FHA Loan Guide
FHA Loans: 3.5% Down, 580 FICO, Built for First-Time Buyers
FHA loans are government-insured mortgages with looser credit and down-payment rules than conventional. If your credit's still rebuilding or you don't have 20% saved, FHA opens the door — with the trade-off of lifetime mortgage insurance.
Today's 30-Yr FHA
5.49%
/ 6.4% APR
3.5%Minimum down
580Minimum FICO
57%Max DTI w/ comp factors
In this guide
What Is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration (part of HUD). The FHA doesn't lend money directly — instead, it guarantees the loan to lenders, which lets them approve borrowers with lower credit and smaller down payments than conventional loans allow.
3.5% Down Minimum
With a 580+ FICO, you only need 3.5% down. Between 500-579, you need 10% down. Compare to conventional's 5% minimum (or 3% for first-time buyers).
Lower Credit Floor
FHA's minimum FICO is 500, vs. 620 for conventional. Most lenders set their own overlay at 580. Bankruptcy and foreclosure waiting periods are also shorter.
Government-Insured
If you default, the FHA pays the lender. That insurance is funded by you via MIP (mortgage insurance premium), built into every FHA loan.
FHA Loan Requirements & Qualifications
Here are the official FHA guidelines. Individual lenders may set tighter "overlays" on top of these (most require 580 FICO even though FHA allows down to 500).
| Requirement | FHA Standard |
|---|---|
| Minimum credit score | 500 (with 10% down) / 580 (with 3.5% down). Most lenders cap at 580. |
| Minimum down payment | 3.5% with 580+ FICO / 10% with 500-579 FICO. Can be gifted. |
| Debt-to-income ratio | 43% standard / up to 57% with compensating factors |
| Mortgage insurance | Upfront MIP 1.75% (financed into loan) + Annual MIP 0.15%-0.55% |
| Property occupancy | Primary residence only. No second homes or investment properties. |
| Property type | 1-4 unit residential. Condo must be FHA-approved. Manufactured homes allowed with restrictions. |
| Employment history | 2 years steady employment (gaps allowed with explanation). Self-employed need 2 yrs tax returns. |
| Bankruptcy waiting period | 2 years from Chapter 7 discharge / 1 year from Chapter 13 (with on-time payments) |
| Foreclosure waiting period | 3 years from completion (vs. 7 years on conventional) |
| Mortgage payment vs. income | Housing ratio max 31% / total debt ratio max 43% (without comp factors) |
| Gift funds for down payment | 100% can be gifted from family. Down-payment assistance allowed. |
| Loan limit (2026 floor) | $524,225 in most counties / up to $1,249,125 in high-cost areas |
FHA Mortgage Insurance (MIP) Explained
FHA's biggest cost — and biggest catch — is mandatory mortgage insurance. There are TWO premiums: an upfront one paid at closing (1.75% of the loan), and an annual one (0.15%-0.55%) split into monthly payments. Unlike conventional PMI, FHA's annual MIP often stays for the LIFE of the loan.
Upfront MIP: 1.75%
Charged once at closing. On a $400K loan that's $7,000. Almost always financed INTO the loan rather than paid out of pocket, so you end up financing $407,000.
Annual MIP: 0.55%
The standard rate for 30-year FHA with less than 5% down. Split into monthly payments. On a $400K loan that's $183/month added to your payment.
Lifetime MIP
If your down payment was less than 10%, MIP stays for the LIFE of the loan. With 10%+ down, MIP drops after 11 years. This is the #1 reason FHA borrowers refinance to conventional once they have equity.
Interactive MIP Calculator
See the exact upfront and monthly MIP for your scenario. Numbers update as you type.
Upfront MIP (1.75%)
$7,000
Annual MIP Rate
0.55%
Monthly MIP Cost
$183
2026 FHA Loan Limits
FHA limits are set as 65% of the conforming conventional limit. Most counties use the "floor"; high-cost metros (Bay Area, LA, DC, Honolulu) use the ceiling.
Floor (most counties)
$524,225
High-Cost Ceiling
$1,249,125
FHA Loan Types & Programs
FHA isn't just one loan — it's a family of programs. Most borrowers use the standard 203(b). Renovation buyers use the 203(k). Existing FHA borrowers use the Streamline.
