How to qualify for an FHA loan
Saving for a home can feel impossible when home prices, credit score requirements, and down payment funds seem stacked against you. If you’ve been struggling to get approved for a conventional loan, an FHA-insured loan could be the better deal you’ve been looking for.
Backed by the Federal Housing Administration, this mortgage helps borrowers with less-than-perfect credit, low down payments, and higher debt-to-income ratios qualify for financing.
The best part? You don’t need a higher credit score or a massive savings account to get started. See what you qualify for with Rate and take the first step toward homeownership. You can also use our FHA mortgage calculator to better understand what your monthly payment might look like.
How Do FHA Loans Work?
An FHA-insured loan works like most home loans, but there’s one big difference, it’s backed by the federal government. That means if a borrower defaults, the Federal Housing Administration (FHA) steps in, reducing the risk for lenders.
Because of this, banks, credit unions, and other financial institutions can offer lower interest rates and approve borrowers with lower credit scores who might not qualify for a conventional loan.
Instead of borrowing directly from a government agency, you’ll apply through an FHA-approved lender, which could be a bank, mortgage lender, or direct lender.
The good news is that an FHA home loan gives more people the opportunity to buy a home, even if their credit score isn’t perfect. But like any type of mortgage, there are minimum requirements you’ll need to meet.
FHA Loan Requirements
Qualifying for an FHA home loan is often easier than qualifying for a conventional mortgage, but lenders still review your credit report, debt-to-income ratio, and overall financial situation before approval.
FHA Loan Down Payment Requirements
One of the biggest advantages of an FHA loan is that it doesn’t require a huge upfront payment. An FHA home loan allows a down payment option as little as 3.5%—as long as your credit score is 580 or higher.
For example, if you’re buying a home for $200,000, your down payment option could be as low as $7,000. If your credit score is between 500-579, you’ll need a down payment option of 10% instead.*
The Federal Housing Administration allows down payment funds to come from personal savings, a family member’s gift, or even government assistance programs. However, your lender will require documentation showing that these funds don’t need to be repaid.
FHA Loan Income Requirements
There’s no official minimum income requirement for an FHA loan, but lenders will check your debt-to-income ratio to make sure you can afford your monthly mortgage payment.
Typically, your total debt—including credit card payments, student loans, and other financial obligations—should not exceed 43% of your gross monthly income. However, some FHA lenders may allow a higher DTI if you have strong compensating factors, like a higher credit score or steady income.
FHA Mortgage Insurance
Since FHA loans allow for lower credit scores and small down payments, they require mortgage insurance to protect lenders in case of default.
There are two types of mortgage insurance premiums (MIP):
- Upfront Mortgage Insurance Premium (UFMIP): A one-time fee of 1.75% of the loan amount, usually added to your total cost.
- Annual Mortgage Insurance Premium (MIP): A recurring fee that’s added to your monthly mortgage payment, typically ranging from 0.45% to 1.05%, depending on your loan amount, down payment, and mortgage term.
While mortgage insurance adds to your monthly payment, it makes homeownership possible for many borrowers who don’t meet the requirements for a conventional loan.
FHA Loan Credit Score Requirements
Your credit score plays a major role in whether you qualify for an FHA-insured loan. Unlike a conventional mortgage, which usually requires a higher credit score, an FHA home loan gives borrowers with lower credit scores a chance to qualify.
- 580+ Credit Score: Eligible for a 3.5% down payment option.
- 500-579 Credit Score: Still possible to qualify, but requires a 10% down payment option.
- Below 500: Typically ineligible, though some exceptions apply.
Because credit scores impact the interest rate, borrowers with a higher score will likely secure a lower interest rate and better loan terms.
FHA Property and Lender Requirements
Not every home qualifies for an FHA home loan. The Federal Housing Administration has strict property requirements to ensure homes are safe and livable before approving financing.
Primary Residence Requirement
An FHA loan is meant to help people buy a home they plan to live in—not an investment property or vacation home. This means the home you buy must be your primary residence, and you’re required to move in within 60 days of closing.
FHA Appraisal and Safety Standards
Before approving an FHA-insured loan, the government agency requires a property appraisal to confirm that the home meets HUD safety and habitability standards, and there are no major structural issues that would make the home unsafe.
If a home doesn’t meet these requirements, you may still qualify for an FHA 203(k) loan, which finances repairs and improvements alongside your mortgage loan.**
FHA-Approved Lenders
To apply for an FHA loan, you’ll need to work with an FHA-approved lender—not all banks and financial institutions offer these loans.
