If you’re eyeing a home but think a traditional mortgage is out of reach, an FHA loan might be your ticket. The Federal Housing Administration backs these loans, which means lenders can be more flexible. But there are still rules you have to follow. Below we break down the key requirements so you know exactly what lenders will look for.
FHA doesn’t demand a perfect credit score, but you’ll need at least a 580 rating to qualify for the 3.5% down‑payment option. Scores between 500 and 579 are still eligible, though you’ll have to put down 10%. Lenders will also check for recent bankruptcies or foreclosures – a two‑year gap after a bankruptcy and a three‑year gap after a foreclosure are typical cut‑offs.
The standout benefit of an FHA loan is the low down‑payment. With a 580+ score, you can put down as little as $1,500 on a $50,000 loan. If your score is lower, the down‑payment rises to 10% of the purchase price. Keep in mind you’ll also pay an upfront mortgage insurance premium (usually 1.75% of the loan) and a monthly insurance fee. Those fees protect the government against default, and they’re part of the cost of borrowing.
Lenders measure how much of your monthly income goes toward debt. For FHA loans, a DTI of 43% is the general ceiling, but some lenders stretch to 50% if you have strong compensating factors, like a high credit score or large cash reserves.
Stable income is a must. Expect to provide two years of tax returns, W‑2s, and recent pay stubs. Self‑employed borrowers need to show profit and loss statements and possibly a year‑to‑date balance sheet. The goal is to prove you can comfortably make the mortgage payments.
Not every house qualifies. The home must be your primary residence – you can’t use an FHA loan for a vacation home or investment property. The property also has to meet the FHA’s minimum safety and soundness standards. An FHA‑approved appraiser will check things like roof condition, heating, electrical systems, and overall livability. If the home needs repairs, you may have to fix them before closing.
FHA loans have caps that vary by county. In high‑cost areas, the limit can be as high as $1,089,300 (2024 figures); in most of the country, it sits around $420,680. Check the specific limit for your county to make sure the loan amount you need fits inside the ceiling.
To recap, you’ll need a decent credit score (580+ for the low down‑payment), a small down‑payment, manageable debt levels, stable income, and a home that passes FHA’s inspection. Gather your documents early – tax returns, pay stubs, bank statements – and get pre‑approved with a lender who knows FHA inside out. The pre‑approval process will flag any potential issues before you start house hunting, saving you time and disappointment.
FHA loans open the door for many first‑time buyers, but they still demand some homework. Knowing these requirements upfront puts you in the driver’s seat and makes the whole process less stressful. Ready to start? Pull your financials together, find a lender, and begin the search for a home that fits both your budget and the FHA guidelines.
