How to Qualify for an FHA Home Loan: Credit, Income, and Limits

To qualify for an FHA home loan, you need a credit score of at least 500, a down payment of 3.5% (with a score of 580 or higher) or 10% (with a score between 500 and 579), a debt-to-income ratio generally at or below 43%, roughly two years of steady employment, and a primary-residence property that passes FHA safety standards. Every FHA loan also carries mandatory mortgage insurance, which adds to your monthly payment for as long as you hold the loan when your down payment is under 10%.

Credit Score and Down Payment

FHA uses a two-tier structure that ties your credit score to your minimum down payment. A score of 580 or higher qualifies you for the maximum financing available: a 96.5% loan-to-value ratio, meaning 3.5% down. On a $300,000 home, that is $10,500 upfront rather than the $60,000 a 20% conventional down payment would require.¹

If your score is between 500 and 579, you can still qualify, but the down payment rises to 10%. Below 500, FHA-approved lenders cannot insure the loan.¹

Down payment funds do not have to come entirely from your own savings. FHA allows gifts from family members, employers, labor unions, charitable organizations, and government agencies that assist first-time or lower-income buyers. Friends can contribute if the relationship is documented. In every case the donor signs a gift letter confirming the money is not a loan. No one with a financial stake in the transaction can help: not the seller, the real estate agent, or the loan officer.

If You Have No Credit Score

Borrowers with no credit history are not automatically excluded. Lenders can build a nontraditional credit profile using your rent payments and utility accounts such as electricity, gas, water, and cable. You need at least 12 months of verifiable payment history, with no more than one late payment on any of those accounts.²

The trade-off is tighter underwriting. Debt-to-income ratios are capped at 31% for housing costs and 43% for total debt with no exceptions, and you need two months of cash reserves after closing from your own accounts rather than gift funds.²

Income, Employment, and Debt-to-Income

Your debt-to-income ratio is the share of your gross monthly income taken up by debt payments. FHA caps the back-end ratio, which includes all recurring debts plus your projected mortgage payment, at 43%. Underwriters can approve higher ratios when there are compensating factors, such as substantial cash reserves or a track record of carrying a similar housing cost without trouble.³

Lenders look for at least two years of consistent employment. You do not need to have stayed at one employer the whole time, but your income should be stable or trending upward within the same field. Gaps longer than a month usually need a written explanation showing the gap was temporary and income has resumed.⁴

How Student Loans Are Counted

Student debt trips up many FHA applicants because the calculation is not intuitive. If you are actively repaying and the monthly payment shows on your credit report, the lender uses that number. If your loans are in deferment or forbearance and the report shows a $0 monthly payment, the lender does not ignore them. Instead, they assume a monthly obligation of 0.5% of the outstanding balance. On a $40,000 balance, that is a $200 hit to your DTI even though you are not currently writing a check.¹

If you are on an income-driven repayment plan and actively making payments, the lender can use the actual documented amount. Getting onto an IDR plan before you apply can meaningfully lower the debt figure counted against you.¹

Property, Occupancy, and Appraisal Rules

FHA loans are only for primary residences. At least one borrower on the mortgage must move into the property within 60 days of closing. Investment properties, vacation homes, and short-term flips are excluded.

Eligible property types include single-family homes, multi-family buildings with up to four units when you live in one of them, condominiums in HUD-approved complexes, and manufactured homes on permanent foundations.

The FHA appraisal does two things at once: it sets the home’s market value and checks whether the property meets minimum health and safety standards. This is more demanding than a conventional appraisal. Appraisers flag issues such as chipped or peeling paint in homes built before 1978, missing handrails on stairs, broken windows or doors, standing water near the foundation, evidence of termite damage, and excessive dampness in crawl spaces.⁵

When the appraiser flags these conditions, the seller typically handles the repairs before closing. In a competitive market this can make FHA offers less attractive, which is worth knowing going in. You can sometimes negotiate a repair credit, but the physical work still has to happen before the lender funds the loan.

