- Explore mortgages today and get started on your homeownership goals
- FHA vs. conventional loans
- Credit score for FHA loans
- Down payments and gift funds
- Shopping for a home?
- Home purchase: Basic Home Mortgage 203(b)
- Other specialty FHA loans
- How to apply for an FHA loan
- Pros and cons of FHA loans
- Ways to get the best FHA mortgage rates
An FHA loan is a mortgage insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development. With a minimum 3.5% down payment for borrowers with a credit score of 580 or higher, FHA loans are often a good fit for first-time home buyers or people with little savings or credit challenges.
You can use an FHA home loan to buy or refinance numerous types of homes, including:
The federal government doesn’t issue FHA loans, but it does insure them. That insurance protects lenders in case of default, which is why FHA lenders are willing to offer favorable terms to borrowers who might not qualify for a conventional home loan.
FHA loans are issued by private, FHA-approved lenders, including many banks, credit unions and nonbanks (a type of lender).
Did you know…
Specific types of FHA loans can also be used to finance new construction or renovate an existing home. However, all properties — existing or new construction — must undergo an FHA appraisal. If the property meets government standards, then you can use an FHA loan to buy (or refinance) it.
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FHA vs. conventional loans
In general, it’s easier to qualify for an FHA loan than for a conventional loan, which is a mortgage that isn’t insured or guaranteed by the federal government.
Here are some key differences between FHA and conventional loans:
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Credit score and history: FHA loans allow for lower credit scores than conventional loans. If you’ve had credit problems (including bankruptcy), you might find it easier to qualify for an FHA loan.
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Mortgage insurance: Unlike conventional loans, all FHA loans require mortgage insurance. (However, the amount you pay varies based on the size of your down payment.) With a conventional loan, mortgage insurance generally isn’t required if you make a 20% down payment or once you reach 20% equity in your home.
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Gift funds for down payments: FHA rules are more flexible regarding monetary gifts from family, employers or charitable organizations you can apply to your down payment.
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FHA appraisal: To qualify for an FHA purchase loan, the property must undergo an appraisal to make sure it meets government standards for health and safety. An FHA appraisal is different and separate from a home inspection. Conventional loans don’t require this.
The FHA sets minimum requirements for borrowers seeking an FHA loan. However, each FHA-approved lender can determine its own underwriting standards, so long as those requirements are in line with the minimums set by the FHA. For instance, one lender may require a minimum credit score of 600 and another a minimum of 620.
In general, here are the basic requirements to expect when applying for an FHA loan.
Credit score for FHA loans
According to the FHA, the minimum credit score for an FHA loan is 500. If your score falls between 500 and 579, you can qualify for an FHA loan, but you’ll need to make a down payment of at least 10%.
If your credit score is 580 or higher, you can qualify for a down payment as low as 3.5%.
Again, these are FHA guidelines; individual lenders can and often do opt to require a higher minimum credit score.
🤓 Nerdy Tip
If your credit score doesn’t measure up, you may want to work on building your credit before you begin home shopping. When you’re ready, find a lender that specializes in FHA loans. These lenders might be more experienced at working with credit-challenged borrowers.
DTI requirements for FHA loans differ based on your credit score and other compensating factors, such as how much cash you have in the bank. If you have a credit score from 500 to 579, the FHA generally requires a DTI of less than 43%.
It’s still possible to get an FHA loan with a DTI that’s higher than 50%, but you’ll have to meet compensating factors, and your options will be limited.
Down payments and gift funds
The minimum down payment required for an FHA loan is 3.5% if you have a credit score of 580 or higher. If you have a credit score from 500 to 579, you’ll have to put down at least 10% of the purchase price.
The good news? It doesn’t all have to come from savings. You can use gift money for your FHA down payment, so long as the donor provides a letter with their contact information, their relationship to you, the amount of the gift and a statement that no repayment is expected.
🤓 Nerdy Tip
Look into state and local down payment assistance programs for first-time home buyers, usually defined as someone who has not owned a home within the past three years. You may be able to find low- or no-interest loans, or even grants, to help you pull together the cash.
