Last Updated: February 2026

An FHA loan is a government-backed home loan insured by the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD). FHA loans are insured by the federal government and designed to make homeownership more accessible, especially for first-time homebuyers, borrowers with lower credit scores, and those with limited savings for a down payment.

Since their creation in 1934, the FHA program has helped millions of Americans buy a home. In 2026, FHA mortgages remain one of the most popular loan types in the United States, accounting for roughly 15-20% of all new home mortgage originations. Whether you are applying for an FHA loan for the first time or considering different loan types, this FHA loan is a mortgage option that offers a path to homeownership that many conventional loan programs cannot match. With a minimum down payment of just 3.5% and credit score requirements for FHA loans as low as 580, an FHA mortgage loan deserves serious consideration.

What Is an FHA Loan?

An FHA loan is a type of mortgage where the Federal Housing Administration provides insurance to FHA-approved lenders against losses if the borrower defaults on the loan. This government guarantee allows lenders to offer more favorable terms, including lower down payments and more flexible credit requirements, because the federal government absorbs much of the lending risk.

It is important to understand that the FHA does not directly lend money to borrowers. Instead, FHA lenders — such as banks, credit unions, and mortgage companies — originate the loans, and the FHA insures them. This distinction means you apply for an FHA home mortgage through a private loan officer at an approved lender, not through the government. An FHA loan requires meeting specific guidelines, but the FHA loan may be the most accessible path to homeownership for borrowers with good credit or even those rebuilding credit after a financial setback.

Key Features of FHA Mortgage Loans

Low Down Payment: FHA loans require a minimum down payment of just 3.5% of the purchase price for borrowers with a credit score of 580 or higher. This is significantly lower than many conventional loan programs, making FHA loans an attractive option for buyers with limited savings.

Flexible Credit Requirements: While conventional loans typically require a minimum credit score of 620, FHA loans accept credit scores as low as 500. Borrowers with scores between 500 and 579 can still qualify with a 10% down payment, while those with 580 or above qualify for the 3.5% minimum.

Mortgage Insurance Premium (MIP): All FHA loans require mortgage insurance, which includes both an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount and an annual mortgage insurance premium (MIP) paid monthly. For most borrowers in 2026, the annual MIP rate is 0.55% of the outstanding loan balance.

Government-Backed Security: Because the federal government insures FHA loans, lenders face less risk, which translates to more competitive interest rates for borrowers — even those with less-than-perfect credit.

Loan Limits: FHA loan limits vary by county and are updated annually. For 2026, the national floor is $541,287 for a single-family home, while the ceiling in high-cost areas reaches $1,249,125.

How FHA Loans Work

The FHA loan process mirrors the general mortgage process but includes some unique steps related to government insurance requirements.

Step 1: Find an FHA-Approved Lender

Not every mortgage lender offers FHA loans. You need to work with an FHA-approved lender, which is any bank, credit union, or mortgage company authorized by HUD to originate FHA-insured mortgages. Most major lenders and many local banks are FHA-approved.

Step 2: Get Pre-Approved

Submit your financial information — including income, employment history, assets, and debts — to the lender. They will review your credit score, calculate your debt-to-income ratio, and determine how much FHA loan you can qualify for. A pre-approval letter strengthens your offer when you find a home.

Step 3: Find a Home That Meets FHA Standards

FHA loans have specific property requirements. The home must be your primary residence (not an investment property or vacation home), and it must pass an FHA appraisal that evaluates both the property's value and its condition. The appraisal ensures the home meets HUD's minimum property standards for safety, security, and structural soundness.

Step 4: Complete the FHA Appraisal

An FHA-approved appraiser will inspect the property to confirm it meets minimum property standards. This is more thorough than a standard conventional loan appraisal. The appraiser checks for:

• Structural integrity and foundation condition
• Working heating, plumbing, and electrical systems
• Adequate roofing with at least two years of remaining life
• Safe drinking water and proper sewage disposal
• No lead-based paint hazards (in homes built before 1978)
• Adequate access to the property

Step 5: Underwriting and Closing

The lender's underwriter reviews your complete application, verifies all documentation, and makes the final approval decision. Once approved, you will pay your down payment and closing costs, sign the loan documents, and receive the keys to your new home.

