FHA loans have income, credit, and debt requirements that vary by location and lender

An FHA loan is not one set of rules. The Federal Housing Administration sets a floor — minimum standards that all lenders must follow — but individual lenders can be stricter. You need a credit score of at least 580 to get the standard 96.5% loan-to-value mortgage (meaning you put 3.5% down). Some lenders require 620 or higher. Your debt-to-income ratio — the percentage of your gross monthly income that goes to all debts — cannot exceed 50%, though most lenders cap it at 43%. There is no federal income limit for FHA loans, but your income must be high enough that the monthly mortgage payment, property taxes, insurance, and homeowners association fees do not exceed those debt ratios.

The property itself has requirements. It must be your primary residence, not an investment property. The home must pass an FHA appraisal, which is stricter than a conventional appraisal — the inspector checks for safety hazards, structural problems, and code violations. A house with a cracked foundation, missing roof shingles, or unpermitted additions will not pass. The property must also meet minimum property standards set by HUD, which vary slightly by state but generally require working utilities, no lead paint hazards (for homes built before 1978), and no evidence of mold or pest infestation.

Key Takeaways

  • Your credit score must be at least 580, though many lenders require 620 or higher, and your debt-to-income ratio cannot exceed 50% of your gross monthly income.
  • The property must be your primary residence and pass an FHA appraisal, which checks for safety hazards and code violations that a standard appraisal might miss.
  • You need a down payment of at least 3.5%, and you must have cash reserves after closing — the amount varies by lender but is usually equal to two months of mortgage payments.
  • You will pay mortgage insurance premiums (an upfront fee at closing and an annual fee) because FHA loans are designed for borrowers with lower down payments and credit scores.
  • Your income does not have a federal ceiling, but it must be high enough that your housing costs stay within the debt-to-income limits.

Credit score and debt-to-income ratio requirements

Your credit score is the first gate. With a score of 580 to 619, you can get an FHA loan, but you will pay a higher interest rate and may face stricter requirements from the lender — some will not lend below 620. A score of 620 or above opens more lenders and better rates. The score reflects your payment history, amounts owed, length of credit history, new credit, and credit mix. A recent bankruptcy or foreclosure does not automatically disqualify you — FHA allows loans as soon as two years after a Chapter 7 bankruptcy or one year after a Chapter 13 bankruptcy, provided you can show the hardship was not your fault and your finances have stabilized.

Your debt-to-income ratio is calculated by dividing your total monthly debt payments by your gross monthly income. Total debt includes the new mortgage payment, property taxes, homeowners insurance, HOA fees, car loans, student loans, credit card minimums, and any other monthly obligations. If you earn $5,000 per month and your debts total $2,000, your ratio is 40%. FHA allows up to 50%, but most lenders cap it at 43% to reduce their risk. If you are over the limit, you can lower your ratio by paying down debt before applying, increasing your income (through a co-borrower or documented side income), or looking at less expensive properties.

Down payment and cash reserves

FHA loans require a minimum down payment of 3.5% of the purchase price. On a $200,000 home, that is $7,000. You do not have to save this yourself — it can come from a gift from a family member, an employer, a nonprofit, or a government program. The gift must be documented in writing and the giver cannot expect repayment. Some lenders allow the seller to cover part or all of the down payment as a concession, though this counts against your debt-to-income ratio in some cases.

After your down payment, you must have cash reserves. This is money left in your bank account after closing, and it shows the lender you can handle an emergency. Most lenders require reserves equal to two months of your total housing payment (mortgage, taxes, insurance, HOA). Some require three months. If you have no reserves after closing, some lenders will not approve you. You can build reserves by saving, by including gift money in your down payment calculation, or by asking the seller to contribute to closing costs instead of reducing the price.

Employment and income verification

Your income must be verifiable and stable. The lender will request your last two years of tax returns, your most recent pay stubs (usually the last 30 days), and a verification of employment letter from your employer stating your job title, start date, and current salary. If you are self-employed, you will need two years of tax returns and possibly a profit-and-loss statement. If you receive income from Social Security, disability, alimony, or child support, bring documentation showing the amount and that it will continue for at least three more years.

