Reviewed by the Editorial Team · Updated July 10, 2026 · 6 min read
The FHA loan is the country's default path for buyers with thinner credit or smaller savings: 3.5% down at a 580 score, and note rates that often sit at or below conventional.
Key takeaways
FHA loans let buyers qualify with a credit score as low as 580 and just 3.5% down, among the lowest bars in the market.
Mortgage insurance premiums typically last for the life of the loan, not just until 20% equity like conventional PMI.
The tradeoff suits buyers with thin credit files or limited savings more than those who already qualify for conventional financing.
County-set loan limits cap how much can be borrowed, so FHA fits moderately priced markets better than high-cost metros.
Min. down payment
3.5% (580+), 10% (500–579)
Min. credit score
580 typical; 500 with more down
Mortgage insurance
1.75% upfront + annual, often life-of-loan
Best for
First-time & lower-credit buyers
Today's FHA 30-year rate6.35%avg · Optimal Blue OBMMI · as of Jun 27, 2026
FHA approval rate77.4%900,434 loans · HMDA 2025
Estimated monthly payment at today's rate
Loan amount
Monthly P&I
$250,000
$1,556/mo
$400,000
$2,489/mo
$600,000
$3,733/mo
Principal & interest only, 30-year term at 6.35%. Taxes, insurance and any mortgage insurance are extra. See today's rates →
How an FHA loan works
An FHA loan is a mortgage insured by the Federal Housing Administration. That government backing lets lenders accept lower scores and down payments than a conventional loan would.
3.5% down with a 580 credit score
10% down for scores between 500 and 579
Insured by the FHA, so lenders take on less risk
Rates that often run at or below conventional
Because the loan is insured, FHA note rates frequently undercut conventional — which is why the program dominates first-time-buyer activity nationwide.
FHA loan requirements at a glance
FHA guidelines set the floor; individual lenders can add their own overlays on top.
Credit score of 580 for 3.5% down, or 500-579 for 10% down
The catch is insurance you pay, not the lender. FHA charges an upfront premium of 1.75% of the loan — usually financed in — plus an annual premium split across your monthly payments.
At the minimum down payment that annual premium lasts the life of the loan. That is why an FHA APR looks high next to its note rate.
The standard exit
Build 20% equity and refinance into a conventional loan to drop the insurance for good.
Who an FHA loan fits
FHA is built for buyers a conventional underwriter would decline — recent credit bruises, a score in the 500s or 600s, or barely enough saved for closing.
A credit score under about 660
Less than 5% saved for a down payment
A debt-to-income ratio a conventional lender would balk at
A first purchase where every dollar of cash counts
Once your score clears 620 and you can reach 5% down, run the numbers both ways — conventional-with-PMI often wins on total cost because its insurance cancels.
FHA Loans: pros and cons
Pros
Down payment as low as 3.5%
Credit scores down to 580 accepted
More lenient on past credit issues
Seller can cover up to 6% of closing costs
Cons
Mortgage insurance usually lasts the loan's life
Upfront mortgage insurance premium due at closing
County loan limits cap how much you can borrow
Property must meet HUD minimum condition standards
Requirements at a glance
580+ credit score for 3.5% down (500–579 requires 10%)
Debt-to-income generally under 43–50% with compensating factors
Property must be your primary residence and pass an FHA appraisal
580 for the 3.5%-down minimum. Scores of 500–579 still qualify but require 10% down, and many lenders set their own floor around 600–620 on top of FHA's rule.
A higher score won't lower FHA insurance, but it can win a better note rate.
How long does FHA mortgage insurance last?
At the 3.5% minimum down payment, the annual premium lasts the life of the loan. The only clean exit is to build 20% equity and refinance into a conventional loan, which cancels mortgage insurance entirely.
Is an FHA loan better than a conventional loan?
It depends on your credit. Below about 660, FHA usually wins on rate and approval odds. Above 680 with 5%+ down, conventional often costs less overall because its PMI is cheaper and cancels at 20% equity.
What is an FHA loan and who qualifies?
An FHA loan is a government-insured mortgage that lets buyers qualify with a credit score as low as 580 and just 3.5% down, backed by the Federal Housing Administration.
It's designed for first-time and repeat buyers with thinner credit or limited savings, not a narrow borrower type. html">mortgage calculator to estimate payments.
What is a downside to an FHA loan?
The biggest downside is mortgage insurance that, for most FHA borrowers, lasts the life of the loan rather than canceling at 20% equity like conventional PMI.
You also pay an upfront premium at closing, and the home must meet HUD's minimum property standards, which can complicate fixer-upper purchases.
What would the minimum down payment be for an FHA loan of $250000?
3.5% down on a $250,000 FHA loan is $8,750, assuming a credit score of 580 or higher. Borrowers with scores between 500 and 579 must put down at least 10%, or $25,000 on the same purchase price. The rest of the price is financed through the loan.
How much money do I need to make to qualify for a $400,000 mortgage?
There's no fixed income figure — it depends on your down payment, existing debts, and current rates, since FHA guidelines commonly allow debt-to-income ratios up to roughly 43-50%.
A buyer with little other debt needs less income than one with a car payment and student loans. html">mortgage calculator for an exact estimate.
This guide is general information, not a lending decision. Program rules and dollar limits change — verify current figures with a licensed lender and confirm licensing at NMLS Consumer Access. See all loan types.
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