FHA Loan Requirements Overview

Understanding the full requirements for an FHA loan helps you prepare your application and improve your chances of approval.

Credit Score Requirements

FHA loan credit score requirements are more forgiving than most mortgage programs:

• 580 or higher: Qualifies for the minimum 3.5% down payment
• 500 to 579: Qualifies with a 10% down payment
• Below 500: Does not qualify for an FHA loan

While the FHA sets these minimums, individual lenders may impose higher credit score requirements. Many FHA-approved lenders require a minimum score of 620 or 640, so it pays to shop around.

Down Payment Requirements

The FHA down payment requirement is one of the program's biggest advantages:

• 3.5% minimum with a credit score of 580 or higher
• 10% minimum with a credit score between 500 and 579

For a $350,000 home, the minimum FHA down payment would be just $12,250 (3.5%), compared to $17,500 (5%) for many conventional loan programs. FHA loans also allow your entire down payment to come from gift funds, employer assistance programs, or down payment assistance grants.

Debt-to-Income Ratio (DTI)

FHA guidelines set the following DTI limits:

• Front-end ratio: Up to 31% of gross monthly income for housing expenses (mortgage payment, property taxes, insurance, and MIP)
• Back-end ratio: Up to 43% of gross monthly income for all monthly debt payments combined

However, the FHA allows exceptions for borrowers with compensating factors such as significant cash reserves, minimal discretionary debt, or a history of making similar housing payments. In some cases, the back-end DTI can be approved up to 50% or higher with an automated underwriting approval.

Employment and Income

FHA loans require:

• A steady employment history for at least two years
• Verifiable income through pay stubs, W-2s, and tax returns
• Self-employed borrowers need two years of tax returns showing consistent or increasing income

Property Requirements

The home you purchase with an FHA loan must:

• Be your primary residence (you must move in within 60 days of closing)
• Meet FHA minimum property standards as verified by an FHA appraisal
• Be a single-family home, duplex (2-unit), triplex (3-unit), or four-plex (4-unit) — the borrower must occupy one unit
• Be an FHA-approved condominium if purchasing a condo
• Cannot be a mobile home unless on a permanent foundation and built after June 1976

FHA Mortgage Insurance Premium (MIP) Explained

Mortgage insurance is a required component of every FHA loan. It protects the lender — not the borrower — against losses if the borrower defaults. FHA mortgage insurance comes in two parts.

Upfront Mortgage Insurance Premium (UFMIP)

The upfront MIP is a one-time fee equal to 1.75% of the base loan amount. For a $300,000 FHA loan, the UFMIP would be $5,250. Most borrowers finance this amount into their loan balance rather than paying it out of pocket at closing, meaning it adds to your total mortgage amount.

Annual Mortgage Insurance Premium (Annual MIP)

The annual MIP is an ongoing fee divided into 12 monthly payments added to your mortgage payment. The rate depends on the loan amount, loan-to-value ratio (LTV), and loan term:

For most FHA borrowers using a 30-year loan term with 3.5% down, the annual MIP rate is 0.55%. On a $300,000 loan, that translates to about $137.50 per month added to your mortgage payment.

How Long Do You Pay FHA Mortgage Insurance?

The duration of MIP payments depends on your down payment:

• Down payment less than 10%: MIP lasts for the entire life of the loan (you pay it until the loan is paid off or refinanced)
• Down payment of 10% or more: MIP is required for 11 years, then automatically drops off

This is one of the most significant drawbacks of an FHA loan compared to a conventional loan, where private mortgage insurance (PMI) can be removed once you reach 20% equity. Many FHA borrowers eventually refinance into a conventional mortgage to eliminate ongoing mortgage insurance once they have built sufficient equity.

FHA Loan Limits in 2026

FHA loan limits are the maximum amounts you can borrow using an FHA mortgage. These limits are set annually by HUD and vary by county based on local housing costs.

2026 FHA Loan Limit Overview

The FHA floor is calculated at 65% of the national conforming loan limit ($832,750 for 2026), and the ceiling is set at 150% of that limit. Your specific county limit falls somewhere between the floor and ceiling based on median home prices in your area.

Types of FHA Loans

The FHA offers several distinct loan programs to serve different borrower needs.

