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How to Qualify for an FHA Loan in 2024

To qualify for an FHA loan, you’ll need a credit score of at least 500 and a minimum down payment. Your lender will also closely inspect the property.

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By Kim Porter

Written by

Kim Porter

Freelance writer, Credible

Kim Porter is an expert on credit, mortgages, student loans, and debt management. She has been featured by U.S. News & World Report, USA TODAY Blueprint, Forbes Adviser, Yahoo News, and MSN.

Edited by Reina Marszalek

Written by

Reina Marszalek

Senior editor, Credible

Reina Marszalek has over 10 years of experience in personal finance and is a senior mortgage editor at Credible.

Updated September 11, 2024

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

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FHA loans offer flexibility that make them ideal for first-time homebuyers and those who won’t qualify for a conventional mortgage. However, you’ll still need to meet minimal lending criteria to qualify for an FHA loan. Here’s what to know.

What is an FHA loan? 

A Federal Housing Administration (FHA) loan is a type of government-backed mortgage that comes with low credit score and down payment requirements. Because the mortgage is insured by a government agency, FHA-approved lenders face less risk and can offer lower interest rates to borrowers who might have a difficult time qualifying for other loan types.

How do FHA loans work?

FHA loans are funded by private lenders, such as banks and credit unions, but they’re insured by the Federal Housing Administration. They have lower down payment and credit score requirements compared to some other mortgage programs, so they’re popular with first-time homebuyers or those recovering from a financial setback.

Lenders are willing to offer FHA loans with competitive terms because of the government backing. If a borrower defaults, the FHA pays the lender for the unpaid principal balance. Borrowers fund this program by making upfront and monthly mortgage insurance payments.

FHA loans typically come with a fixed or adjustable interest rate with a maximum loan term of 30 years in most cases. The most you can borrow with an FHA loan depends on the county where the home is located. The upper FHA loan limit is typically $498,257 but stretches to $1,149,825 in high-cost areas.

How to qualify for an FHA loan

To qualify for an FHA loan, borrowers must meet certain requirements:

  • A credit score of 580 with a down payment of at least 3.5% or a score between 500 and 579 with a down payment of 10%
  • No foreclosure within the past three years, no Chapter 7 bankruptcy within the past two years, and no Chapter 13 bankruptcy within the past year
  • Debt-to-income ratio (DTI) no higher than 43%
  • Upfront mortgage insurance premium of 1.75% of the loan amount and annual premium for at least 11 years
  • Property must be primary residence

Here’s a more detailed look at each of these requirements: 

Credit score and down payment

The minimum down payment on an FHA loan depends on your credit score. You’ll need to put down at least 10% if your credit score is between 500 and 579. If your credit score is 580 or higher you can put down as little as 3.5%. However, some lenders raise their credit score standards to minimize risk, which is why it’s so important to shop around.

Credit history

Lenders will also check your credit history. If you have a bankruptcy or foreclosure on your credit reports, you may still qualify for an FHA loan — so long as enough time has passed. You can apply for an FHA loan two years after discharging a Chapter 7 bankruptcy and at least a year after a Chapter 13 bankruptcy. With a foreclosure, you’ll need to wait a minimum of three years, although the FHA will make some exceptions.

DTI

Generally, borrowers with a higher DTI have less room in their budget for more debt, so they pose more risk to the lender. FHA loans allow DTI ratios as high as 43%, though lenders have some flexibility to approve borrowers with a higher debt load. Lenders look at DTI to see how much of your gross monthly income goes toward monthly debt payments. They use this to assess how much room you have in your budget for monthly mortgage payments.

Mortgage insurance

Nearly all FHA loans come with a mortgage insurance premium (MIP). The upfront MIP is equal to 1.75% of the base loan amount, and it’s paid at closing. You’ll also pay an annual MIP that depends on your mortgage term and down payment. If your down payment is 10% or higher, then you’ll only pay the annual MIP for 11 years. A smaller down payment means you’ll pay the annual MIP throughout the life of the loan. The lender calculates your MIP each year based on your current loan balance, then splits the premium into 12 installments and wraps them into your monthly payments.

