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, and a debt-to-income ratio under 50 percent. You must be a U.S. citizen or permanent resident, have a valid Social Security number, and be at least 18 years old. The property itself must be your primary residence — not an investment property or vacation home — and it must pass an FHA appraisal that confirms it meets safety and structural standards.

These are the baseline numbers, but the real work happens in how lenders verify each one. Your credit score matters, but FHA loans are designed for borrowers who don't have perfect credit — a 580 score is low enough that people with past late payments, collections, or even a foreclosure can still may have access to if enough time has passed. Your income and debts are what most applications actually hinge on, because lenders need to see that you can afford the monthly payment.

Key Takeaways

  • You need a minimum credit score of 580, though many lenders set their own floor at 620, and a 3.5 percent down payment.
  • Your debt-to-income ratio — all monthly debts divided by gross monthly income — must stay under 50 percent, and most lenders prefer it under 43 percent.
  • You must show two years of steady employment history and have a valid Social Security number and permanent residency or citizenship.
  • The property must be your primary home, pass an FHA appraisal for safety and condition, and be a single-family home, condo, or approved multi-unit building.
  • Recent negative credit events like foreclosure or bankruptcy do not automatically disqualify you if enough time has passed and you can explain what happened.

How lenders calculate your debt-to-income ratio

Your debt-to-income ratio is the number that makes or breaks most FHA applications. It is your total monthly debt payments divided by your gross monthly income (before taxes). Lenders add up your car payments, credit card minimums, student loans, child support, and the new mortgage payment you are applying for, then divide by what you earn before deductions.

If you make $5,000 a month gross and your debts total $2,000 monthly, your ratio is 40 percent. FHA allows up to 50 percent, but most lenders cap it at 43 percent because they have their own risk rules. This is where a co-borrower or a larger down payment can help — either increases your income or lowers the loan amount, both of which improve the ratio. Paying down credit cards or a car loan before you apply also shrinks the number.

Credit history and past financial problems

A 580 credit score typically means you have missed payments, collections accounts, or high credit card balances in your recent past. FHA does not require a perfect history, but it does require evidence that you have stabilized. If you had a foreclosure, you usually need to wait three years from the sale date; if you filed bankruptcy, you need two years for Chapter 7 or one year for Chapter 13 (if you are still making payments). Late payments older than two years matter less than recent ones.

What lenders actually look for is the reason and the recovery. If you had a medical emergency that caused missed payments, and you have been current on everything for 12 months since, you can explain that in writing and many lenders will move forward. If you have a pattern of late payments with no explanation, or if you are still behind on something, approval becomes much harder. Bring documentation — medical bills, job loss letters, divorce papers — anything that shows the problem was temporary and you have fixed it.

Income and employment verification

Lenders need to see two years of employment history, and they verify it by contacting your employer directly or reviewing tax returns and W-2 forms. If you are self-employed, you will need two years of tax returns and possibly a profit-and-loss statement. If you changed jobs recently, that is fine as long as the new job is in the same field and you have been there at least 30 days — lenders assume you will stay.

Income counts as long as it is stable and likely to continue. That includes W-2 wages, self-employment income, Social Security, pensions, disability payments, and alimony or child support (if you receive it). Bonuses and overtime count if you have received them for at least two years. Rental income from a property you own counts, but lenders typically use 75 percent of the actual rent because they assume some vacancy. If you are changing careers or your income is seasonal, be ready to explain how you will cover the mortgage in slower months.

Property requirements and the FHA appraisal

The property must be your primary residence — the place you live most of the year. FHA loans do not work for investment properties, vacation homes, or properties you plan to rent out. The home itself must pass an FHA appraisal, which is stricter than a standard appraisal. The appraiser checks that the roof is sound, the foundation is not cracked, the plumbing and electrical systems work, and there is no mold, lead paint hazards, or pest damage.

If the appraisal finds problems, the seller usually has to fix them before closing, or you can negotiate a price reduction and fix them yourself after you buy. Some issues — like a roof that is near the end of its life but not yet failing — might require the seller to set aside money in escrow to cover future repairs. Properties that are too far gone do not pass FHA appraisal, which is why you cannot use an FHA loan on a house that needs major structural work.

Citizenship and residency status

You must be a U.S. citizen or a permanent resident (green card holder) to get an FHA loan. You need a valid Social Security number, and the lender will verify your status through the Social Security Administration. If you are a permanent resident, bring your green card and any immigration documents the lender requests. Non-citizens and people without a Social Security number cannot get an FHA loan, though some state and local programs may have different rules.

Lenders also run background checks and verify that you are not on any government watch lists. This is routine and does not mean anything is wrong — it is part of the underwriting process for all loans.

Down payment and cash reserves

The minimum down payment for an FHA loan is 3.5 percent of the purchase price. On a $300,000 home, that is $10,500. You can borrow this money from a family member, but you cannot borrow it from the seller or from anyone with an interest in the property. The lender will ask where the down payment came from, and you will need to document it — bank statements showing the transfer, a gift letter from the family member, and proof that the money has been in your account for at least two months (or longer, depending on the lender).

Some lenders also look at cash reserves — money left in your accounts after closing. If you have three to six months of mortgage payments saved, it strengthens your application, especially if your credit score is lower or your debt-to-income ratio is tight. Reserves are not required, but they help.

Frequently Asked Questions

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

Yes, if three years have passed since the foreclosure sale and you can show that your finances have stabilized since then. Some lenders require a written explanation of what caused the foreclosure. If you can document that it was a one-time hardship and you have been current on all payments since, approval is possible.

What if my debt-to-income ratio is above 50 percent?

Most lenders will not approve you, but some will go up to 50 percent if you have strong compensating factors — a high credit score, large cash reserves, or a co-borrower with good income. Your best move is to pay down debt before applying, which lowers your ratio and improves your chances.

Do I need a co-signer to get an FHA loan?

No, but a co-borrower (someone who will be on the loan with you) can help if your income or credit is weak. A co-signer who is not on the loan does not work for FHA — the co-borrower must be on the mortgage itself and on the title.

Can I use an FHA loan to buy a multi-unit property?

Yes, FHA loans work on duplexes, triplexes, and four-unit buildings as long as you live in one of the units as your primary home. You cannot use FHA to buy a five-unit or larger building, and you cannot buy a multi-unit property as an investment.

What happens if the appraisal comes back low?

If the appraised value is less than the purchase price, you have a few options: renegotiate the price with the seller, increase your down payment to cover the gap, or walk away. The lender will not loan more than the appraised value, so you have to make up the difference in cash.