FHA 203(b) — Standard Purchase Loan

The FHA 203(b) is the most common FHA loan program. It is the standard fixed-rate mortgage used to purchase a primary residence. Most references to "FHA loans" refer to this program. It supports 15-year and 30-year fixed-rate terms as well as adjustable-rate options.

FHA 203(k) — Renovation Loan

The FHA 203(k) loan allows buyers to finance both the purchase of a home and the cost of renovations in a single mortgage. This is ideal for buyers looking at fixer-uppers. Two versions exist:

• Standard 203(k): For major renovations exceeding $5,000, including structural repairs. Requires a HUD consultant.
• Limited 203(k): For minor improvements up to $35,000, such as kitchen updates, painting, or new flooring. No HUD consultant required.

FHA Streamline Refinance

The FHA Streamline Refinance program allows existing FHA borrowers to refinance into a new FHA loan with reduced documentation. Benefits include:

• No new appraisal required
• No income or employment verification needed
• Reduced MIP rates (0.55% annual for most borrowers)
• Must result in a "net tangible benefit" — lower monthly payment or move from ARM to fixed rate

FHA Cash-Out Refinance

Homeowners with an existing mortgage (FHA or otherwise) can use a refinance loan to refinance into an FHA loan and take cash out of their home equity. This is one of several FHA loan options available to current homeowners. The maximum LTV for an FHA cash-out refinance is 80%, meaning you must retain at least 20% equity after the refinance. Borrowers who want to purchase a home or refinance should compare all available loan options to find the best loan terms for their situation.

FHA Energy Efficient Mortgage (EEM)

The FHA EEM program lets borrowers finance energy-efficient improvements as part of their FHA loan. This can include solar panels, insulation, weather-stripping, and high-efficiency HVAC systems. Among FHA loan products, the EEM insures the loan for both the purchase and the improvements, making it a versatile option.

FHA Loan vs Conventional Loan

Choosing between an FHA loan and a conventional loan is one of the most important decisions homebuyers face. Both have advantages depending on your financial situation.

When to Choose an FHA Loan

An FHA loan is typically the better choice when:

• Your credit score is below 680
• You have limited savings and need a low down payment
• Your down payment comes entirely from gift funds
• You have a higher debt-to-income ratio
• You have a past bankruptcy or foreclosure (FHA has shorter waiting periods)

When to Choose a Conventional Loan

A conventional loan is typically better when:

• Your credit score is 680 or higher
• You can put 10-20% down (to avoid or reduce mortgage insurance)
• You want the option to remove mortgage insurance once you reach 20% equity
• You are buying a second home or investment property
• You want to avoid the stricter FHA appraisal requirements

FHA Loan vs VA Loan

If you are an eligible veteran, active-duty service member, or surviving spouse, you may also qualify for a VA loan. Here is how the two programs compare:

For eligible veterans, a VA loan is almost always the better option thanks to zero down payment and no monthly mortgage insurance. FHA loans serve borrowers who do not qualify for VA benefits.

FHA Loan Interest Rates

FHA mortgage rates are generally competitive with — and sometimes lower than — conventional loan rates. Because the federal government insures FHA loans, lenders face less risk and can offer more favorable rates, particularly to borrowers with lower credit scores.

Factors That Affect Your FHA Interest Rate

• Credit Score: Higher scores qualify for lower interest rates. A borrower with a 740 score will receive a better rate than one with a 580 score.
• Down Payment: Larger down payments can slightly reduce your rate.
• Loan Term: 15-year FHA loans typically have lower rates than 30-year terms.
• Market Conditions: FHA rates move with the broader mortgage market, influenced by the Federal Reserve, economic indicators, and investor demand.
• Lender Competition: Different lenders offer different rates for the same FHA loan, so always compare at least 3-5 lenders.

FHA Rate Comparison (2026 Averages)

Rates are approximate averages and vary by lender, credit score, and location.

FHA Loan Closing Costs

In addition to the down payment, FHA borrowers pay closing costs that typically range from 2% to 5% of the purchase price. Common FHA closing costs include:

• Upfront MIP (UFMIP): 1.75% of the loan amount (usually financed into the loan)
• Appraisal fee: $400-$700 for the FHA appraisal
• Origination fee: 0.5-1% of the loan amount charged by the lender
• Title insurance: Varies by state, typically $500-$2,000
• Attorney or escrow fees: $500-$1,500
• Recording fees: $50-$250
• Prepaid items: Property taxes, homeowner's insurance, and prepaid interest

FHA rules allow the seller to contribute up to 6% of the purchase price toward the buyer's closing costs. This seller concession can significantly reduce out-of-pocket expenses for FHA borrowers.

