FHA Loan Requirements Explained (Without the Jargon)

Thinking about buying a home but not sure if you qualify? You’re not alone. One of the most common loan types I help folks with is the FHA loan—and for good reason. It’s flexible, affordable, and designed to help buyers who may not have perfect credit or a huge down payment saved up.

If that sounds like you, let’s talk about what it takes to qualify—and whether it’s the right fit.

So, What Is an FHA Loan?

An FHA loan is a mortgage that’s backed by the Federal Housing Administration. Because it’s insured by the government, lenders can offer it to buyers who might not qualify for conventional loans or have lower scores. Credit scores lower than 700 normally receive much lower rates and mortgage insurance rates with FHA than with conventional loans.

Translation: You don’t need a massive down payment or spotless credit to get approved.

What Are the Basic Requirements?

Here’s a quick breakdown of what lenders (including me!) look for with FHA loans:

1. Credit Score

  • 580 or higher = you only need 3.5% down
  • 500–579 = you’ll need 10% down – I can get 500+ credit scores done as long as there are some positive tradelines with good pay history and very few late payments within the last 12 months.
  • Some lenders require higher scores (like 620 or 640), but we have options starting at 500.

2. Down Payment

  • Just 3.5% down if you qualify
  • You can use gift funds, grants, or even down payment assistance.
    (Need help with that? Start here.)

3. Debt-to-Income Ratio (DTI)

4. Steady Income

  • A 2-year work history is required, but gaps or changes can be explained. We can count your school transcripts as work history as well. If you are returning to work after an extended time off, you may need at least 6 months on your new job to qualify.
  • Self-employed? No problem—I’ll guide you through the documentation

5. You Have to Live There

  • FHA loans are only for your primary residence
  • You can buy a single-family home, duplex, triplex, or even fourplex (and yes, rental income can help you qualify!)

6. The Property Must Qualify Too

  • The home has to meet basic health and safety standards—nothing majorly broken or hazardous
  • I’ll help you make sure any home you’re considering checks all the boxes

What About Mortgage Insurance?

This is one of the trade-offs with FHA loans:
You’ll have mortgage insurance no matter how much you put down.

  • Upfront MIP: 1.75% of the loan, typically rolled into the mortgage
  • Annual MIP: Paid monthly, and it usually sticks around for the life of the loan. With 3.5% down the monthly amount is 0.55% of the total loan amount. With 5% down or greater, it is 0.50% of the total loan amount. Usually much lower than conventional loans with similar credit scores.

Still, for many buyers, it’s a fair trade for easier qualification and lower down payment requirements.

Why So Many People Choose FHA Loans

Here’s why FHA loans continue to be a popular option:

  • Low down payment (as little as 3.5%)
  • More flexible credit score guidelines
  • Easier to qualify for than many conventional loans
  • You can use gift funds or down payment assistance
  • You may even be able to refinance later with a streamlined FHA refinance (super simple process)

Want to check if you qualify? You can get started here—it only takes a few minutes.

A Few Things to Consider Before You Decide

As great as FHA loans are, they’re not perfect for everyone. A few things to be aware of:

But don’t stress—I’ll help you navigate all of this so you’re never left guessing.

So, Is an FHA Loan Right for You?

It might be, if…

  • Your credit score is between 500–700
  • You’re short on cash for a down payment
  • You’ve had some credit bumps in the past
  • You’re buying a multi-unit property to live in and want to use rental income to help qualify

If your score is higher (say 680+) and you’ve got at least 3% to put down, we’ll also compare a conventional loan side-by-side so you can make the best choice for your budget and long-term goals.

Let’s Take the First Step

I’m here to make the process simple—and even a little fun. If you’re wondering whether an FHA loan is your best bet, let’s talk about your situation and see what programs are the best fit.

Start your free pre-approval right here
Or feel free to call me at (214) 945-1066 if you just have a few questions.

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