Apply
FHA Loan Requirements

FHA Loan Requirements: What You Actually Need to Qualify

FHA loans have the most flexible qualifying standards of any mainstream mortgage. That’s the whole point of the program. But “flexible” gets misread as “easy,” and plenty of borrowers walk into an application thinking a 580 score is the only requirement.
It isn’t. There are six areas FHA underwriting looks at, and a file has to clear all of them. Here’s what they are, what the published minimums say, and where the flexibility actually lives.

Credit Score.

Requirement FHA Minimum What It Really Means
Credit score 500 with 10% down, 580 with 3.5% down Most lenders won't go below 580. Some won't go below 620.
Down payment 3.5% with 580+ score Can be entirely gifted. Sellers can cover up to 6% in closing costs.
Debt-to-income 31% front / 43% back, standard Goes higher with compensating factors or automated approval.
Income and employment Two years of stable history Job changes are fine. Unexplained gaps are the problem.
Credit events 2 years after Chapter 7, 3 after foreclosure Shorter with documented extenuating circumstances.
Property Primary residence, 1 to 4 units, meets FHA appraisal standards Not for investment property or second homes.
Each one has its own page below with the detail. What follows is the overview and, more usefully, the underwriter’s view of how these interact.
01

The six requirements at a glance

FHA’s published floor is 500. With a score between 500 and 579, you need 10% down. At 580 or above, the minimum drops to 3.5%.
That’s FHA’s rule. It is not necessarily your lender’s rule. Most lenders add overlays on top of FHA guidelines, and a 580 floor is common. Some set it at 620. If your score is in the 500s, the loan is possible, but you need to find a lender who writes to FHA’s published guidelines rather than a stricter internal standard, and you need to ask that on the first call.
There’s also a difference between the score and the report. FHA looks at both. A 640 with two recent collections and a 30-day mortgage late reads very differently from a 640 that’s been climbing steadily for two years.
FHA credit score requirements
02

Down payment

3.5% of the purchase price with a 580 or higher score. 10% with a score between 500 and 579.
What makes FHA’s down payment different from conventional isn’t just the percentage. It’s where the money can come from. The entire 3.5% can be a gift from a family member, employer, or approved organization, with no requirement that you contribute anything from your own funds. Conventional programs are tighter about this.
Sellers can also contribute up to 6% of the sale price toward closing costs, which is more generous than most conventional loans allow.
FHA down payment requirements
03

Debt-to-income ratio

FHA’s standard limits are 31% for housing costs alone (front-end) and 43% for all debts combined (back-end).
Those are the manual underwriting limits. In practice, most FHA files run through automated underwriting, and an approval there can support back-end ratios up to 50%. With strong compensating factors, files have been approved at ratios approaching 57%. That range is where FHA’s flexibility actually shows up, and it’s also where knowing how underwriting works matters more than knowing the guideline.
FHA debt-to-income limits
04

Income and employment

FHA wants two years of stable, documented income. That does not mean two years at the same job. It means two years of work history that makes sense, with income that’s likely to continue.
Job changes within the same field are generally fine. Gaps over six months need an explanation and usually six months back on the job. Self-employed borrowers need two years of tax returns showing the business. Overtime, bonus, and commission income can count, but only with a two-year track record.
05

Credit events: bankruptcy, foreclosure, short sale

FHA is more forgiving here than conventional, and this is one of the main reasons people who’ve had a hard few years end up in FHA.
Chapter 7 bankruptcy: two years from the discharge date
Chapter 13 bankruptcy: one year into the repayment plan with court permission, or two years after discharge
Foreclosure or short sale: three years from the completion date
All of those can be shortened with documented extenuating circumstances, which means something outside your control, like a medical event or a job loss from a layoff, that caused the problem and has since been resolved.
FHA loans after bankruptcy or foreclosure
06

Property requirements

The property has to be your primary residence. FHA does not finance investment property or second homes. One to four units is fine, as long as you live in one of them.
The property also has to pass an FHA appraisal, which includes a property condition component that conventional appraisals don’t. Peeling paint on a pre-1978 home, missing handrails, a roof with under two years of life, and non-functioning utilities are the common failures. Most are fixable, but they can delay closing.
Condos need to be on FHA’s approved list or qualify for single-unit approval.

What the guidelines don't tell you

Here’s where 30 years of doing this and a stretch on the underwriting side matters.

The published minimums are not where most files are decided. A file at 580 with 3.5% down, a 43% back-end ratio, and no reserves technically meets every guideline. It’s also a file an underwriter will look at hard, because it has no margin anywhere. Meanwhile a file at 640 with a 47% ratio and three months of reserves can sail through, because the compensating factors carry it.
Compensating factors are how FHA flexibility actually works. Reserves after closing, a history of paying housing costs equal to or higher than the new payment, minimal increase in housing payment, residual income after all debts. These are what let a file exceed the standard ratios. Knowing which ones an underwriter weighs and which ones they don’t is the difference between a file that gets approved at 50% DTI and one that gets denied at 44%.
Collections matter, but not the way people think. FHA doesn’t require collections to be paid off. But if unpaid non-medical collections total more than $2,000, the underwriter has to count 5% of that balance as a monthly debt in your ratios, unless you set up a payment plan. Medical collections are excluded entirely. A borrower with $5,000 in old medical bills and nothing else is in better shape than one with $2,500 in a single old cell phone bill.
The lender you choose determines which guidelines apply. This is the one people underestimate. FHA sets the floor, but every lender decides how far above it they’ll sit. Two lenders looking at the same 590-score file can reach opposite decisions and both be following the rules.

Frequently asked questions

FHA's minimum is 500 with 10% down or 580 with 3.5% down. Most lenders set their own floor at 580 or 620.

FHA requires 3.5% down, but that entire amount can be gifted. Combined with a state down payment assistance program and seller-paid closing costs, some buyers close with very little of their own money. It depends on what's available in your area.

No. FHA has no income limits. Some down payment assistance programs that pair with FHA do.

Yes, on every loan regardless of down payment. There's an upfront premium and an annual premium. How FHA mortgage insurance works

Only if you live in one of the units. A two-to-four unit property where you occupy one unit qualifies. A property you won't live in does not.

Comparable to conventional, typically 30 to 45 days. FHA appraisals can add time if the property needs repairs.

Not sure where you stand?

I’ve underwritten these files and I’ve originated them for 30 years. If you want to know whether your situation works before you go through an application, get in touch and I’ll tell you.
Buying outside Colorado or Texas? Barrett Financial Group originates in 48 states. Get in touch and I’ll connect you with a licensed originator in yours.
See What You Qualify For

Ready to Get Started with Your FHA Loan?

Take the next step with our easy and secure online loan application. Apply online, check your loan status, and complete your application tasks in one convenient place.
Apply