FHA Loan After Bankruptcy or Foreclosure

One of the biggest advantages of FHA loans is the shorter waiting periods after major credit events:

After Bankruptcy

• Chapter 7 Bankruptcy: Two-year waiting period from discharge date (conventional loans require a four-year wait)
• Chapter 13 Bankruptcy: May be eligible after 12 months of on-time plan payments with court approval, or one year after discharge

After Foreclosure

• FHA: Three-year waiting period from the date of foreclosure sale
• Conventional: Seven-year waiting period

After Short Sale or Deed-in-Lieu

• FHA: Three-year waiting period
• Conventional: Four-year waiting period (or two years with 20% down)

These shorter timelines make FHA loans the first viable option for borrowers rebuilding credit after a financial setback.

Advantages of FHA Loans

FHA loans offer several distinct benefits over other mortgage programs:

• Lower Credit Score Acceptance: Qualify with scores as low as 500, making homeownership accessible to more borrowers
• Small Down Payment: Just 3.5% down with a 580+ credit score saves thousands compared to larger down payment requirements
• Gift Funds Allowed: Your entire down payment and closing costs can come from family gifts or employer assistance
• Competitive Interest Rates: Government backing means favorable rates even for borrowers with lower credit
• Assumable Loans: FHA loans can be assumed by a qualified buyer, which is valuable when interest rates rise
• Shorter Waiting Periods: Faster recovery from bankruptcy, foreclosure, or short sale
• Flexible DTI Guidelines: Higher debt-to-income ratios may be approved with compensating factors
• Multi-Unit Properties: Finance a duplex, triplex, or four-plex and live in one unit while renting the others

Disadvantages of FHA Loans

FHA loans also carry some drawbacks that borrowers should consider:

• Lifetime Mortgage Insurance: With less than 10% down, MIP lasts the entire life of the loan — you cannot cancel it
• Upfront MIP Cost: The 1.75% UFMIP adds to your loan balance, increasing the total amount financed
• Property Restrictions: Must be a primary residence, and the home must pass FHA appraisal standards
• Loan Limits: May not be sufficient in very high-cost markets
• Stricter Appraisals: FHA appraisals can flag issues that conventional appraisals might not, potentially complicating the purchase
• Seller Reluctance: Some sellers prefer offers from conventional loan borrowers because FHA appraisals are more stringent
• Higher Total Cost: For borrowers with strong credit, the long-term cost of FHA MIP can exceed what they would pay with conventional PMI

How to Apply for an FHA Loan

Ready to apply for an FHA mortgage? Follow this step-by-step process:

1. Check Your Credit Score

Pull your free credit reports from AnnualCreditReport.com and review your FICO scores. If your score is below 580, work on improving it before applying, or plan for a 10% down payment.

2. Calculate Your Budget

Determine what you can afford by calculating your debt-to-income ratio. Include your estimated mortgage payment, property taxes, homeowner's insurance, and MIP in the calculation. A good rule: keep total housing costs under 31% of gross monthly income.

3. Save for Down Payment and Closing Costs

You will need at least 3.5% for the down payment plus 2-5% for closing costs. Research down payment assistance programs in your state — many offer grants or forgivable loans that do not need to be repaid.

4. Gather Documentation

Have the following ready before meeting with a lender:

• Two years of W-2 forms and tax returns
• Recent pay stubs (30 days)
• Bank statements (60 days)
• Photo ID and Social Security number
• List of all debts and monthly payments
• Gift letters (if receiving gift funds for down payment)

5. Compare FHA-Approved Lenders

Get quotes from at least three FHA-approved lenders. Compare interest rates, closing costs, and lender fees. Even a 0.25% difference in rate can save or cost you thousands over the life of the loan.

6. Get Pre-Approved

Submit your full application to your chosen lender. Pre-approval gives you a clear picture of what you can afford and strengthens your offers when house shopping.

