FHA loans

FHA loan requirements for first-time buyers

FHA rules are public, and they are more specific than most summaries suggest. Here are the requirements that shape a first-time buyer's FHA loan, each traced to a HUD document, with a worked example of what the insurance adds.

Reviewed November 2026 · Written for Buy Home Tips from the sources listed below

FHA loans are made by approved private lenders and insured by the Federal Housing Administration. HUD's own myth-busting sheet sums up the appeal: FHA's minimum required investment can be lower than most conventional loans, only 3.5 percent in most cases, and FHA has lower minimum credit score requirements than most conventional mortgages. The rules below explain what sits behind those headlines.

2026 FHA one-unit loan limits. From HUD Mortgagee Letter 2025-23, case numbers assigned on or after January 1, 2026

Credit score tiers

FHA ties the down payment to the borrower's minimum decision credit score. At or above 580, a borrower is eligible for maximum financing. Between 500 and 579, the loan-to-value is limited to 90 percent. Below 500, the transaction is not eligible for FHA-insured financing. Borrowers with non-traditional or insufficient credit histories can still get maximum financing but must be manually underwritten. HUD's Mortgagee Letter 2026-11 changes how the decision score is selected for case numbers assigned on or after January 1, 2027, and keeps these thresholds.

Debt-to-income ratios

Most FHA loans go through FHA's automated scorecard, which weighs the whole file. For manually underwritten loans, HUD publishes ratio limits: 31 percent for the total mortgage payment and 43 percent for total fixed payments as the baseline, with higher limits allowed for borrowers at 580 and above who have specific compensating factors such as verified cash reserves or residual income. Lenders explain which path your loan takes.

The down payment and where it can come from

At 3.5 percent down, a $300,000 purchase needs $10,500 of minimum investment. HUD notes that this money can come from your own funds, gifts, second mortgages and grants through down payment assistance programs. Gifts and assistance need documentation, so start the paper trail early.

Mortgage insurance

FHA charges two premiums. The upfront premium is 1.75 percent of the base loan, typically financed into the loan. The annual premium is divided into monthly payments. HUD's Mortgagee Letter 2023-05 lowered annual premiums for most new purchase loans. For a 30-year loan with a base amount at or below the letter's threshold of $726,200, the annual premium is 0.55 percent when the loan-to-value is above 95 percent and 0.50 percent at 95 percent or below. With more than 90 percent loan-to-value, it is paid for the life of the loan; at 90 percent or less, for 11 years.

Loan limits

FHA sets maximum loan amounts by county. For case numbers assigned on or after January 1, 2026, HUD's Mortgagee Letter 2025-23 sets the one-unit floor at $541,287, which is 65 percent of the national conforming limit, and the ceiling at $1,249,125, which is 150 percent. Special exception areas in Alaska, Hawaii, Guam and the Virgin Islands have a one-unit ceiling of $1,873,625. HUD's mortgage limits search shows the limit for any county.

Occupancy and property standards

The home must be your principal residence. FHA appraisers estimate value and check that the property meets minimum standards for safety, security and soundness. Items such as peeling paint on homes built before 1978, missing handrails, broken windows or a roof near the end of its life may need repair before closing. Condominium units generally need the project to be FHA-approved or to meet single-unit approval rules.

Is FHA your best option?

FHA often suits buyers with scores below the levels where conventional pricing improves, buyers with higher debt ratios, and buyers using assistance programs. Conventional loans can be cheaper for buyers with stronger credit and larger down payments, largely because private mortgage insurance can be cancelled. Ask two lenders for FHA and conventional Loan Estimates on the same day and compare the cost over the years you expect to keep the loan. The calculator below gives a quick view of the monthly payment for any scenario.

Mini calculator: the full monthly payment

Price, down payment, rate and term give principal and interest. Add your own quotes for property tax, insurance, mortgage insurance and HOA dues to see the whole bill.

Home price ($)

Down payment (% of price)

Interest rate (% a year)

Loan term (years)

Monthly tax + insurance + mortgage insurance + HOA ($)

Enter your figures to see the result. Nothing you type leaves this page.

A planning estimate, not a loan offer. The rate shown by default is only a placeholder; type a rate from a real Loan Estimate.

FHA readiness checklist

Confirm your decision credit score and which down payment tier it puts you in.
Look up your county's FHA limit with HUD's search tool.
Ask lenders for the upfront and annual premium on your Loan Estimate.
Price a conventional loan on the same day for comparison.
Check whether a target condo is FHA-approved before you offer.
Ask the seller about peeling paint, missing rails or safety issues the appraiser may flag.

Questions buyers ask

What is the minimum credit score for an FHA loan?

Under HUD's thresholds, 580 or higher qualifies for maximum financing, 500 to 579 is limited to 90 percent loan-to-value, and below 500 is not eligible. Lenders can set higher minimums.

How much is FHA mortgage insurance?

There is an upfront premium, typically financed into the loan, and an annual premium paid monthly. HUD's Mortgagee Letter 2023-05 sets the annual rate by loan amount, term and loan-to-value; for a common 30-year loan with less than 5 percent down at or below the letter's loan-amount threshold, it is 0.55 percent a year.

Can I use gift money for an FHA down payment?

Yes. HUD notes that the 3.5 percent minimum investment may come from the borrower's own funds, gifts, second mortgages and grants through down payment assistance programs, subject to documentation.

Are FHA loans only for first-time buyers?

No. Repeat buyers can use FHA, but the home must be your principal residence.

Sources checked for this page

Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.