Your Guide To FHA Loan Requirements

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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FHA loans are an attractive option for many first-time homebuyers. Backed by the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (HUD), these home loans feature flexible eligibility criteria. As a result, you can get approved with a lower credit score and down payment than you’ll find with other home loan products. However, you should consider the additional costs before deciding if an FHA is best for your financial situation, like mortgage insurance and funding fees. 

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Types of FHA Loans

Many borrowers turn to FHA loans to buy their dream homes. However, these loan products can also be used to refinance or renovate qualifying properties. 


FHA loans can be used to purchase a primary residence that meets HUD guidelines. 

FHA Rate/Term Refinances

An FHA rate/term refinance could be ideal if your credit score is low, but you want a better interest rate or a different loan term. 

FHA Streamline Refinance

If you already have an FHA loan, it’s possible to get a lower interest rate, save on mortgage insurance and reduce your monthly mortgage payment with an FHA Streamline Refinance. Plus, these loan products don’t require you to submit a mountain of paperwork when you apply. 

Cash-Out Refinance

An FHA cash-out refinance lets you pull equity out of your home. 

FHA 203(k) Loan

This loan product is ideal if you want to fund the purchase of a home and renovation costs with a single loan product.

What are the Requirements for an FHA Loan?

Before applying for an FHA loan, familiarize yourself with the eligibility requirements to ensure your financial and credit health are up to par. You should take into account that lenders set their own guidelines and can implement what’s referred to as overlays, like higher credit scores or debt-to-income requirements, that make it more challenging to get approved for a loan. 

Property Requirements

You must use the home you purchase with an FHA loan as your primary residence. Eligible properties include single-family homes, condos, townhomes and multi-family homes with two- to four units (assuming you occupy at least one). 

The FHA also requires that the home meet the minimum property standards, which can be confirmed through an FHA appraisal. Furthermore, at least one borrower must move into the house within 60 days of closing. 

Credit Score

The minimum credit score per FHA guidelines is 500, but your down payment will be substantially lower if your score is at least 580. Be mindful that some lenders require much higher scores, given current market conditions. 

Down Payment

You’ll need 3.5% down if your credit score is 580 or higher. A 10% down payment is required if your credit score is between 500 and 579. 

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Mortgage Insurance 

There are two mortgage insurance requirements for FHA loans: 

  • Upfront mortgage insurance premium: 1.75% of the loan amount that’s payable at closing unless you opt to roll it into the loan amount 
  • Monthly mortgage insurance payments: payable for the life of the loan or 11 years if you make a down payment of at least 10%

Loan Limits

The FHA loan limits in 2022 are $420,680 for single-family homes or up to $970,8000 for high-cost areas. 


Lenders will verify your earnings by examining pay stubs, bank statements, W-2s and federal tax returns to determine if you qualify for a loan. 

You should also have an acceptable debt-to-income (DTI) ratio, which is the percentage of your monthly gross income used to cover debt payments. FHA guidelines recommend a DTI that doesn’t exceed 43%. It’s also best if the mortgage payment for the home you’re considering doesn’t exceed 31% of your gross income. 

How Does an FHA Loan Differ from a Conventional Loan?

Conventional loans aren’t insured by the federal government. Furthermore, there’s no 1.75% funding fee, like you’ll find with an FHA loan. Here are some other ways conventional loans differ from FHA loans: 

  • Loan limit: Conventional mortgage loans are limited to $647,200 for a single-unit property. This figure increases to up to $970,800 for homes located in high-cost areas.
  • Eligibility criteria: The credit score minimum is 620, and the down payment requirement ranges from 3% to 20% on conventional loans.
  • Loan terms: Most lenders offer 8- to 30-year terms on conventional loans, but the loan term for FHA loans is limited to 15- or 30 years.
  • Interest: Fixed-rate and adjustable-rate conventional loans are available. However, the interest rate on FHA loans is always fixed.
  • Mortgage insurance: Private mortgage insurance is assessed on conventional loans if your down payment is less than 20%. The upside is that you can have it removed once you have 22% equity.

How to Get an FHA Loan

With so many lenders to choose from, it can be overwhelming to research lenders and find the best option to get an FHA loan. Fortunately, loanDepot understands the added stress that comes with the home-buying process and offers seamless mortgage solutions to make securing a home loan less challenging. 

With over 200 locations nationwide, loanDepot is available to assist you with your home purchase or refinance needs. To date, the lender has funded over $96 billion in purchase loans and $179 billion in mortgage refinances. 

If you decide an FHA loan isn’t a good fit, several other options are available, including conventional fixed-rate or adjustable-rate mortgages and VA loans. 

loanDepot is licensed in all 50 states and has Licensed Lending Officers standing by to help make your home-buying dreams a reality. Get started today by submitting an online inquiry. A loanDepot team member will reach out to you shortly to discuss your goals and the next steps.

Choose A Mortgage That's Right For You
Lower Rate, Fast Approval. Connect with a Lending Expert. Apply Now. No Hidden Fees. Faster Closing Times. Low Fixed Rates. A+ Rating with BBB. Cash-Out Refinancing.

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