FHA loans are America's most popular government-backed mortgage — allowing 580 credit scores and 3.5% down payment. Here is everything you need to know.
FHA Loan — Quick Facts 2024
580 (3.5% down)
3.5%
57%
$498,257
1.75%
0.55%/yr
What Is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD). The FHA insures lenders against default, which allows approved lenders to offer more flexible qualification standards — lower credit scores, higher DTI ratios, and smaller down payments than conventional loans.
FHA loans were created in 1934 during the Great Depression to stimulate homeownership. Today they remain one of the most popular first-time buyer programs, accounting for roughly 15–20% of all purchase mortgages annually.
FHA Loan Requirements 2024
Credit Score
580+: 3.5% minimum down payment
500–579: 10% minimum down payment required
Below 500: Not eligible for FHA financing
Note: While FHA sets these minimums, many FHA-approved lenders impose higher "overlay" minimums of 620–640. Shop multiple lenders if your score is near the FHA minimum.
Down Payment
The minimum FHA down payment of 3.5% can come entirely from gift funds — a major advantage over most conventional programs. Acceptable gift sources: family members, employers, close friends (with documentation), government agencies, and approved nonprofits.
Debt-to-Income Ratio
FHA allows back-end DTI up to 57% with automated underwriting approval — significantly higher than conventional loans. This makes FHA appealing for buyers with student loans, car payments, or other debts that push their ratio above 43–50%.
FHA Mortgage Insurance Premium (MIP)
Upfront MIP: 1.75% of the loan amount, typically rolled into the loan balance
Annual MIP: 0.55% for most 30-year loans (paid monthly = 0.055% ÷ 12)
MIP duration: Life of loan for down payments under 10%; 11 years for 10%+ down
On a $300,000 FHA loan: Upfront MIP = $5,250 (financed); Annual MIP = $1,650/year = $137.50/month.
FHA Loan Limits 2024
Property Type
Standard Areas
High-Cost Areas
1 Unit (SFR)
$498,257
Up to $1,149,825
2 Unit (Duplex)
$637,950
Up to $1,472,250
3 Unit
$771,125
Up to $1,779,525
4 Unit
$958,350
Up to $2,211,600
FHA Property Requirements
FHA loans require the property to meet Minimum Property Requirements (MPRs) — standards ensuring the home is safe, sound, and secure. The FHA appraiser will note any deficiencies that must be repaired before loan approval. Common issues: peeling paint (in pre-1978 homes), missing handrails, roof with less than 2 years remaining life, exposed wiring, broken windows.
FHA vs Conventional: When FHA Wins
Credit score below 680 — FHA rates and approval are more favorable
Need to use 100% gift funds for down payment
DTI above 45–50% — FHA allows up to 57%
Recent bankruptcy (2-year wait vs 4-year for conventional)
Recent foreclosure (3-year wait vs 7-year for conventional)
Frequently Asked Questions
The FHA minimum is 580 for 3.5% down, and 500 for 10% down. However, individual FHA-approved lenders may require higher minimums (620–640) as their own internal policies. If your score is 580–619, you may need to shop multiple lenders to find one willing to approve you at the FHA floor rather than their overlay minimum.
For FHA loans with less than 10% down payment (originated after June 2013), MIP lasts for the entire life of the loan. The only way to remove it is to refinance into a conventional loan once you have 20% equity. For FHA loans with 10% or more down, MIP automatically cancels after 11 years. This lifetime MIP requirement is a major disadvantage of FHA vs conventional for long-term homeowners.
Yes — FHA loans can be used to purchase properties with up to 4 units, as long as you occupy one of the units as your primary residence. You can use projected rental income from the other units to help qualify. This makes FHA an attractive path to 'house hacking' — living in one unit while renting out others to offset housing costs. Loan limits are higher for 2–4 unit properties.
Disclaimer: Smart Mortgage Guide provides educational content only. We are not a licensed mortgage lender, broker, or financial advisor. Rates, limits, and program details are subject to change. Always consult with a licensed mortgage professional before making financial decisions.