The property you’re trying to buy with an FHA loan has to undergo an appraisal from an FHA-approved professional and meet FHA minimum property requirements.
Shopping for a home?
Compare mortgage rates for FHA loans and other first-time homebuyer options.
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If your down payment is less than 10%: You will pay FHA mortgage insurance for the life of the loan.
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If your down payment is 10% or more: You will pay FHA mortgage insurance for 11 years.
With a conventional loan, you can cancel private mortgage insurance once you reach 20% equity in your home. FHA mortgage insurance can’t be canceled in the same way.
🤓 Nerdy Tip
Once you have enough home equity, you could choose to refinance your FHA loan into a conventional loan. This would remove the FHA mortgage insurance requirement, but you’d have to meet new qualifications and pay additional closing costs and fees.
Home purchase: Basic Home Mortgage 203(b)
The Basic Home Mortgage 203(b) is the standard single-family home loan backed by the FHA. Only primary residences — not vacation or second homes — qualify for FHA-insured loans.
You may want to refinance your FHA loan to lower your interest rate, shorten your mortgage term or get cash flow for a costly project, such as a home renovation. Options include:
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FHA 203(k) rehabilitation mortgages: This option helps borrowers finance fixer-uppers by rolling purchase and renovation costs into one loan. The standard 203(k) loan lets borrowers finance improvements over $5,000. The FHA limited 203(k) loan lets borrowers finance improvements up to $75,000.
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Title 1 Property Improvement Loans: These loans are also available to finance home repairs and improvements. Homeowners can obtain this loan without refinancing their existing mortgage, and the funds can be used to supplement a 203(k) loan. However, you can borrow only up to $25,000 for a single-family home.
Other specialty FHA loans
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Energy-efficient mortgages: An energy-efficient mortgage can be used to finance home improvements to help a home save energy. To qualify for this financing, the home must undergo an energy assessment from a qualified professional.
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Construction-to-permanent loans: This loan type helps borrowers finance the purchase of a home that’s still being built by paying the contractor in installments. When the home is finished, the loan converts to a permanent mortgage. Qualifying for these types of loans can be more difficult and time-consuming than a traditional purchase mortgage.
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Manufactured homes: This includes the type sometimes called a mobile home. Manufactured homes can be bought with FHA financing, so long as everything meets HUD requirements. For example, HUD mandates that a manufactured home is at least 400 square feet, and it must be designed to use as a dwelling attached to a permanent foundation.
No matter what type of FHA loan you’re seeking, there will be limits on the mortgage amount. FHA loan limits in 2026 range from $541,287 to $1,249,125.
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Low-cost county limit: The upper limit for FHA loans on single-family homes in low-cost counties is $541,287. An example is Lucas County, Ohio, where Toledo is located.
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High-cost county limit: The upper limit for FHA loans in the highest-cost counties is $1,249,125, which would include mortgages in San Francisco County, California, for example.
How to apply for an FHA loan
Applying for an FHA loan will require personal and financial documents, including but not limited to:
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A valid Social Security number.
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Proof of U.S. citizenship, legal permanent residency or certain eligible work statuses.
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Bank statements for, at a minimum, the past 30 days. You’ll also need to provide documentation for deposits made during that time, such as pay stubs.
Your lender may be able to automatically retrieve some required documentation, like credit reports, tax returns and employment records. Special circumstances — such as if you’re a student or you don’t have a credit score — may require additional paperwork.
Pros and cons of FHA loans
An FHA loan might be your best option for homebuying if you have credit challenges. Still, it’s important to understand the trade-offs.
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Lower minimum credit score requirements than conventional loans.
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Down payments as low as 3.5%.
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Debt-to-income ratios as high as 50% allowed (in some cases, may be higher if you meet compensating factors).
Disadvantages of FHA loans
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FHA mortgage insurance lasts the full term of the loan with a down payment of less than 10%.
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Property must undergo a separate appraisal and meet strict health and safety standards, which some sellers will consider an added hurdle.
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No jumbo loans: The loan amount cannot exceed the conforming limit for the area.
Though the FHA sets standard requirements, FHA-approved lenders’ requirements may be different.
Ways to get the best FHA mortgage rates
Frequently Asked Questions
