If you've been told your credit isn't good enough to buy a home, or you don't have enough saved for a down payment, an FHA loan might be your path to homeownership. These government-backed mortgages, insured by the Federal Housing Administration, were specifically designed to help first-time buyers and those with less-than-perfect credit get into homes they can afford.
FHA loans have been helping Americans become homeowners since 1934. The program doesn't lend money directly—instead, it insures loans made by approved lenders, reducing their risk and allowing them to approve borrowers who might not qualify for conventional loans. This insurance comes at a cost to borrowers, but for many, it's the tradeoff that makes homeownership possible.
Who Should Consider FHA?
FHA loans fill a specific niche in the mortgage market. They're worth considering if you have a credit score between 500 and 700—the range where conventional loans either won't approve you or will charge significantly higher rates. While conventional loans technically go down to 620, borrowers in that range often find better terms with FHA.
If you're rebuilding credit after a bankruptcy or foreclosure, FHA offers faster paths back to homeownership. You can qualify for an FHA loan just two years after a Chapter 7 bankruptcy (versus four years for conventional) and three years after a foreclosure (versus seven years for conventional), provided you've reestablished good credit.
FHA also helps borrowers with limited savings. The 3.5% minimum down payment is among the lowest available for mortgages, and FHA allows that entire amount to come from gift funds—family can help you buy a home without you saving a penny of your own.
FHA Requirements: What You Need to Qualify
The credit score requirements are FHA's most famous feature. With a score of 580 or higher, you can put down just 3.5%. Scores between 500 and 579 require 10% down—still more accessible than most conventional programs, which simply won't approve scores that low.
Your debt-to-income ratio can go up to 43% on the back end (total debts including housing), though some lenders approve higher ratios with compensating factors like substantial savings or a history of successfully managing similar payment amounts.
FHA requires a two-year employment history, though this doesn't mean you need to be at the same job for two years. Lenders want to see stable, consistent income—job changes within the same field are generally fine, and even career changes can work if you can show progression and stability.
The property must be your primary residence—FHA doesn't finance vacation homes or investment properties. However, you can use FHA for multi-unit properties (up to fourplexes) if you live in one of the units, making it a popular option for buyers interested in house hacking.
Understanding FHA Mortgage Insurance
The cost of FHA's accessible qualification standards is mortgage insurance premium (MIP)—and this is where FHA gets complicated. You'll pay MIP in two forms:
The upfront MIP is 1.75% of your loan amount, charged at closing. On a $300,000 loan, that's $5,250. Most borrowers roll this into the loan rather than paying cash, which increases your loan balance but keeps closing costs lower.
The annual MIP is paid monthly as part of your mortgage payment. For most borrowers, it's 0.55% of the loan amount annually (down from 0.85% after a recent reduction). On a $300,000 loan, that works out to about $138 per month.
Here's the catch that trips up many borrowers: if you put less than 10% down, MIP stays for the life of the loan. Unlike conventional PMI, which goes away at 20% equity, FHA MIP is permanent unless you refinance into a conventional loan once you've built sufficient equity. If you put 10% or more down, MIP can be removed after 11 years—but few FHA borrowers put that much down, since the whole point is the low down payment.
This lifetime MIP requirement is FHA's biggest drawback. Over time, the cost adds up substantially. Many FHA borrowers refinance into conventional loans once their credit improves and they have 20% equity, eliminating the ongoing insurance cost.
FHA Loan Limits
FHA sets maximum loan amounts that vary by county, reflecting local housing costs. In 2026, the floor (lowest limit nationwide) for a single-family home is $541,287. The ceiling in high-cost areas reaches $1,249,125. Most counties fall somewhere between these extremes.
If you need to borrow more than your county's FHA limit, you'll need to consider conventional or jumbo loans, which have stricter qualification requirements.
Is FHA Right for You?
FHA makes sense when its accessible qualification standards outweigh the cost of lifetime mortgage insurance. If your credit score is below 680, FHA often offers better terms than conventional alternatives. If you have minimal savings, the 3.5% down payment gets you into a home years sooner than waiting to save 10% or 20%.
However, if your credit score is above 700 and you can put 5% or more down, compare FHA to conventional loans carefully. Conventional PMI—which goes away at 20% equity—may cost less over time than FHA's permanent MIP. A good loan officer can run the numbers both ways to show you the total cost difference.
Many successful homeowners use FHA as a stepping stone. They buy with FHA's accessible terms, build equity and improve their credit over a few years, then refinance into a conventional loan to eliminate the ongoing MIP. This strategy lets you become a homeowner now while positioning yourself for lower costs later.