Reviewed by Jeff Shin, NMLS #1041652. Updated .

FHA loan requirements

HUD sets the floor for every FHA loan in its Single Family Housing Policy Handbook (HUD 4000.1). The rules most borrowers ask about:

  • Credit score. Per HUD, a score of 580 or higher qualifies for maximum financing, which is a minimum down payment of 3.5%. Scores from 500 to 579 are limited to 90% financing. Many FHA lenders set their own minimum above HUD’s, so two lenders can give the same file two different answers.
  • Occupancy. The home has to be your primary residence. FHA covers one to four units, so a two-flat you live in qualifies. A rental you do not live in does not.
  • Property condition. The FHA appraisal checks safety, security, and soundness as well as value. Peeling paint on older homes, missing handrails, and broken utilities are the common repair flags.
  • Loan limits. HUD publishes FHA loan limits by county each year. Above the limit, the loan cannot be FHA.
  • Mortgage insurance. FHA charges an upfront mortgage insurance premium, set by HUD at 1.75% of the base loan amount and usually financed into the loan, plus an annual premium paid monthly.

FHA loan rates and what they leave out

FHA rates often price close to or below conventional rates for the same borrower, because the government insurance absorbs much of the credit risk. The rate is only half of it. Mortgage insurance is added on top, so the APR and the monthly payment are the fair comparison, not the note rate. Compare any FHA quote against the weekly mortgage rate benchmark, then check the points and lender fees on page 2 of the Loan Estimate.

Same buyer, same price: FHA vs. conventional payment side by side, and how the upfront MIP changes cash to close.

FHA for first-time home buyers

FHA is the loan most first-time buyers hear about first, mostly because the credit rules are more flexible than conventional underwriting. It is not always the cheapest choice. With strong credit, a conventional loan with private mortgage insurance can cost less over time because that insurance can be removed later. FHA vs. conventional: how to decide walks through it, and the first-time buyer guide covers the other programs.

FHA streamline refinance and FHA cash-out

An FHA streamline refinance replaces an existing FHA loan with a new one at a lower rate, with reduced documentation and usually no new appraisal. HUD requires a net tangible benefit, so the new loan has to actually improve the payment or the terms. An FHA cash-out refinance is a full refinance with an appraisal, and HUD caps it at 80% of the home’s value. More here: FHA streamline checks before you chase a lower payment.

FHA 203(k) renovation loans

A 203(k) loan finances the purchase and the repairs in one FHA mortgage, based on the value after the work is done. HUD offers a Limited 203(k) for non-structural repairs and a Standard 203(k) for larger projects, which requires a HUD consultant. Contractor bids and the repair timeline become part of the approval. See 203(k) checks before a fixer-upper offer.

Choosing among FHA lenders

Every FHA-approved lender works under the same HUD rules and adds its own overlays on top: a higher credit minimum, a lower debt-to-income cap, or no manual underwriting. Barrett Financial Group, L.L.C. (NMLS #181106) is the broker and can price one FHA file across several wholesale lenders, which matters most when a file sits near one of those overlays.

Questions borrowers ask

What credit score do I need for an FHA loan?

HUD allows FHA financing with a credit score as low as 500. A score of 580 or higher qualifies for maximum financing under HUD rules, and scores from 500 to 579 are limited to 90% financing. Individual lenders often set a higher minimum, so the score that works depends on the lender as well as HUD.

Can an FHA loan be used for an investment property?

No. FHA requires the home to be your primary residence. You can buy a two- to four-unit property with FHA if you live in one of the units and rent the others.

Are FHA mortgage rates lower than conventional rates?

The note rate on an FHA loan is often close to or below a conventional rate for the same borrower. FHA mortgage insurance is added on top, so compare the APR and the full monthly payment, not the rate alone.

What is an FHA streamline refinance?

It is a refinance from an existing FHA loan into a new FHA loan with reduced documentation and usually no appraisal. HUD requires the new loan to give a net tangible benefit, such as a lower combined rate and mortgage insurance payment.

How do I get pre-approved for an FHA loan?

A lender reviews your credit, income, assets, and debts against HUD rules and its own overlays, then issues a pre-approval for a price range. BankPricer can review your numbers first, with no credit pull, so you know whether FHA or conventional fits before you apply.

Sources

Program rules on this page are summarized from the agencies that set them. Lenders can add stricter requirements. Checked October 7, 2026.

Related

FHA lenders by city: all 33 markets

Every page in this section, not a selected eight — a hub that links a quarter of its own children is a hub that hides the other three quarters.

Pages marked not licensed cover markets outside the licensed footprint. They are educational only. Jeff Shin is licensed to originate residential mortgage loans in Illinois, Indiana, Kansas, Michigan, New Jersey, Texas.

Other loan products

Not sure which of these applies to you?

That is usually the actual question. Send the situation rather than the product name — purchase or refinance, primary or investment, price range, and timeline — and you get the structures that fit, with what each one costs.

Get a second opinion