A recent job change does not disqualify you, but the lender will want to see that you moved to a similar role in the same field. If you changed careers, you may need to show two years of work history in the new field. Seasonal income (like construction or teaching) is averaged over the past two years. If you are on probation at a new job, some lenders will wait until probation ends before approving you.

Property appraisal and inspection standards

The FHA appraisal is more detailed than a conventional appraisal. The appraiser inspects the roof, foundation, plumbing, electrical, heating, and cooling systems. They check for water damage, mold, pest damage, and code violations. They measure the square footage and compare it to similar homes in the area to determine value. If the home does not meet FHA minimum property standards, the appraisal will come back conditional — the seller must make repairs before closing, or you can renegotiate the price.

Common issues that fail FHA appraisals include missing roof shingles, cracked or settling foundations, outdated electrical systems (knob-and-tube wiring), plumbing that does not meet code, evidence of mold or water intrusion, lead paint hazards in homes built before 1978 (the paint must be encapsulated or removed), and unpermitted additions or renovations. If the seller will not make repairs, you can walk away without penalty. If you want the home badly enough, you can pay for repairs yourself, though this reduces your cash reserves and may push you over your debt-to-income limit.

Mortgage insurance premiums and ongoing costs

FHA loans require mortgage insurance because you are putting down only 3.5% and the lender is taking on more risk. There are two parts: an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP). The UFMIP is usually 1.75% of the loan amount and is rolled into your mortgage — on a $193,000 loan (after your $7,000 down payment on a $200,000 home), the UFMIP is about $3,378. The annual MIP varies by your loan-to-value ratio and credit score but typically ranges from 0.55% to 0.80% of the loan amount per year, paid monthly as part of your mortgage payment.

You will pay mortgage insurance for the life of the loan if your down payment was less than 10%. If you put down 10% or more, you can remove mortgage insurance after 11 years. This is a real cost — on a $193,000 loan at 0.65% annual MIP, you will pay about $125 per month in insurance alone. Factor this into your budget when deciding how much house you can afford.

Citizenship and residency requirements

You must be a U.S. citizen or a non-citizen national to get an FHA loan. Permanent residents (green card holders) can also may have access to. You must have a valid Social Security number. You do not have to be a resident of the state where you are buying the home, but the property must be in the United States.

If you are not yet a permanent resident or citizen, you cannot get an FHA loan. Some lenders offer loans to borrowers with an Individual Taxpayer Identification Number (ITIN) if they have been in the country for at least two years and can document income, but these are rare and usually come with higher interest rates.

Frequently Asked Questions

Does a bankruptcy or foreclosure disqualify me from an FHA loan?

No. FHA allows loans as soon as two years after a Chapter 7 bankruptcy or one year after a Chapter 13 bankruptcy, as long as you can show the hardship was not your fault and your finances have stabilized since then. A foreclosure follows similar rules — you can usually get an FHA loan two years after the foreclosure closes, provided you have re-established credit and have no recent late payments.

What if I have a co-signer or co-borrower?

A co-borrower (someone who will be on the deed and the mortgage) helps your debt-to-income ratio because their income counts toward the total. A co-signer (someone who signs the note but is not on the deed) does not help with FHA loans — FHA does not recognize co-signers. If you need help, add a co-borrower, usually a spouse or family member.

Can I use a gift for my down payment?

Yes. The gift must come from a family member, an employer, a nonprofit, a government program, or a religious organization. The giver must provide a written gift letter stating the amount, that no repayment is expected, and their relationship to you. The gift funds must be deposited in your bank account at least two days before closing.

What happens if the appraisal comes back low?

If the appraised value is lower than the purchase price, you have three options: renegotiate the price with the seller, pay the difference in cash (which increases your down payment), or walk away. You cannot proceed with the loan at the original price because the lender will only lend based on the appraised value.

Can I get an FHA loan if I am self-employed?

Yes, but you will need two years of tax returns, a profit-and-loss statement for the current year, and possibly a letter from your accountant. The lender will average your income over two years, so a recent business launch or a year with very low income will lower your may have access to amount. Some lenders require self-employed borrowers to have higher credit scores or larger down payments.