7. Find Your Home and Make an Offer

Work with a local real estate agent to find homes within your budget. When you find the right one, make a competitive offer. Your pre-approval letter shows sellers you are a serious, qualified buyer.

8. Complete the FHA Appraisal and Close

Your lender will order an FHA appraisal. If the home passes, the underwriter completes final review, and you proceed to closing. Sign your documents, pay your costs, and you are a homeowner.

FHA Loan FAQs

Can I use an FHA loan to buy a rental property?

Not directly. FHA loans require the property to be your primary residence — you must live in it. However, you can buy a multi-unit property (up to 4 units) with an FHA loan, live in one unit, and rent out the others. This is one of the most powerful strategies for new real estate investors.

How much house can I afford with an FHA loan?

The amount depends on your income, debts, credit score, and local FHA loan limits. As a general guideline, with a $75,000 annual income and minimal debt, you could potentially qualify for a home priced around $300,000-$350,000 with an FHA loan.

Can I get an FHA loan if I already own a home?

Generally, FHA loans are for primary residences only, and borrowers can only have one FHA loan at a time. Exceptions exist for relocation (moving more than 100 miles), family size increases, and co-borrower situations. You can also use an FHA loan to refinance your existing FHA mortgage.

Do FHA loans take longer to close?

FHA loans may take slightly longer due to the stricter appraisal process. Average closing time is 30-45 days, compared to 25-35 days for conventional loans. However, working with an experienced FHA lender can help speed up the process.

Can I refinance out of an FHA loan later?

Yes. Many borrowers start with an FHA loan and refinance into a conventional loan once they reach 20% equity and have a credit score above 680. This eliminates the ongoing MIP payments. The FHA Streamline Refinance is also available if you want to stay with an FHA loan but get a lower rate.

Is the FHA going to eliminate lifetime MIP?

As of February 2026, there has been periodic discussion in Congress and at HUD about modifying the lifetime MIP requirement, but no changes have been enacted. The annual MIP rate was reduced to 0.55% in 2023, which lowered costs for borrowers, but the duration requirement remains in place for loans with less than 10% down payment.

What is an FHA case number?

An FHA case number is a unique identifier assigned to your FHA loan application. It is generated when the lender orders the FHA appraisal and is used to track the loan through HUD's system. The case number is tied to the specific property, not just the borrower.

Summary: Is an FHA Loan Right for You?

An FHA loan is one of the most accessible mortgage programs available, offering a path to homeownership for borrowers who might not qualify for conventional financing. Key takeaways:

• Best for: First-time buyers, borrowers with credit scores of 500-680, and those with limited down payment savings
• Down payment: As low as 3.5% with a 580+ credit score
• Mortgage insurance: 1.75% upfront + 0.55% annual MIP (may last life of loan)
• Loan limits: $541,287 to $1,249,125 depending on location (2026)
• Property type: Primary residence only (1-4 units)
• Key advantage: Most flexible credit requirements of any major mortgage program
• Key drawback: Lifetime MIP if you put less than 10% down

Whether you are buying your first home or recovering from a financial setback, an FHA loan can open the door to homeownership. Just be sure to compare FHA loans with conventional and VA options (if eligible) to find the best fit for your situation.

FHA Loan FAQs

What is an FHA loan?

An FHA loan is a mortgage insured by the Federal Housing Administration. It helps borrowers with lower credit scores and smaller down payments qualify for home financing. FHA loans accept credit scores as low as 580 with just 3.5% down.

What credit score do I need for an FHA loan?

You need a minimum 580 credit score for 3.5% down. Scores between 500 and 579 can qualify with 10% down. Most lenders prefer 620 or higher for the smoothest approval.

How much is FHA mortgage insurance?

FHA charges an upfront premium of 1.75% of the loan amount plus an annual premium of 0.55% for most borrowers. With less than 10% down, you pay annual MIP for the life of the loan. With 10% or more down, MIP drops off after 11 years.

What are the 2026 FHA loan limits?

The 2026 FHA floor is $524,225 for a single-family home in most counties. High-cost areas go up to $1,209,750. Limits vary by county based on local home prices.

Can I use an FHA loan for a second home?

No. FHA loans are only for primary residences. You must live in the home within 60 days of closing. For second homes or investment properties, consider a conventional loan instead.