FHA 203(b)
The mainstream FHA loan. 3.5% down, 30-year fixed, single-family or 1-4 unit. About 95% of FHA loans are 203(b).
FHA 203(k)
Buy a fixer-upper AND finance the renovation in one loan. Standard 203(k) for major work, Limited 203(k) for under $35K of repairs.
FHA Streamline
Refinance an existing FHA loan without a new appraisal or income docs. Must have a net tangible benefit (lower payment or shorter term).
FHA Cash-Out
Tap home equity for cash with an FHA loan. Up to 80% LTV. Full income/asset verification required (unlike Streamline).
HECM (FHA Reverse)
Home Equity Conversion Mortgage. Lets borrowers 62+ tap home equity without monthly payments. Fully insured by FHA.
FHA Energy Efficient Mortgage
Add the cost of energy-efficient improvements (solar, insulation, windows) to your FHA loan. Common when combined with 203(k).
Wondering if you'd qualify?15-minute call. No credit pull. Find out before you make an offer.
Check My Eligibility →FHA vs Conventional vs VA
FHA isn't always the cheapest option, especially for stronger credit files. Here's the honest side-by-side.
| Factor | FHA This Page | Conventional | VA |
|---|---|---|---|
| Min down payment | 3.5% | 3% | 0% |
| Min FICO | 580 (500 with 10% down) | 620 | ~580 (lender set) |
| Mortgage insurance | MIP for LIFE of loan (if <10% down) | PMI drops at 78% LTV | None ever |
| Upfront mortgage insurance | 1.75% (financed) | None | VA funding fee 1.4-3.6% (financed) |
| Max loan amount (most counties) | $524,225 | $832,750 | No max (full entitlement) |
| Max DTI | 57% with comp factors | 50% with comp factors | 60% with comp factors |
| Property type | Primary only | Primary, 2nd home, investment | Primary only |
| Bankruptcy waiting period | 2 years (Ch 7) | 4 years (Ch 7) | 2 years (Ch 7) |
| Best for | First-time buyers, lower credit | Strong credit, 5%+ down | Military / veterans |
FHA Pros & Cons
Balance is essential. FHA opens doors, but those doors come with a tradeoff.
Pros of FHA Loans
- Just 3.5% down with a 580 FICO — lowest barrier to entry of any common loan type
- Credit floor of 500 (with 10% down) — rebuilding-credit borrowers have options
- 100% gift funds allowed for down payment — parents/family can cover the entire 3.5%
- Higher DTI tolerance (up to 57% with comp factors) than conventional
- Shorter waiting periods after bankruptcy or foreclosure (2-3 years vs. 4-7)
- FHA Streamline refi has minimal docs — no appraisal, no income verification
- Assumable: a future buyer can take over your FHA loan at your existing rate
Cons of FHA Loans
- Lifetime MIP if you put down less than 10% — can't be removed without refinancing
- Upfront MIP of 1.75% adds $7K to a $400K loan from day one
- Lower loan limits than conventional in most counties
- Primary residence only — no second homes or investment property
- Stricter property standards (FHA appraisals catch more issues; condo must be FHA-approved)
- Once equity hits 20-30%, refinancing to conventional usually saves $150-$300/month
- Total all-in monthly payment often higher than conventional for borrowers with 700+ FICO
Who FHA Is Best For
FHA earns its place for specific scenarios. If you fit one of these, FHA usually wins the math vs. conventional.
FICO 580-680
FHA pricing barely changes between 580 and 720, while conventional pricing gets harsh below 700. FHA typically wins for credit under 680.
Limited Savings
Only 3.5% down with full gift-fund allowance. On a $400K home that's $14K vs. $20K for conventional 5%.
Recent Bankruptcy / Foreclosure
FHA accepts borrowers 2 years post-Chapter 7 or 3 years post-foreclosure. Conventional requires 4 and 7 years respectively.
First-Time Buyers
FHA's structure (low down, lower credit, friendly DTI) is optimized for first-time buyers. Plus most state DPA programs pair best with FHA.
Buying a Fixer-Upper
FHA 203(k) is the easiest way to finance both the home purchase AND renovation costs in a single loan. Unique to FHA.
