The core requirements for an FHA loan

To get an FHA loan, you need a credit score of at least 580 (though some lenders require 620), a down payment of 3.5 percent, proof of steady income for the past two years, a valid Social Security number, and lawful residency in the United States. You also cannot have filed for bankruptcy within the last two years, and you cannot owe money to the federal government. The property itself must be your primary residence — not an investment property or vacation home — and it must pass an FHA appraisal.

The FHA does not set a maximum income limit, but your monthly debt payments (including the new mortgage) cannot exceed 43 percent of your gross monthly income. Some lenders will go to 50 percent if you have strong compensating factors, like savings or a lower debt-to-income ratio in other areas. This is called your debt-to-income ratio, and it is the single biggest reason applications are denied or require a co-borrower.

You do not need to be a first-time buyer. The FHA insures loans for repeat buyers, people rebuilding credit, and borrowers with past financial problems — as long as enough time has passed and you can show the problem is resolved.

Key Takeaways

  • Your credit score must be at least 580, though many lenders prefer 620 or higher, and you need two years of documented income history.
  • Your monthly debt payments cannot exceed 43 percent of your gross income, and this is calculated to include the new mortgage payment.
  • You must put down 3.5 percent of the purchase price, and the property must be your primary home and pass an FHA appraisal.
  • Bankruptcy, foreclosure, and federal debt can disqualify you, but waiting periods exist — typically two years after bankruptcy and three years after foreclosure.
  • The FHA allows co-borrowers and will consider compensating factors like savings or lower debt in other areas if you are slightly over the income threshold.

Credit score and payment history

The FHA's minimum credit score is 580, but this is a floor, not a target. Lenders often set their own minimums higher — 620 is common — and will scrutinize what makes up your score. Late payments, collections, and charge-offs hurt you more than a low score alone. If you have recent late payments (within the last 12 months), most lenders will deny you outright. If your lates are older, you will need to explain them in writing.

The FHA cares less about your score than about the story behind it. A 580 score with one missed payment five years ago is stronger than a 600 score with three late payments in the last year. Lenders will ask you to write a letter of explanation for any negative marks. Be honest and specific: say what happened, why it happened, and what you did to fix it. A job loss followed by steady re-employment looks better than a pattern of missed payments with no clear cause.

If your credit is thin — few accounts, no history — you can build it before applying. Becoming an authorized user on someone else's account, getting a secured credit card, or paying down existing balances all help. Most lenders will wait 90 days after you open a new account before counting it toward your score, so plan ahead if you are close to the threshold.

Income and employment verification

You must show two years of continuous employment or income history. For W-2 employees, this means your last two years of tax returns and recent pay stubs. For self-employed borrowers, it means two years of tax returns plus year-to-date profit-and-loss statements. If you changed jobs, you need to show you stayed in the same field or that your new job pays at least as much as the old one.

Lenders average your income over the past two years, so a recent raise helps but does not count fully until you have been in the new role for a few months. If you took a new job within the last 30 days, most lenders will not count that income yet. Bonus income, commission, and overtime are averaged over two years as well — if you earned it inconsistently, the lender will use a conservative average.

Retirement income, Social Security, disability payments, and alimony all count as income if they are documented and will continue for at least three years. Bring the award letter or benefit statement that shows the amount and the date it started. If you receive child support, you can count it only if you have received it consistently for the past two years and have a court order showing it will continue.

Down payment and savings

The FHA requires a 3.5 percent down payment on the purchase price. On a $200,000 home, that is $7,000. The down payment must come from your own funds, a gift from a family member, or a grant — not from a loan. If you receive a gift, the lender will ask for a letter from the gift-giver stating that the money does not need to be repaid.

You do not need to have the down payment saved before you apply, but you do need to show where it will come from. If a family member is giving it to you, have that conversation and get the letter ready before you submit your application. If you are saving it yourself, bank statements showing deposits over time help prove the money is yours and not borrowed.

