Who Qualifies for an FHA Loan? Credit, Income, and Property Rules

You qualify for an FHA loan if you’re a U.S. citizen or lawful permanent resident with a credit score of at least 500, a stable two-year work history, a debt-to-income ratio the lender can work with, and enough cash for a down payment of 3.5% or 10% depending on your credit. The home has to be your primary residence and has to pass an FHA appraisal. The Federal Housing Administration doesn’t lend the money itself; it insures the loan so private lenders can approve borrowers with smaller savings and lower scores than a conventional mortgage would allow.

Credit Score and Down Payment

Your FICO score sets your down payment. At 580 or higher, you qualify for the 3.5% minimum. Between 500 and 579, you can still get an FHA loan, but you’ll need to put down 10%. Below 500, FHA financing isn’t available to you at all.¹

Lenders pull all three bureaus — Equifax, Experian, and TransUnion — and use the middle score. Note that individual lenders often set their own floors above FHA’s. A lender may require a 620 or 640 even when FHA rules would accept 580, so if your score is on the low end, it’s worth shopping around.

Income, Work History, and Debt-to-Income

Lenders want to see stable, documented income. The standard is a two-year work history verified through tax returns and W-2s. You don’t have to have stayed at one employer; staying in the same line of work generally satisfies the rule. If you have an employment gap of six months or more, you can still qualify as long as you’ve been in your current job for at least six months and can document a two-year history before the gap.²

Your debt-to-income ratio (DTI) measures how much of your gross monthly income goes to debt payments. FHA sets the benchmark at 43% for total monthly obligations, including the new mortgage payment, car loans, student loans, credit card minimums, and other recurring debts.³ Groceries, utilities, and other everyday spending don’t factor in.

A DTI above 43% isn’t an automatic no. Compensating factors can push a lender to approve a higher ratio: at least three months of mortgage payments in cash reserves after closing, a strong credit history, or additional income not counted in the primary calculation.³

If You’re Self-Employed

Self-employment doesn’t disqualify you, but the paperwork is heavier. You’ll need two years of complete individual federal tax returns with all schedules, plus two years of business returns. The business returns can sometimes be skipped if your individual returns show increasing self-employment income over the past two years, your closing funds aren’t coming from business accounts, and the loan isn’t a cash-out refinance.²

If more than a calendar quarter has passed since your last tax year ended, expect to provide a year-to-date profit and loss statement. Corporations and S-corporations also need a business credit report during manual underwriting.²

Citizenship and Residency

FHA loans are available to U.S. citizens, lawful permanent residents (green card holders), and citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau. Permanent residents must document their lawful status and meet the same requirements as citizens.⁴

A 2025 policy change eliminated FHA eligibility for non-permanent resident aliens. Borrowers on work visas or other temporary legal status were previously able to qualify; under the current rules, they’re not.⁴

What Property You Can Buy

The house has to be your primary residence. At least one borrower must move in within 60 days of closing and intend to live there for at least one year.¹ Vacation homes and investment properties don’t qualify. Multi-unit buildings of up to four units are eligible as long as you occupy one unit.

The loan amount can’t exceed the FHA limit for your county, and the limits are higher for two-, three-, and four-unit properties. Your county’s specific limit is posted on HUD’s website.⁵

Before closing, an FHA-approved appraiser inspects the property to confirm it meets HUD’s minimum standards. That covers structural condition, mechanical systems, water damage, pest issues, and lead-based paint hazards. If the home fails the review, the seller usually has to complete repairs before the loan can close.

One more property restriction to know: if the seller acquired the home fewer than 91 days before your purchase contract is signed, it’s not eligible for FHA financing. This anti-flipping rule has exemptions for government agencies, financial institutions, HUD-approved nonprofits, and inherited properties.⁶

Where Your Down Payment Can Come From

You don’t have to fund the down payment entirely from your own savings. FHA rules allow gift funds, but only from approved sources: a family member, your employer or labor union, a close friend with a documented relationship to you, a charitable organization, or a government homeownership assistance program.¹ The gift can’t come from anyone with a financial interest in the sale — not the seller, the agent, or the builder.

You’ll need a signed gift letter stating the donor’s name, address, phone number, relationship to you, the amount, and confirmation that no repayment is expected. You’ll also need to document the actual transfer with bank statements or wire records.¹

Sellers can also contribute up to 6% of the sale price toward your closing costs, including origination fees, discount points, prepaid items, and the upfront mortgage insurance premium. Seller concessions can’t be applied to your minimum down payment, and any amount above your actual closing costs reduces the property’s value for loan calculation purposes.⁷

Qualifying After Bankruptcy, Foreclosure, or Short Sale

A past financial hardship doesn’t disqualify you permanently, but there’s a waiting period.

Bankruptcy

After a Chapter 7 discharge, you have to wait at least two years from the discharge date. If the bankruptcy was caused by circumstances beyond your control, such as a serious medical emergency, and you’ve handled your finances responsibly since, an exception can allow eligibility after 12 months.⁸

For Chapter 13, you can qualify while still in the repayment plan as long as at least 12 months of on-time payments have been made and the bankruptcy court gives written permission to take on a new mortgage.⁸

Foreclosure, Short Sale, or Deed-in-Lieu

Each of these triggers a three-year waiting period. The clock starts on the date title transferred away from you, not on the date the process began.¹ If less than three years have passed, the file must go through manual underwriting instead of the standard automated approval.

Mortgage Insurance Is Required

Every FHA loan carries mortgage insurance, and you can’t opt out. There’s an upfront premium of 1.75% of the base loan amount, which you can roll into the loan balance, plus an annual premium added to your monthly payment. For a 30-year loan of $625,500 or less with the minimum 3.5% down, the annual rate is 0.85%; with at least 10% down it drops to 0.80%.⁹

How long you pay the annual premium depends on your down payment. Put down less than 10% and you pay it for the life of the loan; the only way out is refinancing into a different loan type. Put down 10% or more and it falls off after 11 years.⁹ It’s worth factoring that difference into how much you decide to put down.

1
U.S. Department of Housing and Urban Development (HUD). FHA Single Family Housing Policy Handbook 4000.1
2
U.S. Department of Housing and Urban Development (HUD). Mortgagee Letter 2022-09
3
U.S. Department of Housing and Urban Development (HUD). Section F – Borrower Qualifying Ratios Overview
4
U.S. Department of Housing and Urban Development (HUD). Mortgagee Letter 2025-09
5
U.S. Department of Housing and Urban Development (HUD). HUD’s Federal Housing Administration Announces 2026 Loan Limits
6
eCFR. 24 CFR Part 203 Subpart A – Eligible Properties
7
U.S. Department of Housing and Urban Development. What Costs Can a Seller or Other Interested Party Pay on Behalf of the Borrower
8
U.S. Department of Housing and Urban Development. How Does a Bankruptcy Affect a Borrowers Eligibility for an FHA Mortgage
9
U.S. Department of Housing and Urban Development (HUD). Appendix 1.0 – Mortgage Insurance Premiums