High DTI Scenarios
If your debt-to-income runs 45%+, FHA can stretch to 57% with compensating factors. Conventional usually caps at 50%.
Estimate Your FHA Monthly Payment
Includes upfront MIP financed into the loan and monthly MIP. Rate auto-fills from today's published FHA rate.
FHA Loan FAQ
The questions every first-time and rebuilding-credit buyer asks. Direct answers.
Can I really get an FHA loan with a 580 credit score?
Yes — 580 is the official FHA minimum for 3.5% down. Most lenders honor that, though some add overlays requiring 620+. We work with lenders who'll go to 580 for the right file. Below 580 (down to 500), FHA still allows it but requires 10% down.
How does FHA mortgage insurance work?
Two pieces. Upfront MIP is 1.75% of the loan amount, almost always financed INTO the loan rather than paid at closing. Annual MIP is 0.55% (most common scenario) divided by 12 and added to your monthly payment. If your down payment was less than 10%, this annual MIP stays for the LIFE of the loan.
How do I get rid of FHA mortgage insurance?
If you put down less than 10%, MIP doesn't drop off on its own. The path to remove it is refinancing into a conventional loan once you've reached 78-80% LTV through payments + appreciation. We model this regularly for FHA borrowers; on a $400K loan it typically saves $150-$200/month.
Can my parents pay the entire down payment as a gift?
Yes. FHA allows 100% gift funds from family members. Need a gift letter from the donor stating it's not a loan and they don't expect repayment. We'll guide you through the paperwork. Cash deposits can't be used — the funds must transfer bank-to-bank with a clean paper trail.
Is FHA only for first-time home buyers?
No — that's a common myth. FHA is open to anyone who meets the credit, DTI, and occupancy requirements. The only catch is that the property has to be your primary residence, and you can usually only have one FHA loan at a time.
Can I buy a condo with an FHA loan?
Yes, but the entire condo project must be on the FHA-approved list (the "HRAP" list). Many newer condo developments aren't approved. Search HUD's FHA Condo Approval database before making an offer. If a condo isn't FHA-approved, we may be able to get a "single-unit approval" or you'd switch to conventional.
How long after a bankruptcy can I get an FHA loan?
Two years after a Chapter 7 discharge, one year after Chapter 13 with on-time payments. Compare to conventional which requires four years post-Chapter 7. FHA is the most common path back into homeownership after bankruptcy.
What's the difference between FHA and conventional MIP?
FHA MIP is mandatory and often lifetime. Conventional PMI is only required below 80% LTV and drops off automatically at 78%. Conventional also doesn't have an upfront premium. For borrowers with 700+ FICO, conventional with PMI usually costs less monthly than FHA with MIP even at the same down payment.
Can I use FHA for a 2-4 unit property?
Yes, but you have to live in one of the units. FHA on a 2-4 unit is one of the best ways to "house hack" — live in one unit, rent the others, use the rental income to qualify. We do these regularly. The down payment is still 3.5%.
How long does an FHA loan take to close?
30-45 days for purchases (slightly longer than conventional due to FHA appraisal review). 14-21 days for FHA Streamline refis. 30-45 days for FHA cash-out refis.
Get Pre-Approved for an FHA Loan in 24 Hours
Free FHA eligibility check with no credit pull at the first call. We'll model FHA vs. conventional side-by-side and show you which loan gives you the lowest 5-year total cost. If you qualify, pre-approval letter in 24 hours.
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Terms & Conditions: FHA loan rates and pricing shown are illustrative based on 740 FICO (FHA pricing barely varies above 580), single-family primary residence, 30-year fixed. Actual rate depends on credit profile, debt-to-income, property type, loan amount, and current market conditions at lock time. APR includes estimated closing costs and is for comparison purposes. FHA MIP rates: 0.55% annual for 30-yr with LTV greater than 95%, 0.50% annual for 30-yr with LTV less than or equal to 95%, lower for 15-yr terms. Upfront MIP is 1.75% of base loan, typically financed. Annual MIP duration: lifetime if down payment less than 10%; 11 years if 10%+. 2026 FHA loan limits: $524,225 floor / $1,249,125 ceiling for 1-unit. Subject to credit and program approval. OnPoint Mortgage Pro is a licensed mortgage broker; NMLS #2134550. Equal Housing Lender.