Buying a three- or four-unit property adds a self-sufficiency test. The net rental income from all units, including an estimated rent for the unit you will occupy, must equal or exceed the total monthly mortgage payment. You also need three months of mortgage payment reserves after closing, and those reserves cannot come from gift funds.⁶

Mortgage Insurance Premiums

Every FHA loan carries mortgage insurance, and it is the biggest cost that sets FHA apart from conventional financing. You pay two types: an upfront premium at closing and an annual premium collected monthly.

The upfront mortgage insurance premium is 1.75% of the base loan amount. On a $300,000 loan that is $5,250. Most borrowers roll this into the loan balance rather than paying it out of pocket.⁷

The annual premium varies with your loan term, loan-to-value ratio, and loan amount. For a standard 30-year loan with the minimum 3.5% down payment, expect roughly 0.50% to 0.85% of the loan balance per year, which on a $300,000 loan works out to about $125 to $215 added to your monthly payment.

How long you pay the annual premium is the detail that catches most borrowers off guard. Put 10% or more down and it drops off after 11 years. Put less than 10% down, which includes everyone using the 3.5% minimum, and you pay annual MIP for the life of the loan. The only way out is to refinance into a conventional mortgage once you have built enough equity, typically 20%.⁷

2026 Loan Limits

FHA does not insure loans above a set dollar amount, and the cap varies by county based on local home prices. For 2026, the national floor for a single-family home is $541,287, which applies in lower-cost markets. In high-cost areas the ceiling reaches $1,249,125.⁸

Your county limit sits somewhere between the floor and the ceiling. HUD publishes a free lookup tool where you can enter your state and county to find the exact figure, and the same tool shows the higher limits for two-, three-, and four-unit properties.⁹

Waiting Periods After Bankruptcy or Foreclosure

A past bankruptcy or foreclosure does not permanently disqualify you, but you must wait out specific time periods before applying.

Chapter 7 bankruptcy: you can apply two years after the discharge date, not the filing date. During that time, you need to re-establish credit and show responsible financial management.
Chapter 13 bankruptcy: you may qualify after 12 months of on-time payments to your court-approved plan, with the trustee’s written approval.
Foreclosure: the waiting period is three years from the date the foreclosure was completed.

These waiting periods are shorter than what conventional lenders typically require. Lenders want to see that whatever caused the earlier crisis has been resolved, not just that the clock has run out.

Documents to Have Ready

The foundation of your application is the Uniform Residential Loan Application, which your lender provides. It covers employment, income, assets, debts, and residential history for the past two years.⁴

Beyond the application, plan to gather:

Your most recent pay stub showing at least 30 days of year-to-date earnings, plus W-2s from the past two years. Self-employed borrowers need two years of complete federal tax returns.
Recent bank and investment account statements covering at least two months. If your down payment includes gift funds, add the signed gift letter and a paper trail showing the transfer.
Social Security numbers for every applicant, two years of residential addresses, and employer names, addresses, and phone numbers for every job in the two-year lookback.
Documentation for any debts that might not appear on your credit report, such as private loans or payment agreements.

Accuracy matters more than speed. Inconsistencies between your application and supporting documents are the most common reason files stall in underwriting.⁴

1
Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook
2
Department of Housing and Urban Development. Nontraditional Credit Verification and Evaluation
3
HUD. HUD 4155.1 Chapter 4 Section F – Borrower Qualifying Ratios Overview
4
HUD.gov. FHA TOTAL Mortgage Scorecard User Guide – Chapter 2
5
HUD.gov. General Acceptability Criteria for FHA-Insured Mortgages
6
HUD Archives. HOC Reference Guide – Rental Income
7
Department of Housing and Urban Development. Appendix 1.0 – Mortgage Insurance Premiums
8
U.S. Department of Housing and Urban Development. HUD’s Federal Housing Administration Announces 2026 Loan Limits
9
HUD.gov. FHA Mortgage Limits