FHA Loan Requirements 2024

When qualifying for an FHA loan, you’ll need a credit score of at least 500 or better. With a score of 500, you’ll also need a down payment of at least 10%. However, if you have a credit score of 580 or higher, your down payment requirement drops to only 3.5%.   

Keep in mind that while the FHA sets guidelines for credit scores, individual lenders may set higher requirements to minimize their risk. This is one of several reasons to compare lenders to find the one that’s right for you.  

In addition to reviewing borrower credit scores, mortgage lenders will look for steady employment and income to cover the loan. Lenders will verify that you have an income history of at least two years or proof of enrollment in school/Military.  

If you are using cash gifts in any way to fund your down payment, the gift must be verified in writing and signed and dated by the person supplying the funds. In addition, the gift must be provided by an acceptable donor. The transfer of the funds from the gift donor documentation is required.  

Additionally, FHA borrowers must not have any delinquent federal debt or judgments against them. This can include tax debt as well as other forms of federal debt, especially debt associated with past FHA loans.  

Your debt-to-income (DTI) ratio refers to the relationship between your monthly income and your monthly debt. For example, if your monthly income is $5,000 but you have $1,700 in debt, your DTI is 34% ($1,700/$5,000).   

With a credit score of 580 or higher, you may qualify for an FHA loan with a DTI as high as 50%, though this can vary between lenders.  

Your down payment requirement varies depending on your credit score and relationship to the seller:  

• With a credit score of 580 or higher: 3.5% down payment  
• With a credit score of 500 to 579: 10% down payment  
• Higher down payments may be required when purchasing from a family member, builder, landlord, or if it’s a corporate transfer  

You may see these down payment requirements listed as the “minimum required investment,” or MRI.  

Typically, when you put down less than 20% on a home, you’ll be expected to pay something called “private mortgage insurance,” or PMI. FHA loans do not have PMI payments, but they do require you to pay a monthly mortgage insurance premium (MIP).  

There are two payments associated with mortgage insurance premiums. The first is upfront MIP, typically financed into the total loan amount. The second is annual MIP which is paid monthly in the mortgage payment.  

How much is a typical MIP? The exact number can vary based on factors that include:  

• Your total mortgage amount  
• Your mortgage term  
• Your loan-to-value (LTV) ratio / size of your down payment  
• Borrowers can generally expect their MIP to run between 0.15% to 0.75% of their base amount. These payments will be rolled into your monthly mortgage payments, making it easier to keep track of your MIP.  

In addition to the above financial requirements, there are specific FHA loan requirements that relate directly to the property you’re purchasing. To qualify for an FHA loan, the property must meet the following requirements:  

• The home must be your primary residence, not a second home or vacation property  
• It can’t be an investment property unless you occupy one unit in a multi-unit dwelling  
• The home must pass an FHA appraisal unless you’re renovating with a 203(k)  
• The title must be in your name (or the name of a living trust as long as the beneficiary of the living trust is a borrower on the loan) at the settlement  

Beyond these basic requirements, the property must be a single-family residence such as a detached house, townhouse, or condominium. It’s possible to use an FHA loan to purchase a multi-family home of up to four units, but as noted, you must occupy one of those units. 3-4 unit properties must also meet additional requirements such as self-sufficiency.  

The FHA requires that the loan apply to your primary residence. What counts as legal residency? According to the FHA, the home must become your primary residence within 60 days of signing the security instrument. Afterward, you must continue occupying the residence for at least one full year.  

This also means that you can’t use an FHA loan to flip a house. That is, you can’t buy a home within 90 days of a prior sale. There are exceptions to this rule, such as if you received the home as part of an inheritance.  

While citizenship is not explicitly mentioned as a requirement, applicants must have a valid Social Security number (SSN) and be a lawful resident of the United States. This implies that non-U.S. citizens, including permanent residents (green card holders) and certain non-permanent residents with legal residency status, may be eligible.  

First, you’ll need to find an FHA mortgage lender. You can use the HUD’s lender list, do independent research, or ask for recommendations.  

To demonstrate your ability to meet the FHA loan requirements, you’ll need documents that highlight your financial situation. Gather things like:  

• Tax returns  
• Pay stubs  
• Bank statements  
• W-2 forms  
• A valid form of ID  
• Your lender will perform a credit check, but it never hurts to check your credit report first and address any errors that may artificially lower your score.  

Most lenders will allow you to get pre-approved for a mortgage, which will give you a definitive picture of how much you can expect to borrow. And a pre-approval letter will give your offer greater legitimacy in the eyes of sellers.  

Before you can close on the sale, an FHA-approved appraiser must inspect the property to ensure it meets the HUD’s minimum standards. This process also applies to rehabilitation loans, so you know what sort of funding you’ll need to renovate the home. 

Finalize the loan with the lender by establishing the payment terms and signing the documents. You’ll also pay closing costs at this time, usually 3% to 6% of the total loan amount.