A 612 credit score, $9,400 in savings, and a 1954 ranch with a furnace older than the buyer. Files like that get approved every week. Files that look stronger on paper get declined. The gap usually comes down to knowing which FHA loan requirements are hard lines and which are guidelines a human underwriter can work around.
The FHA doesn’t lend you money. It insures the loan so that lenders will take a chance on a 3.5% down payment. That insurance is why the rules exist, and why they’re written the way they are: the program is designed to be forgiving on credit history but strict on the property and the math.
The baseline requirements, in one place
Here’s the whole program in shorthand before we get into the parts that trip people up:
- Credit score: 500 minimum; 580 or better for the lowest down payment
- Down payment: 3.5% with a 580+ score, 10% with a 500–579 score
- Debt-to-income ratio: generally capped at 43%, stretchable toward 50% with compensating factors
- Employment: two years of stable history, with income documented and likely to continue
- Property: primary residence only, one to four units, must meet HUD’s Minimum Property Requirements
- Loan limit: must fall under the FHA ceiling for the county
- Mortgage insurance: 1.75% upfront plus an annual premium of roughly 0.55%
One catch that isn’t on that list: lenders add their own requirements on top of FHA’s. These are called overlays, and plenty of banks set a 620 or 640 credit floor even though HUD allows 500. A lender telling you no doesn’t always mean the FHA is telling you no.
Credit score and down payment move together
The FHA doesn’t use one credit cutoff. It uses tiers, and the down payment changes at each one.
580 and above
This is the headline number. At 580, you qualify for the 3.5% minimum. On a $260,000 purchase that’s $9,100 down. It doesn’t have to be your own money, either. FHA allows the entire down payment to be a gift from a family member, documented with a gift letter and a paper trail showing where the funds came from.
500 to 579
You’re still eligible, but the down payment jumps to 10%. On the same $260,000 house, that’s $26,000 instead of $9,100. Going from a 579 to a 580 score can be worth $17,000 in cash at closing, which is why a few months of credit cleanup often pays better than any negotiation with a seller.
Below 500
Not eligible for an FHA loan. This is one of the few absolute lines in the program.
No score at all
Borrowers without a traditional credit history can still qualify through non-traditional credit. You’ll need a track record of 12 months of on-time payments on things like rent, utilities, car insurance, or a phone bill, typically three or four accounts, verified in writing.
Debt-to-income is the number that sinks more files than credit
Your DTI is all your monthly debt payments divided by your gross monthly income. The new house payment counts as principal, interest, taxes, insurance, and the mortgage insurance premium. So do car loans, student loans, child support, and minimum credit card payments.
Here’s how it plays out. A household earning $5,800 a month gross, with a $420 car payment, $180 in student loans, and $65 in minimum card payments, has $665 of existing debt. Add a $1,900 house payment and the total is $2,565, or 44.2%. That’s above FHA’s 43% guideline, but not automatically a decline. Automated underwriting can approve up to roughly 50% when compensating factors exist: reserves in the bank, a long history of paying a similar rent, or a credit score well above the minimum.
Student loans get their own rule. FHA generally counts the greater of 1% of the outstanding balance or the actual payment. On a $48,000 balance, that’s $480 a month even if you’re paying $0 under an income-driven plan, unless the servicer documents the lower payment in writing.
The house has to pass its own test
FHA appraisals are stricter than conventional ones. The appraiser isn’t just establishing value; they’re confirming the home meets HUD’s Minimum Property Requirements, and a bad report can stall a deal over a $200 repair.
The usual trouble spots:
- Peeling or chipping exterior paint on homes built before 1978, which triggers a lead-based paint concern
- Utilities that are shut off at the time of inspection, since the appraiser can’t test systems that aren’t running
- Missing handrails on stairways, exposed wiring, or a roof with remaining life that’s clearly short
- Crawl space access that’s blocked or a basement with active moisture
- Condos that aren’t on the FHA-approved project list
Sellers can pay for these repairs, and they can also contribute up to 6% of the purchase price toward your closing costs. That concession is negotiable and worth asking for in a slow market.
Income and paperwork: the two-year rule
Salaried borrowers typically need a two-year work history with no unexplained gaps longer than six months. Overtime, bonuses, and commissions are averaged over two years and only count if there’s a reasonable expectation they’ll continue. Self-employed borrowers hand over two years of personal and business returns, and the income is calculated from the adjusted gross income line, not the number the accountant optimized.
If you switched from a W-2 to full-time self-employment last spring, expect a longer conversation and possibly a lower qualifying income than you’d like.
What doesn’t automatically disqualify you
This is where FHA earns its reputation as the forgiving option.
- Chapter 7 bankruptcy: eligible two years after the discharge date
- Chapter 13: eligible after 12 months of on-time trustee payments with court approval
- Foreclosure, deed-in-lieu, or short sale: three-year waiting period
- Medical collections: excluded from the debt calculation entirely
- Non-medical collections: accounts totaling under $2,000 are generally ignored
FHA also permits a non-occupant co-borrower, such as a parent, to help a buyer qualify on a one-unit property, subject to limits on the borrower’s own contribution to the payment.
The costs that don’t show up in the down payment
Mortgage insurance is the line item borrowers underestimate most. There are two pieces. The upfront premium is 1.75% of the base loan amount and is usually financed into the loan, so on a $252,000 base loan you’d add about $4,410. The annual premium is roughly 0.55% of the loan balance, paid monthly, which comes to about $115 a month on that same loan.
Then the part that surprises people: if you put down less than 10%, that annual premium stays on the loan for its entire life. At 10% down or more, it drops off after 11 years. Refinancing later to a conventional loan is the only way to shed it sooner.
You’re also looking at closing costs of roughly 2% to 5% of the purchase price, plus a home inspection you should pay for yourself even though the appraisal technically covers condition.
Loan limits and where FHA stops working
The FHA won’t insure a loan above the limit for your county. For 2025, the floor for low-cost areas is $524,225 and the ceiling for high-cost markets is $1,209,750, with most counties landing somewhere between. A house priced above the local limit means FHA is off the table, and you’re comparing a conventional loan with private insurance or a jumbo loan at a different pricing tier.
Geography matters in other ways too. In a qualifying rural ZIP code, a USDA loan can beat FHA outright because it allows zero down and charges a lower annual fee. On a $240,000 purchase, the difference in monthly cost is real money, and the eligibility map decides it for you.
It’s worth reading a full side-by-side comparison chart of loan types rather than judging each one on its down payment alone, since mortgage insurance, rate, and loan limits rarely tell the same story.
Run your own numbers before a lender runs them for you
Pull all three credit reports for free, dispute anything that’s plainly wrong, and check the score each bureau is reporting, because lenders use the middle of the three. Add up your monthly debts and divide by your gross income to see where you land before a loan officer does it for you.
Then talk to at least two FHA-approved lenders and ask each one directly what their credit score floor is, whether they have overlays above FHA guidelines, and how they calculate student loan payments. The answers differ more than you’d expect. That’s also why the cheapest quote on paper can lose by thousands over the life of the loan, which is the whole argument in this breakdown of how loan comparisons quietly go wrong.
FHA requirements are forgiving on purpose. The borrowers who struggle are usually the ones who assumed the 3.5% down payment was the only rule that mattered, and found out about the appraisal, the DTI ceiling, or the lifetime insurance premium at the worst possible moment. Knowing all of it in advance is what turns a marginal file into a clean approval.