FHA Loans

For a standard FHA purchase, a borrower with a credit score of 580 or higher can be eligible for maximum financing of 96.5%, which generally means a 3.5% minimum required investment. With a credit score from 500 through 579, FHA limits financing to 90% LTV, so the minimum investment is 10%. A borrower without a traditional credit score can still be eligible for maximum financing, but the loan has to be manually underwritten using FHA’s nontraditional or insufficient-credit rules.

The 3.5% is based on FHA’s Adjusted Value, which for an ordinary purchase is generally the lower of the property value or the purchase price after any applicable inducements to purchase. It also is not necessarily your total cash to close. Closing costs, prepaid taxes and insurance, and an appraisal that comes in below the contract price can all affect the amount you actually need.

There is even a $100 Down program for certain eligible HUD-owned properties.

These are FHA program thresholds, not an approval guarantee; lender requirements may be stricter.

There is not one FHA debt-to-income limit that applies to every borrower. Standard FHA forward loans are generally evaluated through FHA’s TOTAL Mortgage Scorecard, which looks at the overall risk of the file and returns an Accept or Refer result. A Refer, or a file that otherwise requires manual underwriting, is evaluated under FHA’s manual underwriting rules.

For a manually underwritten loan, FHA’s basic qualifying ratios are 31% for the housing payment and 43% for total debt. With a credit score of at least 580, FHA can permit higher ratios when specific compensating factors are documented: up to 37/47 with one qualifying compensating factor, 40/40 when the borrower meets FHA’s documented “no discretionary debt” criteria, or 40/50 with two qualifying compensating factors. Borrowers with scores below 580, or with no credit score, generally cannot exceed 31/43 under the standard manual matrix.

So a DTI above 43% does not automatically mean FHA will not work, but the answer depends heavily on whether the file receives an automated approval or has to be manually underwritten, as well as the rest of the borrower’s profile.

An FHA loan is a mortgage insured by the Federal Housing Administration.

No. FHA insures the mortgage; it does not fund the loan. The actual mortgage is made by an FHA-approved lender. FHA establishes the insurance and eligibility rules, and that insurance protects the lender against certain losses if the borrower defaults.

That distinction matters because lenders can have different rates, pricing and underwriting standards even though they are all offering FHA-insured financing. It also would be misleading to say that FHA necessarily requires a lower down payment than conventional financing. FHA’s standard maximum-financing purchase requires 3.5%, while eligible conventional programs can permit 97% financing, or 3% down.

Program eligibility does not by itself establish lender availability. We’ll confirm which financing options are available for your property, occupancy and circumstances.

FHA can work with a much wider range of credit histories than just borrowers with perfect credit. For traditional credit, a score of 580 or higher can qualify for maximum financing, while a score from 500 through 579 is limited to 90% LTV. FHA also has a path for borrowers without a traditional credit score, but those files must be manually underwritten under FHA’s nontraditional or insufficient-credit rules.

Past major credit events have their own rules and their own starting dates. For manual underwriting, a Chapter 7 bankruptcy generally does not disqualify a borrower once two years have elapsed from discharge to FHA case-number assignment, provided the borrower has reestablished good credit or chosen not to incur new credit obligations. FHA can consider a period between 12 and 24 months when circumstances beyond the borrower’s control caused the bankruptcy and a responsible financial-management history is documented. A Chapter 13 can potentially qualify after at least 12 months of the repayment period when payments have been made satisfactorily and the borrower has written permission from the bankruptcy court. A foreclosure or deed-in-lieu is generally subject to a three-year period measured from the transfer of ownership, not simply from the date the borrower stopped making payments.

These waiting periods are evaluated as of FHA case-number assignment.

Short sales have their own three-year rule measured from transfer of title as well, but FHA has an important exception for a borrower who kept the prior mortgage and installment debts paid within the month due during the 12 months preceding the short sale. That is why “you had a bankruptcy/foreclosure/short sale, so just wait X years” is often too simplistic.

FHA normally has two mortgage-insurance charges. The upfront mortgage insurance premium, or UFMIP, is 1.75% of the base loan amount for a standard purchase or refinance. It can generally be financed into the mortgage instead of being paid entirely in cash at closing.

There is also an annual MIP that is collected through the monthly payment. For a common 30-year purchase with more than 95% LTV and a base loan amount of $726,200 or less, the current annual rate is 0.55%. The rate varies with loan term, LTV and base loan amount, so 0.55% should not be presented as universal. For example, a greater-than-15-year loan above $726,200 with more than 95% LTV carries a 0.75% annual MIP under the current premium schedule.

How long you pay it also matters. For new standard FHA forward loans under the current premium rules, annual MIP generally remains for the mortgage term when original LTV exceeds 90%; at 90% or below, it generally lasts 11 years. That is materially different from conventional private mortgage insurance, which follows separate cancellation rules.

A conventional refinance may remove FHA mortgage insurance later, but future eligibility, rates and costs still need to be evaluated.

A useful comparison is FHA versus a conventional loan using the same purchase price, down payment and timing. Do not assume FHA is better because its interest rate is lower, or conventional is better because it avoids FHA mortgage insurance. Eligible conventional programs can go as low as 3% down, and conventional PMI can often be cancelled later under rules that do not apply to FHA MIP.

I would compare the cash to close, total monthly payment, interest rate and points, upfront mortgage-insurance cost, monthly mortgage-insurance cost and duration, and the expected cost over the amount of time you realistically expect to keep the loan.

There is no universal winner. A borrower’s credit profile, down payment, loan amount, property and expected time in the loan can change the answer significantly.

Yes. FHA financing can be used on an eligible one- to four-unit property, provided the borrower will occupy the property as a principal residence. That means someone can buy a duplex, triplex or four-unit property with FHA financing and live in one of the units.

Three- and four-unit properties have an additional self-sufficiency test. FHA calculates net self-sufficiency rental income using the appraiser’s market rent for all of the units, including the unit the borrower will occupy, and subtracts the greater of the appraiser’s vacancy/maintenance estimate or 25% of the market rent. The property’s PITI divided by that net rental amount cannot exceed 100%.

Three- and four-unit FHA transactions also require three months of PITI in documented reserves after closing. A duplex does not have that same three-to-four-unit self-sufficiency test; reserve requirements can still depend on how the loan is underwritten, including a one-month PITI requirement for manually underwritten one- to two-unit transactions.

For 2026, the one-unit FHA limit starts at $541,287 in lower-cost areas and can reach $1,249,125 in high-cost areas. The applicable limit depends on the county and number of units.