Skip to main content
KPCB Edge — Keep Pushing Costs Back
Menu

FHA Loan Requirements: Credit, Down Payment and How to Apply

By KPCB StaffCombined Expertise In The Low Income Housing Space For 10 Years · How we write our guides

Real estate agent with house model and keys

An FHA loan is a mortgage from a private lender that the Federal Housing Administration insures. With a credit score of 580 or higher, you can put down as little as 3.5%. With a score from 500 to 579, you need at least 10% down, and below 500 you can't get an FHA loan.

You apply through an FHA-approved lender, not through HUD. The lender decides whether to approve you, and FHA insures the loan once it closes.

How an FHA loan works

FHA is part of the U.S. Department of Housing and Urban Development (HUD). It doesn't lend money itself. Banks, credit unions and mortgage companies make the loans, and FHA insures them. Because the lender is protected if a borrower stops paying, it can accept a lower credit score and a smaller down payment than it would for a conventional loan.

The basic FHA loan is called a 203(b) mortgage. You can use it to buy or refinance a home with one to four units, as long as you live in it.

FHA loans have a few trade-offs:

  • You pay mortgage insurance, both upfront and every month.
  • The home has to be your main home.
  • The loan can't be larger than the FHA limit for your county.

The Consumer Financial Protection Bureau (CFPB) says FHA loans can often be the cheaper choice for buyers with lower credit scores or small down payments. For buyers with good credit and a 10% to 15% down payment, FHA loans tend to cost more than conventional loans. The CFPB suggests getting quotes for both kinds of loan and comparing the total cost.

FHA loan requirements

Credit score and down payment

FHA uses your "minimum decision credit score," which comes from your credit report. If the lender pulls three scores, it uses the middle one. If it pulls two, it uses the lower one. When two people apply together, the lender uses the lower of their two scores.

Your credit scoreMinimum down paymentCan you get an FHA loan?
580 or higher3.5% of the priceYes, with maximum financing (up to 96.5% of the home's value)
500 to 57910% of the priceYes, but the loan is capped at 90% of the home's value
Below 500Not applicableNo

FHA sets these as minimums. Each lender can set its own higher score requirement, so one lender may turn you down while another approves you. If you have no credit score at all, FHA still allows a loan, but the lender has to review your file by hand using other proof that you pay your bills.

A change takes effect on January 1, 2027. For loans with case numbers assigned on or after that date, lenders can use VantageScore 4.0 and FICO Score 10T in addition to the classic FICO score. HUD says the same 500 and 580 cutoffs apply to the new models.

If your score is close to a cutoff, it may be worth working on it before you apply. Our guide to how credit scores affect housing assistance covers the basics, and the CFPB recommends getting free copies of your credit reports, checking them for errors and disputing any mistakes.

Where your down payment can come from

Your down payment can be your own savings. FHA also accepts gifts, with no expectation of repayment, from:

  • a family member
  • your employer or labor union
  • a close friend with a clearly documented interest in you
  • a charity
  • a government agency or public program that helps low- or moderate-income families or first-time buyers

The lender will ask for paperwork showing where gift money came from. A donor can't give you cash that was kept at home; the money has to be traceable.

HUD says state and local governments offer down payment help. Our guide to housing grants explains what kinds of help exist and where to look.

Steady income and manageable debt

The lender has to document your last two years of work and income. If you get a paycheck, expect to provide recent pay stubs and your W-2 forms from the past two years. If you're self-employed or have other kinds of income, the lender will ask for different records, such as tax returns.

The lender also checks your debt-to-income ratio. That's how much of your gross monthly income (before taxes) goes to your housing payment and to all of your monthly debts.

Almost every FHA purchase loan is first run through FHA's automated scoring system, called TOTAL Mortgage Scorecard. If your file doesn't get an "Accept" from that system, or you have no credit score, the lender reviews it by hand. For hand-reviewed loans, HUD's handbook sets these limits:

  • With a score of 500 to 579, or no score: your housing payment can be up to 31% of your income, and all debts together up to 43%.
  • With a score of 580 or higher: the same 31% and 43% limits, or higher limits (up to 40% and 50%) if you have strengths such as cash savings left over after closing or a new payment close to your current rent.

The automated system can sometimes approve higher ratios, so ask your lender which rules apply to your file.

Living in the home

At least one borrower has to move into the home within 60 days of closing and plan to live there for at least one year. FHA generally insures only one home per borrower as a main residence, and it won't insure a loan meant for buying rental property.

Residency

You don't have to be a U.S. citizen. Lawful permanent residents can qualify on the same terms as citizens. So can citizens of the Federated States of Micronesia, the Marshall Islands and Palau. The lender will ask for proof of your status, and HUD notes that a Social Security card alone is not enough to prove immigration or work status.

FHA mortgage insurance

Every FHA loan has mortgage insurance. It protects the lender if you stop paying, and it comes in two parts.

The upfront premium is 1.75% of the base loan amount. You can pay it at closing or add it to your loan.

