FHA Loan Requirements for 2023

Mortgages backed by the Federal Housing Administration have different requirements from other types of home loans. It’s often easier to qualify for an FHA loan than a conventional loan — for example, if you have less than perfect credit or a past bankruptcy.

You don’t need to be a first-time home buyer to qualify for an FHA loan. However, FHA loans are popular with first-time homeowners because they couple low down payment requirements with more lenient standards for credit scores and existing debt. Some conventional mortgages allow down payments as low as 3%, but to qualify, you’d likely need to meet stricter credit score and debt-to-income ratio requirements than the minimums set by the FHA.

FHA loans don't come from the government. The FHA insures them on behalf of lenders, such as banks and credit unions. While the government sets minimum requirements for FHA borrowers, each lender is free to set their own standards — for example, requiring a higher credit score.

This is one of the reasons why it's smart to shop and compare FHA lenders. They might have different qualifications, and you can weigh lenders' rates and fees.

Here's a rundown of the key FHA loan requirements.

» MORE: See NerdWallet’s best lenders for FHA loans

Borrowers can qualify for FHA loans with lower credit scores than most conventional loans allow, which is one reason first-time home buyers are often attracted to them. The FHA lets borrowers with credit scores as low as 500 be considered for home loans.

While the FHA sets guidelines for credit score minimums, FHA lenders often minimize their risk by mandating higher credit minimums.

Even a lender who's following FHA guidelines to the letter will offer better terms (like a lower down payment and more allowance for existing debt) if you have a higher credit score. A stronger credit score should also help you get a better FHA mortgage rate.

» MORE: Ways to build credit fast

With an FHA loan, the minimum down payment depends on your credit score. If you have a credit score that's 580 or higher, the minimum down payment is 3.5%.

If your score falls between 500 and 579, the minimum down payment required is 10%. FHA guidelines sometimes refer to this as the minimum required investment, or the MRI.

» MORE: FHA loan down payment details

Lenders pay attention to your debt-to-income ratio regardless of the type of mortgage you get. You can use a debt-to-income ratio calculator to figure out where you stand. Lenders like to see a lower DTI because it means you’re more likely to be able to afford a loan and make payments on time.

The FHA's guidelines for DTI vary depending on your credit score. They also consider other aspects of your financial picture, such as how much cash you have on hand.

The FHA looks at two ratios:

• PTI, or front-end debt ratio: This is the ratio of your proposed monthly mortgage payments to your monthly income. The FHA calls this your Total Mortgage Payment to Effective Income Ratio, abbreviated as PTI for payment-to-income. You might also see this referred to as your front-end debt ratio.

• DTI: The debt-to-income ratio, known as DTI, measures the percentage of your pretax income that you spend on monthly debt payments. This includes your mortgage or rent, credit cards, student loans and other obligations.

Your PTI can be as high as 40% and your DTI as high as 50% if your credit score is at least 580 and you meet additional qualifications. Some lenders will issue FHA loans to borrowers with DTIs higher than 50%, but options are limited.

» MORE: How your debt-to-income ratio affects your mortgage

There is no minimum or maximum salary that will qualify you for or prevent you from getting an FHA-insured mortgage. However, you must:

• Show an income history of at least two years through employment verification or proof of enrollment in school or the military.

• Have a credit history, most commonly through a traditional credit score. If you don’t have a credit score, you’ll need to demonstrate a history of paying at least three types of bills on time, such as rent or utilities.

• Not have delinquent federal debt or judgments, tax-related or otherwise, or debt associated with past FHA-insured mortgages.

• Account for cash gifts that help with the down payment. That can include money from a friend or family member, a charity, your employer or union, or from a government agency. These gifts must be verified in writing, signed and dated by the donor.

» MORE: How to find down payment assistance programs

The property must meet FHA loan limits, which vary by county. In 2023, that’s generally up to $472,030 for single-family homes in low-cost areas and up to $1,089,300 in high-cost areas.

Some counties have limits between these amounts. You can visit HUD's website to look up the FHA loan limit in any county.

» MORE: Tips for getting the best FHA mortgage rates

Here is some of the documentation you will need when applying for an FHA home loan:

• Valid government-issued ID, such as a driver's license or passport.

• Proof of a Social Security number.

• Two years' worth of original pay stubs, W-2 forms or valid tax returns.

• Signed and dated letters that detail the source and amount of any gift funds and explicitly state that you don't need to pay back the money.

An FHA-approved lender will walk you through the details of other documentation you might have to provide.

» MORE: How to apply for a mortgage

In addition to borrower qualifications, the property must meet certain requirements before you can qualify for an FHA mortgage:

• The loan must be for a principal residence (not a vacation or second home).

• At least one borrower must occupy the property within 60 days of closing and intend to continue occupying the home for at least one year.

• The property can be a single-family home (detached or part of a development like a condo or townhouse), a multifamily home with up to four units (so long as you occupy one) or a manufactured home that's on a permanent foundation.

• It can't be an investment property, with the exception of a multiunit dwelling where you live in one of the units.

• Unless you are using a 203(k) loan for renovation, it must pass an FHA appraisal, which ensures the home meets the FHA's minimum property standards.

• The property can’t be a house flip, meaning you can’t buy a home within 90 days of a prior sale. (Some exceptions apply, such as if the prior owner inherited the home.)

• You must take title to the property in your own name or in the name of a living trust at settlement.

» MORE: What to know about buying a condo with an FHA loan

Lenders are willing to offer FHA loans because they know that in the worst-case scenario, where they have to foreclose on a home, the FHA will pay them back. That's why you'll sometimes see the FHA described as insuring home loans.

That FHA backing is funded by you, the homeowner, via FHA mortgage insurance.

• Upfront payment: You'll be required to make an upfront mortgage insurance premium equal to 1.75% of the loan amount at closing, though this can be rolled into the loan. After that, you'll make monthly mortgage insurance payments.

• Monthly payments: If your down payment is 10% or more, you'll have to make monthly mortgage insurance payments for 11 years. But if you make a down payment of less than 10% on an FHA loan, you will continue to make monthly mortgage insurance payments for the life of your loan.

The amount of insurance you'll pay is calculated based on the length and total cost of your mortgage as well as the amount of your down payment.

FHA mortgage insurance can't be canceled when you reach 20% equity in your home, the way private mortgage insurance can. However, once you have enough home equity, you could refinance your FHA loan into a conventional loan to remove the FHA mortgage insurance requirement. If you go that route, you’ll have to meet new qualifications and pay additional closing costs and fees.

» MORE: FHA closing costs

If you have lost a home to foreclosure, you'll have to wait three years before applying for an FHA loan. There are some exceptions, however, for circumstances like a serious illness.

Those who have experienced bankruptcy can also qualify for an FHA loan, though you'll have to demonstrate you're on better financial footing. Some allowances may be made individually, but in general, you'll need to wait two years after a Chapter 7 bankruptcy and at least a year after a Chapter 13 bankruptcy to apply for an FHA mortgage.

» MORE: What to know about bankruptcy

FHA loans are often attractive to borrowers with lower credit scores or smaller down payments because these loans typically have more relaxed qualification requirements than conventional mortgages. Credit challenges and saving for a down payment can be big hurdles for first-time home buyers.

If you are a first-time home buyer, you might be able to combine an FHA loan with down payment or closing cost assistance from state first-time home buyer programs. Because the FHA allows gift funds to cover those costs, one of these programs might help you more comfortably afford a home.

But anyone, even a repeat buyer or a homeowner looking to refinance a mortgage, can use an FHA loan as long as they meet the eligibility requirements.

» MORE: Comparing FHA vs. conventional loans