FHA Loan Requirements 2026

HUD sets the FHA credit minimum at 580 FICO for the standard 3.5% down payment program. Borrowers with FICO scores between 500 and 579 can still use FHA but must put 10% down. Below 500, FHA financing is not available under any circumstances per HUD 4000.1 Section II.A.1.b.ii.

The HUD minimum is theoretical for most borrowers. Lender overlays push the practical threshold higher. Most national lenders require 620-640 minimum FICO for FHA approval, even though HUD would allow 580. This overlay practice exists because lenders selling FHA loans to Ginnie Mae can face buyback demands if early-payment defaults cluster at the low end of the FICO range.

Overlay-Free FHA Lenders (will approve 580+ FICO)

Verify overlays directly with lender before application. Overlays change without public notice.

Manual underwriting is available for borrowers with no credit score (thin file). FHA accepts alternative credit references including 12 months of on-time rent payments, utility payment history, and insurance premium history as substitutes for a traditional FICO score under the non-traditional credit guidelines in HUD 4000.1 Section II.A.1.c.

The FHA down payment minimum is 3.5% of the purchase price for borrowers with 580+ FICO. On a $300,000 home, that is $10,500. For borrowers with 500-579 FICO, the minimum increases to 10% ($30,000 on a $300k home).

Down payment funds can come from personal savings, checking and investment accounts, gift funds from family (with a signed gift letter and source-of-funds documentation), approved down-payment-assistance programmes, and employer assistance programmes. Down payment cannot be loaned from a non-family source unless the second lien is a formal subordinate financing arrangement approved by HUD.

Seller concessions can cover closing costs (up to 6% of the purchase price) but cannot be applied to the down payment per HUD 4000.1 Section II.A.4.d. This is a key distinction: if you plan to use seller concessions to get into a home with minimal cash, you still need 3.5% from your own funds or an approved DPA programme.

For down-payment-assistance options that stack on top of FHA, see our full DPA programme guide. The Chenoa Fund provides 3.5% down nationwide for FHA borrowers with 620+ FICO, making it possible to purchase with zero cash from the buyer if combined with seller-paid closing costs.

FHA charges two forms of mortgage insurance: the Upfront Mortgage Insurance Premium (UFMIP) and the Annual MIP charged monthly. Both are set by HUD Mortgagee Letter and were last updated in HUD Mortgagee Letter 2024-04, effective March 2024.

FHA uses two DTI ratios: the front-end ratio (housing PITI divided by gross monthly income) and the back-end ratio (all monthly debt obligations divided by gross monthly income). Standard thresholds are 31% front and 43% back, but most FHA loans are approved through the TOTAL Scorecard automated underwriting system, which can approve higher DTIs with compensating factors.

With one compensating factor (substantial savings reserves, minimal housing payment shock, or excellent credit), the back-end can reach 50%. With two compensating factors, it can reach 56.9% per HUD 4000.1 Section II.A.5.d. Manual underwriting caps at 43% back-end DTI in most cases. The 56.9% limit is a TOTAL Scorecard output, not a human underwriting decision.

See our full DTI guide with handbook citations for both FHA and conventional thresholds.

Every property financed with an FHA loan must meet HUD's Minimum Property Requirements (MPR). These are appraiser-verified standards intended to ensure the property is safe, sound, and sanitary. The full MPR standard is in HUD Handbook 4000.1 Section II.A.3. The most commonly triggered items in practice:

• Lead-based paint: All homes built before 1978 must have intact paint surfaces. Peeling, chipping, or deteriorating paint requires remediation before FHA financing can close.
• Handrails: Required on all stairways with more than three risers, interior and exterior.
• Electrical: No exposed or unsafe wiring, functional circuit panels, working outlets.
• HVAC: Functional heating system capable of maintaining 50 degrees Fahrenheit in all livable spaces. No health or safety concerns with the system.
• Plumbing: Functional cold and hot water, proper drainage, no evidence of sewage backup.
• Roof: Must have a minimum of 2 years of remaining useful life. If under 2 years, the seller must replace the roof or the appraiser can decline to certify.
• Structural integrity: No evidence of foundation settlement, active water intrusion in basement or crawlspace, or structural instability.
• Attic and crawlspace: Must be accessible and inspectable.

FHA appraisals are valid for 120 days. If required repairs are not completed within that window, the appraisal expires and a new one is required. This timeline pressure can disadvantage FHA buyers in a slow-repair market.

In competitive seller markets, FHA appraisal requirements are a strategic liability. If the seller has multiple offers including at least one conventional-financed buyer, the FHA MPR requirement for a pre-1978 house with peeling paint gives the seller a legitimate reason to prefer the conventional offer. This is discussed in more detail on our when FHA wins and when conventional wins pages.

FHA loans are for primary residences only. The borrower must occupy the property as their principal residence within 60 days of closing and maintain it as such for at least one year. Second homes, investment properties, and vacation properties do not qualify for FHA financing.

Non-occupant co-borrowers are allowed for family members only (parents, children, siblings) under HUD 4000.1 Section II.A.1.b.iii. This is more restrictive than conventional loans, which allow non-occupant co-borrowers from a broader pool of relationships. For multi-unit properties (2-4 units), the borrower must occupy one unit; rental income from the other units can be used to qualify.

FHA requires a two-year work history, but does not require two years with the same employer. Gaps in employment of less than 6 months with a plausible explanation (schooling, medical, relocation) are generally acceptable. Self-employed borrowers must provide two years of tax returns showing stable or increasing income.

W-2 employees need their most recent pay stubs and two years of W-2 forms. Non-traditional income sources including child support, disability payments, Social Security, and rental income can qualify if they have a documented 3-year continuance expectation. Part-time income requires a 2-year history of part-time work in the same field.