consider when you’re looking at an FHA loan vs. a conventional mortgage include:

Credit Score and Down Payment Requirements

FHA loans are generally considered to be easier to qualify for than conventional loans. FHA borrowers typically need a credit score of 580 to be eligible to make a 3.5% down payment. And even with a score between 500 and 579, they may qualify with a 10% down payment.

In comparison, some lenders offer conventional mortgages with a down payment as low as 3%, but borrowers typically must have a credit score of 620 or higher to qualify for this amount.

Mortgage Insurance Requirements

Mortgage insurance is mandatory with an FHA loan, regardless of the down payment amount. If you get a 30-year FHA loan with a 3.5% down payment, you’ll be paying the MIP for as long as you have the loan (unless you refinance to a conventional loan). If you put down at least 10%, you’ll pay the MIP for 11 years. With a conventional loan, you’re only required to have private mortgage insurance (PMI) if your down payment is less than 20%. And the insurance can be canceled once you have at least 80% equity in your home. Understanding PMI vs. MIP is important as you weigh the choice of loan options.

Loan Limits

Both conventional and FHA loans limit the amount a homebuyer can borrow, and these maximum loan sizes can vary by region.

In most areas of the U.S., the 2026 FHA loan limit for a single-family home is $541,287, but in more expensive markets, it can go as high as $1,249,125.

Conventional loans are subject to the conforming loan limit set by the Federal Housing Finance Agency. For 2026, that limit is $832,750 in most areas of the U.S., with a ceiling of $1,249,125 in more expensive regions. Mortgages that exceed that threshold are considered nonconforming jumbo loans and are subject to more stringent underwriting standards.

Property Requirements

FHA-insured loans also have stricter property requirements, designed to protect both borrowers and lenders. While appraisals for conventional loans focus primarily on the property’s market value, an FHA appraisal will also check the property for safety, sound construction, and adherence to code restrictions. The purchased home also must be the borrower’s primary residence.

Mortgage Rates

Mortgage rates for FHA loans can be lower than the rates for conventional loans. But because FHA loans require a MIP, often for the life of the loan, borrowing with an FHA loan may cost more overall.

Alternatives to an FHA Loan

FHA loans and conventional loans are just two among the many different types of mortgage loans available to homebuyers. Other loan programs that can provide competitive rates and mortgage terms for borrowers include:

•   Veterans Affairs (VA) loans: A loan guaranteed by the U.S. Department of Veterans Affairs can be an excellent option for eligible members of the U.S. military and surviving spouses. There are no income limits on VA loans, and there are no longer standard loan limits on VA direct or VA-backed home loans.

•   U.S. Department of Agriculture (USDA) loans: These loans are guaranteed by the USDA and aim to help moderate- to low-income borrowers buy homes in eligible rural areas. Loan limits and income limits apply.

•   First-time homebuyer programs: If you have the resources to manage a higher monthly payment but you need some help with your down payment, there are many local, state, and federal down payment assistance programs that can help. There may be requirements for the property’s location and the homebuyer’s income, but it’s worth checking out what’s available.

The Takeaway

If you’re worried about qualifying for a home mortgage loan because your credit is average or you don’t have much savings for a down payment, an FHA-insured loan might be right for you. Because FHA-approved lenders are taking less risk when they fund a government-backed FHA loan, the requirements for borrowers are typically more lenient, and interest rates may be lower.

There are some downsides to FHA loans, including the requirement that borrowers pay mortgage insurance, which can make the loan more expensive over time. To find a mortgage and a monthly payment that’s a good fit for you — whether it’s an FHA loan, a conventional loan, or another option — it’s a good idea to research and compare what various lenders have to offer. You can seek advice from a qualified mortgage professional if you have questions.