Reviewed by the Editorial Team · Updated October 18, 2026 · 9 min read
An FHA loan is a mortgage insured by the Federal Housing Administration, so approved lenders can accept a 580 credit score and 3.5% down. You pay for that backing with mortgage insurance, upfront and monthly, which lasts for the life of the loan unless you put down 10% or more.
Key takeaways
An FHA loan allows 3.5% down with a score of 580 or higher, or 10% down with a score as low as 500.
Mortgage insurance costs 1.75% upfront plus 0.55% a year, and it lasts the life of the loan unless you put down 10% or more.
On a $350,000 home, FHA costs $2,416 a month against $2,371–$2,509 for a conventional loan with 5% down, but conventional PMI ends around year 12.
County loan limits run from $541,287 to $1,249,125, and the home must pass an FHA appraisal against HUD's minimum property standards.
Down payment
3.5%, or 10% below a 580 score
Min credit score
580; 500 with more down
Mortgage insurance
1.75% upfront + 0.55% a year
Insurance lasts
Life of loan under 10% down
FHA 30-year average6.89%Optimal Blue OBMMI · Nov 5, 2026.
$350,000 home, 3.5% down$2,416/moPrincipal, interest and MIP; taxes and insurance extra. FHA vs conventional ↓
How an FHA loan works
An FHA loan is insured by the Federal Housing Administration, part of HUD. If a borrower defaults, the insurance repays the lender, so lenders can approve lower scores and smaller down payments than conventional underwriting usually allows. The insurance protects the lender, but you pay the premiums.
Down payment: 3.5% with a 580 score, 10% below that
Credit: 500 is the floor, but many lenders require more
Insurance: an upfront premium plus an annual premium, both set by HUD
Home: your primary residence, one to four units
FHA loans are also assumable: a qualified buyer can take over your balance and rate with the lender's approval. That helps when your rate beats today's, though the buyer must cover the gap between the price and what you owe. The assumable mortgage guide explains the process.
How much you can borrow
FHA caps each loan by county. For 2026, the limit on a one-unit home runs from $541,287 in most counties to $1,249,125 in the costliest areas. Your lender confirms the figure for your county, and the FHA loan limits reference has the full table.
Income sets the second limit. Lenders add your new payment to your other monthly debts and look for a total near 43% of gross income, up to 57% with compensating factors. The home affordability calculator shows what that means for your budget.
Down payment at three price points
The down payment is a percentage of the price, so the cash needed scales with it. A score below 580 raises the requirement from 3.5% to 10%. Closing costs are extra.
Minimum down payment on three home prices
Down payment at three price points
Home price
Down payment at 3.5%
Down payment at 10%
$250,000
$8,750
$25,000
$350,000
$12,250
$35,000
$450,000
$15,750
$45,000
What an FHA loan really costs
Take a $350,000 home. With 3.5% down you borrow $343,661 at the FHA 30-year average of 6.89% (Nov 5, 2026), including the 1.75% upfront premium of $5,911 added to the loan. The comparison is a conventional loan with 5% down at its 7.09% average.
Worked exampleA $350,000 home: FHA with 3.5% down vs conventional with 5% down
What an FHA loan really costs
Loan
Down
Rate
P&I
Insuranceper month
Monthly
FHA, 3.5% down
$12,250
6.89%
$2,261 on $343,661
$155 MIP, for life
$2,416
Conventional, 5% down
$17,500
7.09%
$2,232 on $332,500
$139–$277 PMI, cancels
$2,371–$2,509
FHA mortgage insurance lastsLife of loanwith under 10% down — refinancing out of FHA is the usual exit
Conventional PMI ends automaticallyYear 12when the balance reaches 78% of the original value — sooner on request at 80% or by prepaying
Rates: Optimal Blue OBMMI 30-year averages — FHA 6.89%, conforming 7.09% (Nov 5, 2026). FHA loan includes the 1.75% upfront MIP financed; annual MIP 0.55% shown for the first year. PMI shown at 0.5%–1.0% a year, inside the typical 0.46%–1.5% range — your rate depends mostly on credit score. Taxes and insurance are extra. Run the FHA calculator
Monthly totals are $2,416 for FHA and $2,371–$2,509 for conventional, insurance included. FHA needs $12,250 down instead of $17,500, but its loan starts larger because the 1.75% upfront premium is added to it.