Lenders also look at your reserves — money left over after closing. If you have three to six months of mortgage payments saved after the down payment and closing costs, it strengthens your application. This is especially true if your debt-to-income ratio is close to the limit. Savings show you can weather a job loss or emergency without defaulting.

Debt-to-income ratio and existing debts

Your debt-to-income ratio is the sum of all your monthly debt payments divided by your gross monthly income. The FHA allows up to 43 percent. If you earn $5,000 a month, your total monthly debts (car loans, credit cards, student loans, and the new mortgage) cannot exceed $2,150.

The lender counts the new mortgage payment, property taxes, homeowners insurance, and mortgage insurance as debt. They also count car loans, student loans, credit card minimums, alimony, and child support. Medical debt in collections may or may not count depending on the lender. Utility bills and rent do not count unless you are currently behind.

If you are over 43 percent, you have a few options: pay down existing debt before applying, increase your income (though this takes time to document), lower the price of the home you are buying, or add a co-borrower with income. Some lenders will go to 50 percent if you have strong compensating factors — high savings, a significant raise, or a very low credit risk otherwise. Ask your lender what they will accept before you spend time on an application.

Bankruptcy, foreclosure, and federal debt

You cannot have filed for bankruptcy within the last two years. After two years, you can apply, but the lender will want to see that you have rebuilt credit and that the bankruptcy was caused by a one-time event (job loss, medical emergency) rather than poor money management. If you filed Chapter 7, the lender wants to see at least two years of on-time payments since discharge. If you filed Chapter 13, you can apply while still in the repayment plan if you have your trustee's permission and have made all payments on time.

A foreclosure requires a three-year waiting period from the date the lender took back the property. After three years, you can apply if you have re-established credit and have a stable income. Some lenders will consider you after two years if you have strong compensating factors.

If you owe money to the federal government — back taxes, student loan defaults, or overpaid benefits — you must resolve it before the lender will approve you. This does not mean paying it all at once; a payment plan with the IRS or Department of Education counts as resolution. Get documentation of the plan in writing before you apply.

Property requirements and appraisal

The property must be your primary residence, meaning you will live there most of the year. The FHA will not insure loans for investment properties, vacation homes, or properties you plan to rent out. The lender will ask you to sign a statement confirming this.

The property must pass an FHA appraisal, which is stricter than a standard appraisal. The appraiser checks that the home is safe, structurally sound, and worth the purchase price. Common issues that fail FHA appraisal include missing handrails, exposed wiring, mold, lead paint (in homes built before 1978), and major roof or foundation damage. If the appraisal comes back low, you can renegotiate the price, pay the difference out of pocket, or walk away.

The FHA also has limits on the loan amount in your area, called the conforming loan limit. In most counties, this is higher than the typical home price, but in expensive markets it may cap what you can borrow. Your lender will tell you the limit for your county when you start the process.

Frequently Asked Questions

Can I get an FHA loan if I have had a foreclosure?

Yes, but you must wait three years from the date the lender took back the property. After three years, you can apply if you have rebuilt credit and have stable income. Some lenders will consider you after two years if you have strong compensating factors, like high savings or a significant income increase.

What if my debt-to-income ratio is too high?

Pay down existing debt before applying, or add a co-borrower whose income can be counted. Some lenders will stretch to 50 percent if you have savings, a recent raise, or other signs of financial strength. Ask your lender what they will accept before you apply.

Do I need to be a first-time homebuyer?

No. The FHA insures loans for anyone who meets the requirements, regardless of whether you have owned a home before. Repeat buyers, people rebuilding credit, and borrowers with past financial problems can all use FHA loans.

What counts as income for an FHA loan?

W-2 wages, self-employment income, Social Security, retirement benefits, disability payments, and alimony all count if documented and expected to continue for at least three years. Bonus and commission income are averaged over two years. Child support counts only if you have received it consistently for two years and have a court order.

Can a family member gift me the down payment?

Yes. The down payment can come from a gift, but the lender will ask for a letter from the gift-giver stating the money does not need to be repaid. The gift must be from a family member or an organization that provides down payment assistance.