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FHA loan requirements in 2023

Find out if you qualify for an FHA loan and what you'll need to apply

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If you don’t qualify for a conventional mortgage, a mortgage backed by the Federal Housing Administration (FHA) could be your next best option. These FHA loans have lower income and credit requirements for borrowers. Read on to learn more about FHA loan requirements, how to qualify and apply, get answers to frequently asked questions, and discover if FHA loans are worth it.

Key insights:

  • The minimum credit score needed for an FHA loan is 500.
  • FHA borrowers can put as little as 3.5% down.
  • There are no minimum or maximum income requirements for FHA loans.

What is an FHA loan?

An FHA loan is a mortgage backed by the Federal Housing Administration. It is designed for low- to moderate-income homebuyers who may not have perfect credit scores. To qualify, you need to meet requirements set forth by the individual lender.

Who qualifies for an FHA loan?

Qualifying for an FHA loan is often easier than qualifying for a conventional loan because the credit requirements aren't as strict. You need a FICO credit score of at least 580 to qualify for a loan with a 3.5% down payment. If your score is between 500 and 579, you can still qualify for an FHA loan with a 10% down payment with some lenders.

FHA loan requirements are relatively straightforward, but lenders can impose their own minimums guidelines. Borrowers of FHA loans must pay mortgage insurance upfront and every month. Mortgage insurance is paid to the FHA. For more information, read about how an FHA loan works.

What are the requirements for an FHA loan?

FHA guidelines state that applicants must meet the following requirements to qualify for an FHA mortgage loan:

  1. Minimum down payment of 3.5%: An FHA home loan requires a minimum down payment of 3.5% of the total home price if you have at least a 580 credit score. You'll need to make a down payment of 10% of the home price if your credit score is between 500 and 579.
  2. FHA minimum credit score of 500: The absolute lowest credit score for an FHA loan is 500. Keep in mind that a higher credit score can lower your down payment requirement and rate, so it's a good idea to spend time fixing your credit score by paying down your debts and making payments on time before you apply for an FHA loan.
  3. FHA income requirements: There are no minimum or maximum income requirements to qualify for an FHA loan.
  4. Debt-to-income (DTI) ratio under 43%: The DTI ratio measures how much total debt you have in relation to your income. The lower your DTI ratio, the more money you have to pay toward things besides debt every month. You want a low DTI ratio to get approved for a low interest rate. Most lenders won't offer you an FHA loan if your DTI ratio is more than 50%, and some will only accept your application if your DTI ratio is 43% or lower.
  5. Meet FHA loan limits: The loan limits change every year and vary based on your specific location.
  6. Home appraisal by an FHA-approved appraiser: Every home purchased through the FHA home loan program must go through an appraisal process. You'll need an FHA-approved appraiser to assess the home's value and ensure it meets all of FHA's minimum property requirements.
  7. Mortgage insurance premium: With FHA loans, borrowers must pay mortgage insurance premiums. There is both an upfront cost (which you can roll into your loan amount) and a monthly charge.
  8. Stable income: To be eligible for a mortgage, lenders must verify the borrower's employment for the most recent two years. Typically, a borrower's income is considered stable when they have been employed in a current job for six months or longer.
  9. Non-occupying co-borrowers allowed: The FHA requires that at least one person on the loan lives in the home as a primary residence. When there are two or more borrowers but one or more will not live in the property as a primary residence, the maximum mortgage is limited to a 75% loan-to-value (LTV) ratio.
  10. Age requirements in the state of residence: To get an FHA loan, you must meet your state's legal age requirements to sign a mortgage.

2022 FHA loan limits

FHA loan limits vary based on your specific location and are subject to change each year. In 2022, the FHA loan limit for a single-family home in most areas is $420,680. In high-cost areas, the cap is $970,800.

Special exception areas, such as Hawaii, Alaska, Guam and the Virgin Islands, have higher FHA ceilings. The maximum amount for a single-unit home is $1,456,200.

Low-cost areasHigh-cost areas

FHA mortgage insurance requirements

Borrowers on FHA loans are usually required to pay mortgage insurance premiums (MIP) to the FHA. There is both an upfront MIP and an annual MIP, which most borrowers pay in monthly installments.

The upfront MIP is 1.75% of the loan amount. The annual MIP is between 0.45% and 1.05%, depending on the mortgage term, the base loan amount and the LTV ratio. If your LTV ratio is 90% or less, you’ll pay MIP for 11 years; otherwise, you pay it for the full mortgage term.