The annual premium is paid in monthly installments with your mortgage payment. For a loan of $726,200 or less with a term longer than 15 years:

Down paymentAnnual premiumHow long you pay it
Less than 5%0.55% of the balanceFor the life of the loan
5% to just under 10%0.50% of the balanceFor the life of the loan
10% or more0.50% of the balance11 years

Larger loans and 15-year loans have different rates. HUD lists them all in Appendix 1.0 of its Single Family Housing Policy Handbook 4000.1.

For example, on a $200,000 base loan, the upfront premium is $3,500. At 0.55%, the annual premium starts at about $1,100 a year, or roughly $92 a month, and goes down slowly as you pay off the balance.

With less than 10% down, the monthly premium usually lasts as long as you keep the loan. Ask a lender or housing counselor how that affects your total cost compared with a conventional loan.

2026 FHA loan limits

FHA caps how much you can borrow, and the cap depends on the county. For loans with case numbers assigned on or after January 1, 2026, HUD's 2026 limits are:

PropertyLowest-cost areas (floor)Highest-cost areas (ceiling)
1 unit$541,287$1,249,125
2 units$693,050$1,599,375
3 units$837,700$1,933,200
4 units$1,041,125$2,402,625

Many counties fall between the floor and the ceiling. Alaska, Hawaii, Guam and the U.S. Virgin Islands have their own adjusted limits because building costs more there. Look up your county with HUD's FHA mortgage limits tool.

HUD sets new limits each calendar year. As of October 2026, it had not yet announced the 2027 limits. Check HUD's FHA lender page if you expect to close in 2027.

Other FHA loan programs

  • The 203(k) rehabilitation loan lets you roll repair costs into your mortgage. The Limited 203(k) covers up to $75,000 in repairs. The Standard 203(k) is for bigger projects, needs at least $5,000 in work and requires a HUD-approved 203(k) consultant.
  • The Energy Efficient Mortgage (EEM) lets you add the cost of energy-saving improvements to an FHA purchase or refinance loan. The improvements have to cost less than the energy they're expected to save over their useful life.
  • FHA also insures loans for manufactured homes, whether you own the land or the home sits in a park.
  • The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage. All borrowers must be at least 62 at closing. It's for people who already own a home, not for buyers using an FHA purchase loan.

How to apply for an FHA loan

  1. Talk to a HUD-approved housing counselor (optional, but useful for first-time buyers). Call 800-569-4287 (TTY 202-708-1455) or search online. The CFPB says counselors can help with buying a home and credit problems, often at little or no cost.
  2. Check your credit reports and fix any errors before you apply.
  3. Find FHA-approved lenders near you with HUD's Lender List Search. You can search by city, state or ZIP code, and filter for lenders that do 203(k) loans.
  4. Apply with more than one lender. Each one must give you a Loan Estimate within three business days of receiving your application. Compare the interest rate, fees and cash needed at closing.
  5. Gather your documents: pay stubs, W-2s from the past two years, bank statements, records for any gift money, and proof of residency if you're not a U.S. citizen. Your lender will tell you exactly what it needs.
  6. Find a home and make an offer. The home must be appraised by an FHA roster appraiser, who checks its value and condition.
  7. Go through underwriting and closing. The lender makes the final decision on your loan, and you sign at closing.

Common problems to avoid

  • Picking one lender without comparing. Lenders can set stricter rules and different prices than FHA's minimums, so a second Loan Estimate can make a real difference.
  • Using money you can't document. Large deposits or cash gifts that can't be traced may not count toward your down payment.
  • Counting on a home that's priced over your county's limit. Check the limit before you start shopping.
  • Forgetting mortgage insurance. Ask the lender to include it in the monthly payment it quotes you.
  • Taking on new debt during the process. A new car loan or credit card can change your debt-to-income ratio before closing.

If you aren't ready to buy yet, our guide to how rent-to-own works explains another path, and the benefit finder can help you check for other housing help.

Frequently asked questions

What is the minimum credit score for an FHA loan?

FHA's minimum is 500, with at least 10% down. With a score of 580 or higher, you can put down 3.5%. Individual lenders may require a higher score.

Do I have to be a first-time homebuyer?

No. FHA loans are open to repeat buyers too. The main rule is that the home must be your main residence.

Can a family member give me my down payment?

Yes. FHA accepts gift funds from family members, your employer or union, certain close friends, charities and government homebuyer programs. The lender will need records showing where the money came from.

Can I drop FHA mortgage insurance?

If you put down 10% or more, the annual premium ends after 11 years on most loans. With less down, it usually lasts for the life of the loan.

Does HUD approve my FHA loan?

No. You apply with an FHA-approved lender, and that lender decides whether you qualify. FHA insures the loan after it closes. If you have questions about FHA rules, the FHA Resource Center is at (800) 225-5342.

Can I use an FHA loan for a duplex or fourplex?

Yes, if you live in one of the units. FHA loans cover homes with one to four units, and the 2026 loan limits are higher for multi-unit homes.

Sources

Up next · Low Income Mortgage

What Are Housing Grants? Where Real Housing Help Comes From

Federal housing grants go to states and cities, not to you directly. Learn how down payment help, USDA repair grants and free housing counselors work.

Read the guide Or see what you may qualify for

Want to go further? Our free Academy walks you through the application step by step. Open the Academy

More on Low Income Mortgage