Appraisal and property requirements

FHA loans can only be used to purchase a principal residence — not a vacation home or investment property unless you purchase a multiunit dwelling and live in one of the units. The property will also need to pass a special FHA appraisal to ensure the home meets minimum standards. At least one borrower will need to live in the home within 60 days of closing, with the intention of occupying the home for at least one year.

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Types of FHA loans

There are different types of FHA home loans, each with its own set of criteria:

FHA 203(b) loan

This loan is the FHA’s basic mortgage product, so it’s what most people think of when talking about FHA loans. You can use the 203(b) loan to purchase or refinance a principal residence, which may be a single-family home, manufactured home, or a property with up to four units.

FHA energy efficient loan

The FHA’s energy-efficient loan allows you to purchase a home and finance home improvements that reduce energy usage on the property. The “energy package” funds must be used toward eligible cost-effective improvements, such as solar panels and basic weatherization items.

FHA 203(k) loan

An FHA 203(k) loan covers the costs of buying a home and rehabilitating the property within a single mortgage. The entire value of the property, including the rehabilitation, must still fall within FHA’s mortgage limits for the location. The property will also need to meet certain structural and energy efficiency standards.

FHA loans vs. conventional loans

A conventional mortgage is any home loan that isn’t backed by a government agency. These may come with slightly lower down payment requirements compared to FHA loans, but borrowers must have a higher credit score to qualify. Conventional loans also let you skip mortgage insurance if your down payment is high enough. And even if you are required to pay for mortgage insurance, you can cancel the premium once you have enough home equity. Here’s a quick comparison of how conventional mortgages compare to FHA loans:

FHA loan
Conventional loans
Minimum credit score
500 or 580
Typically 620
Down payment
10% or 3.5%
As low as 3%, but 5% to 20% is typical
Terms
Up to 30 years
Up to 30 years
Insurance premiums
All FHA loans come with upfront and annual mortgage insurance. You may be able to cancel it in some cases.
Conventional loans come with private mortgage insurance if your down payment is less than 20%. The insurance is canceled once you reach an 80% loan-to-value ratio.

FHA home loan requirements FAQ

Can you be disqualified from an FHA loan?

You may not qualify for an FHA loan if your credit score or DTI doesn’t meet the lender’s requirements. It’s also possible to be disqualified if you’ve defaulted on federal debt, such as a tax bill or federal student loan. You’ll also have to show you have enough money to cover the down payment.

What would cause a house to fail an FHA inspection?

A property must be safe, sound, and secure to qualify for an FHA loan. Generally, that means there are no health or safety hazards present, the property is structurally sound, and the home provides a secure environment for its inhabitants. If the property doesn’t meet these conditions, then it may not have a strong resale value — and therefore won’t pass the test.

What is included in an FHA appraisal?

During an FHA appraisal, the appraiser will look for issues with the following:

  • Health and safety hazards
  • The roof, foundation, doors, windows, and major systems
  • The land lease, land surveys, descriptions, and any other legal documents available for the property

The appraiser will document the results and include them in an appraisal report.

How long does it take to get an FHA loan?

Once you submit your mortgage application, it can take between 30 and 60 days for the lender to underwrite your loan and let you know if you qualify.

How strict are FHA loans?

While FHA loans come with some flexibility, borrowers must pass minimum requirements to be eligible. They’ll generally need a credit score of at least 500, a DTI of 43% or less, and a minimum down payment. Additionally, the property must be deemed safe, sound, and secure.

Meet the expert:
Kim Porter

Kim Porter is an expert on credit, mortgages, student loans, and debt management. She has been featured by U.S. News & World Report, USA TODAY Blueprint, Forbes Adviser, Yahoo News, and MSN.