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    FHA loan FAQ

    Can you use down payment assistance with an FHA loan?

    While the FHA itself does not provide down payment assistance, you may be able to qualify for down payment assistance from state or local programs. A list of homebuying programs by state is available on the Department of Housing and Urban Development's website. The list is a great starting point if you're not sure where to look.

    Down payment assistance and other monetary gifts made toward your down payment, closing costs or toward the purchase of a home do require documentation and verification by your lender. There are various state and federal regulations at play that must be met to use gift funds toward a down payment. You'll want to verify that any options you're pursuing are approved sources of help by verifying them with your loan officer to ensure they meet FHA loan requirements.

    What is an FHA funding fee?

    The FHA funding fee includes both the upfront fee and monthly premium that borrowers must pay for mortgage insurance. These fees are known as the upfront mortgage insurance premium (UFMIP) and the mortgage insurance premium (MIP). The upfront fee is equivalent to 1.75% of your mortgage amount. The MIP is a fee added to your monthly payment. This fee protects lenders from potential loss. Borrowers can finance the upfront fee by rolling it into their mortgage.

    What is the interest rate on an FHA loan?

    FHA rates vary by lender and location. See what the current mortgage rates are.

    How much are FHA closing costs?

    FHA closing costs average around 2% to 5% of the overall mortgage amount. Homebuyers purchasing a property for $200,000, for example, can expect to pay $4,000 to $10,000 on closing costs. However, borrowers should note that closing costs vary depending on the lender. After you apply, check the Loan Estimate form from the lender to get estimates of closing costs.

    How many times can you get an FHA loan?

    Borrowers can technically use FHA loans as many times as they like. It’s a common misconception that only first-time homebuyers can access FHA loans. However, you can usually only have one FHA loan at a time — this is partially to prevent the program from being used to purchase investment properties. Exemptions apply with extenuating circumstances such as changes in family size, job relocation and scenarios where a co-borrower vacates the property with an existing FHA loan to purchase a home of their own.

    Are FHA loans hard to get?

    FHA loans are typically easier to get than conventional mortgages. You only need a credit score of 500 to begin the qualification process.

    How long do FHA loans take to close?

    The closing time on an FHA loan shouldn't vary too much from any other home loan. FHA loans do require in-depth appraisals by an FHA-approved appraiser, and any issues they identify must be fixed prior to closing on the loan. On average, you can expect an FHA home loan closing to take between four and six weeks.

    Why do underwriters deny FHA loans?

    Failure to meet any of the qualifications outlined above may result in your FHA loan being denied. The most common reasons for being denied an FHA loan are bad credit and high debt.

    Why do sellers not like FHA loans?

    One reason FHA loans may be less appealing to a seller is the appraisal guidelines. For the loan to close, an FHA-approved appraiser must evaluate the property. If the appraiser determines the home's value to be below the seller’s listed price, the seller must lower the price to match the appraisal or lose the offer from the FHA borrower.

    Can I pay off my FHA loan early?

    You can pay off an FHA loan early. According to the HUD Lender's Guide to the Single Family Mortgage Insurance Process, a borrower may prepay a mortgage in whole or in part.

    Can I rent out my house with an FHA loan?

    FHA loans are designed for residences the owner will occupy. You must agree to live in the home for at least one year as your primary residence before renting the home to another tenant.

    Bottom line: Are FHAs good?

    An FHA loan is a good loan for homebuyers who have a low to moderate income and may not have funds available for a large down payment. Homebuyers with good credit only have to put down 3.5% on an FHA loan. Conventional loans sometimes require a much larger down payment.

    This type of loan is also a good idea for homebuyers with less-than-perfect credit because FHA loans have lenient credit score requirements. It’s possible to get an FHA loan with a credit score as low as 500.

    If you prefer the benefits of a conventional loan but don’t quite qualify for one yet, we recommend you work on improving your credit score and getting out of debt. Even waiting a year or two while you build credit and lower your debt can make a huge difference in your eligibility.

    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. To learn more about the content on our site, visit our FAQ page. Specific sources for this article include:
    1. U.S. Department of Housing and Urban Development, "Maximum Mortgage Limits 2022." Accessed Nov. 11, 2022.
    2. U.S. Department of Housing and Urban Development, “Lender’s Guide to the Single Family Mortgage Insurance Process.” Accessed Nov. 27, 2022.
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