Can You Qualify for an FHA Loan? Key Eligibility Criteria

Answer

FHA loans help many buyers with lower down payments and more flexible credit standards. Understanding the eligibility requirements for an FHA mortgage ensures you can move forward confidently.

Here’s how you generally qualify for an FHA loan:

• Credit Score: Most lenders require a minimum FICO score of 580 to secure the 3.5% down payment option. Borrowers with scores between 500–579 may still qualify but must provide at least 10% down.
• Down Payment: You need at least 3.5% of the purchase price as a down payment when your credit score is 580 or higher. Funds can come from savings, gifts, or approved down-payment assistance programs.
• Debt-to-Income Ratio (DTI): Lenders typically look for a DTI at or below 43%. In some cases, you may qualify with a DTI up to 50% if you have strong compensating factors (e.g., significant cash reserves).
• Steady Employment: FHA borrowers should have at least two years of consistent employment or income history. Recent job changes are allowed if the new position is in the same field and does not sacrifice income.
• Proof of Income: Provide two years of W-2s or tax returns, recent pay stubs (last 30 days), and evidence of any additional income (bonuses, alimony, social security).
• Primary Residence Requirement: FHA loans apply only to owner-occupied properties. You must live in the home as your primary residence for at least 12 months.
• Mortgage Insurance: FHA requires an upfront MIP of 1.75% of the loan amount (rolled into the loan) plus an annual MIP (typically 0.45–1.05% of the loan balance), paid monthly.
• Property Standards: The home must meet FHA’s minimum property standards and pass an appraisal by an FHA-approved appraiser. Safety, security and soundness are evaluated.

FHA lenders may apply overlays—stricter rules than FHA’s minimum—so requirements can vary. Buyers are recommended to compare quotes from multiple FHA-approved lenders and verify program details.
Before deciding, it’s advisable to consult a licensed mortgage professional or local real estate attorney to confirm your specific eligibility and understand all costs involved.