Time is the real difference. Conventional PMI ends automatically in year 12 on this schedule, when the balance reaches 78% of the original value, and sooner on request at 80%. FHA's $155 a month runs for the whole loan at this down payment, shrinking slightly as the balance falls.
How long you will keep it
If you expect to sell or refinance within a few years, FHA's lifetime premium costs little in practice. If you plan to stay for decades, it keeps charging long after conventional PMI would have ended in year 12.
The premium you finance
The $5,911 upfront premium is usually financed, not paid at closing. It is added to the loan, so it accrues interest for the full term and leaves you with less equity than your down payment suggests. Paying it in cash avoids that if you have the money.
Mortgage insurance premiums are built into a loan's APR, so an FHA loan's APR usually sits further above its note rate than a conventional loan's does. Compare offers by APR and by total monthly payment, not by rate alone.
When an FHA loan goes wrong
Most FHA surprises come from rules attached to the loan, not from the rate on the day you apply. These four deserve a second look before you make an offer:
Insurance for life: under 10% down, only a refinance or sale ends it
Strict appraisal: HUD's minimum standards can force repairs before closing
County limits: $541,287 to $1,249,125, depending on where the home sits
Financed premium: the $5,911 upfront charge starts you with less equity
HUD's Handbook 4000.1 requires the appraiser to confirm the home meets minimum standards for safety, security and soundness, and to report defects that must be fixed before closing. The appraisal is not a home inspection, so HUD recommends buyers order their own.
Plan the inspection and the exit
Hire your own inspector and make your offer contingent on the FHA appraisal. Then set a refinance trigger: once your balance falls to 80% of the home's value and your score has improved, price a conventional refinance and weigh its closing costs against the premiums you would stop paying.
FHA vs. conventional vs. VA and USDA loans
FHA, conventional and the zero-down programs all finance a home you live in. They differ in how much cash you need, what the insurance costs and how long it lasts.
Three ways to buy with a small or no down payment
FHA vs. conventional vs. VA and USDA loans
FHA
Conventional (3–5% down)
VA or USDA (0% down)
Minimum credit score
580 (500 with 10% down)
620 at most lenders
VA lenders often 620; USDA 640
Minimum down payment
3.5%
3% on some programs, more on others
None
Mortgage insurance
1.75% upfront + 0.55% a year
PMI of 0.46%–1.5% a year, below 20% down
VA: one-time funding fee. USDA: 1% upfront + 0.35% a year
How long it lasts
Life of the loan under 10% down; 11 years at 10% or more
Ends at 78% of original value, or on request at 80%
VA: no monthly insurance. USDA: life of the loan
Loan limits
$541,287 to $1,249,125 by county
$832,750, up to $1,249,125 in high-cost areas
VA: none with full entitlement. USDA: income and area limits
Fits best
Lower scores or thinner savings
Stronger credit and some savings
Eligible veterans; rural buyers within income limits
FHA works best when your credit or savings, not your income, are the obstacle. It is built for buyers a conventional underwriter would price high or decline.
A credit score that prices poorly on a conventional loan
Savings that stop short of a 5% down payment
A debt-to-income ratio above conventional comfort levels
A past credit setback followed by steady recent payments
Skip it, or at least price both, if your score is strong and you can put down 5% or more: conventional PMI is often cheaper and eventually cancels. Skip it too if the price exceeds your county's FHA limit or the home would fail HUD's property standards.
FHA loans: pros and cons
Pros
Down payment as low as 3.5%
Approval possible with a 580 credit score
Flexible debt-to-income limits with compensating factors
Assumable by a qualified buyer when you sell
Cons
Mortgage insurance lasts the loan's life under 10% down
1.75% upfront premium is added to your balance
County limits cap how much you can borrow
HUD property standards can delay or derail a purchase
What lenders look for
FHA sets the floor: a score of 580 for 3.5% down, or 500 with 10% down, and a home you will live in. Lenders then verify about two years of steady income and check your savings, because cash left after closing can offset a weaker ratio.