Your lender will review your credit report, income, and financial decisions to determine your eligibility. They’ll also go over fees, closing costs, and loan limits based on your location.
Types of FHA Home Loans
Not all FHA home loans are the same. Depending on your financial situation and homeownership goals, there are different loan options designed to help you get the financing you need.
Traditional Mortgage
This is the most common type of FHA loan, ideal for buying a single-family home or 1-4 unit properties as a primary residence.
It’s a good option if you need a low down payment advantage and have a low credit score that might not qualify for a conventional mortgage. Since FHA loans are government-backed, lenders are more willing to approve borrowers who might not meet the stricter requirements of other loan types.
Home Equity Conversion Mortgage
Also known as an FHA reverse mortgage, this loan option is for homeowners aged 62 and older who want to access their home equity without selling their property. Instead of making monthly mortgage payments, borrowers receive cash based on their home’s value.
This can be a good idea for retirees looking to supplement their income, cover medical expenses, or manage day-to-day costs without taking on additional debt.
However, since this loan impacts inheritance and homeownership rights, it’s important to go over the details with a trusted FHA-approved lender before applying.***
203(k) Mortgage Program
Buying a home that needs work? The 203(k) loan lets you finance both the purchase price and renovation costs into a single mortgage loan. This is a good option for buyers who want to restore a property without having to take out a separate loan for repairs.
Instead of managing multiple loans with different APR rates, you can bundle everything under one FHA home loan. This program is also backed by the U.S. Department of Housing and Urban Development (HUD) to ensure homes meet safety and livability standards after renovations.
Energy Efficient Mortgage Program
The Energy Efficient Mortgage Program allows borrowers to finance energy-saving home improvements as part of their FHA loan. This can include solar panels, insulation upgrades, or energy-efficient heating and cooling systems.
Since these upgrades lower monthly utility costs, they also help with income ratio calculations, which can make it easier to qualify for a loan. If you're looking to cut down on long-term expenses while reducing your environmental footprint, this could be a good idea to explore.
Section 245(a) Loans
If you expect your income to rise in the future, a Section 245(a) loan might be worth considering. This loan option starts with a low monthly payment that gradually increases over time, making it easier to afford a home while your financial situation improves.
It's often a good option for young professionals or borrowers who expect steady career growth. However, since monthly mortgage payments increase over time, it's important to assess whether your income ratio will support the higher payments in the future.
FHA Loan Limits
In 2025, the Federal Housing Administration (FHA) set loan limits to reflect varying housing costs across the United States.
For single-family homes, the standard "floor" limit in most areas is $524,225, while in high-cost areas, the "ceiling" can reach up to $1,209,750. These limits are influenced by local property values, ensuring that FHA loans remain accessible to borrowers nationwide.
To find the specific loan limit in your area, you can use the FHA Mortgage Limits search tool provided by the U.S. Department of Housing and Urban Development. Understanding these limits is crucial for prospective homebuyers to determine their borrowing capacity and align their property search accordingly.
How To Apply For An FHA Loan
If you’ve been dreaming of homeownership but thought your credit score or down payment might hold you back, an FHA loan could be the solution.
With flexible loan requirements, a lower interest rate, and a low down payment advantage, it’s a great option for many first-time homebuyers and those with less-than-perfect credit.
The next step? Finding the right FHA-approved lender to guide you through the process. Guaranteed Rate makes it easy to explore your options and apply online. Get started today with a lender that helps you move forward - apply for an FHA loan here.
*Sample provided for illustration purposes only and is not intended to provide mortgage or other financial advice specific to the circumstances of any individual and should not be relied upon in that regard. Rate, Inc. cannot predict where rates will be in the future
**Credit score and down payment requirements higher for 2-4 unit, investment properties and renovation products.
***: Reverse mortgages are eligible for borrowers 62 and older. Age limits for additional brokered loan options may start at 55. Borrower must pay taxes, fees, and insurance while maintaining the home and using it as primary residence or the loan will need to be repaid. Not available in all states. Not all applicants will be approved. Restrictions apply. Compare loan types when making a financial decision. Rate, Inc. is not affiliated with, nor has this material been reviewed, approved or issued by, HUD, FHA or any government agency. To find a Reverse Mortgage counselor near you go to https://entp.hud.gov/idapp/html/hecm_agency_look.cfm or call (800) 569-4287.
Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the Nevada Department of Veterans Services, the US Department of Agriculture, or any other government agency. No compensation can be received for advising or assisting another person with a matter relating to veterans’ benefits except as authorized under Title 38 of the United States Code.