Compensating factors, such as cash reserves or a payment close to your current rent, are what let a lender stretch past the usual ratio. Many lenders also add overlays above FHA's minimums, so a decline from one lender is not a decline from FHA.
Already own your home? An FHA cash-out refinance lets you borrow up to 80% of its value after 12 months of ownership, under the same mortgage insurance rules.
Requirements at a glance
Credit score of 580 or higher for 3.5% down (500 or higher with 10% down)
Down payment of at least 3.5%, from savings, gift funds or an assistance program
Debt-to-income ratio near 43%, up to 57% with compensating factors
Primary residence of one to four units that passes the FHA appraisal
Loan within your county's FHA limit, $541,287 to $1,249,125 for one unit
Steady, documented income, usually a two-year history
An FHA loan is a mortgage insured by the Federal Housing Administration and made by an approved lender.
You qualify with a credit score of 580 or higher and 3.5% down, or 500 with 10% down, for a home you will live in. Income, debts and the property must also meet FHA rules.
What is the catch to an FHA loan?
The catch is mortgage insurance and the rules attached to the home. Insurance lasts the life of the loan when you put down less than 10%, an upfront premium of 1.75% is usually added to the balance, loan limits vary by county, and the property must meet HUD's minimum standards.
Can I put down 20% on an FHA loan?
Yes — you can put down any amount on an FHA loan, but mortgage insurance still applies. With 10% or more down it ends after 11 years, versus the life of the loan with less.
At 20% down, a conventional loan is usually cheaper because it carries no mortgage insurance, unless a low score rules it out.
What disqualifies you from FHA?
The usual reasons are a credit score below 500, or below 580 without 10% down, debt-to-income too high even with compensating factors, a property that fails HUD's minimum standards, or a home you will not occupy.
A recent bankruptcy or foreclosure can also block approval until the waiting period for that event passes.
How much do I need to make to buy a $300k house with an FHA loan?
It depends on your other monthly debts, so there is no single income figure for a $300,000 house.
Lenders add the new payment (principal, interest, mortgage insurance, taxes and homeowners insurance) to those debts and aim for about 43% of gross income, up to 57% with compensating factors. The affordability calculator turns that into your own number.
How long do you pay FHA mortgage insurance?
For the life of the loan if you put down less than 10%, or 11 years if you put down 10% or more. That covers the annual premium; the upfront premium is paid once, at closing or financed into the loan. Refinancing into a conventional loan is the usual way to stop paying sooner.
FHA or conventional: which is better?
Conventional usually costs less if your score is strong and you can put down 5% or more, because its PMI cancels. FHA usually wins when your score or savings are thin, since its approval standards are looser.
On a $350,000 home the monthly totals are $2,416 for FHA and $2,371–$2,509 for conventional, so compare how long each insurance lasts instead.
Can you remove FHA mortgage insurance (MIP)?
Not on a loan with less than 10% down, unless you refinance or sell: the annual premium runs for the life of the loan. If you put down 10% or more, it drops off automatically after 11 years.
Refinancing into a conventional loan at 80% loan-to-value or less ends it, if the new rate still makes sense.
What credit score do you need for an FHA loan?
FHA's minimum is 580 for the 3.5% down payment option and 500 if you put down 10%. Most lenders set higher minimums of their own, so a score that meets FHA's rule can still be declined elsewhere.
A higher score does not lower FHA's mortgage insurance, but it can improve your interest rate.
Are FHA loans assumable?
Yes — a qualified buyer can take over an FHA loan, with the lender's approval, keeping the original rate and remaining balance. That can be valuable if your rate is below today's.
The buyer must cover the gap between the home's price and what you still owe, and must meet credit and income standards.
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.
Nothing matches that. Try “refinance”, “FHA”, “Texas”, “Rocket” or “PMI”.