FHA Loans: Requirements and Rates

Achieve homeownership with lower down payments through FHA loans — even with less-than-perfect credit.

Requirements for FHA loans

Are you ready to buy a home but unsure about what mortgage options you qualify for? FHA loans make homeownership more accessible with flexible requirements for borrowers with lower credit and smaller savings. 

Low-credit borrowers

FHA loans work with credit scores that might not qualify for conventional loans. Borrowers with scores between 500-579 can secure financing with a 10% down payment, while those with scores above 580 need just 3.5% down.  

Loan limits

Loan requirements for FHA mortgages state that your home’s price can’t be more than 115% of your area’s average home price. For 2025, FHA’s nationwide forward mortgage limit “floor” is $524,225 and the “ceiling” is $1,209,750 for a one-unit property. You’ll also need to pay mortgage insurance if you purchase your home with an FHA loan. 

Property requirements

An appraisal is required, and the property must be your primary residence to purchase a home with an FHA loan. 

Key benefits of an FHA loan

FHA loans can be great home loan options for first-time home buyers. The FHA program makes owning a home more accessible by allowing lower credit scores and down payments. You can also qualify with a higher debt-to-income ratio than traditional loans and accept a seller contribution of up to 6% to help cover closing costs.  

Relaxed requirements

Past credit issues? Higher debts? FHA loans are often approved when others aren’t. 

Low rates

FHA interest rates typically run lower than other types of home loans, like conventional loans. 

Smaller down payments

Save money with FHA home loan down payments as low as 3.5% 

Covered closing costs

You can minimize closing costs with up to a 6% seller contribution. 

Get an FHA home loan

1 Check your eligibility

FHA loans have more flexible requirements than conventional loans, but you’ll still need to meet minimum credit scores, income verification, and debt-to-income (DTI) ratio standards. You’ll need to make sure the property itself also meets FHA standards, as not all homes qualify for this program. 

2 Save for your down payment

FHA loans sometimes offer lower down payment requirements (only 3.5% with a 580+ credit score) compared to conventional mortgages. Although conventional down payments can be as low as 3% for eligible borrowers, they often require higher credit scores. You can also use gift funds for the entire down payment, making homeownership more accessible for first-time buyers. 

3 Gather your financial documents

Applying for your FHA loan will require proof of income, assets, and employment history. Make sure you have recent pay stubs, W-2s, tax returns, and bank statements. AmeriSave’s Loan Experts can help you determine which documents you’ll need. 

4 Get preapproved

Our Loan Experts can review your income, employment, credit, and assets to determine how much you can borrow and the type of home you can purchase with an FHA home loan. We’ll then issue you a Certified Approval letter that lets sellers know you’re qualified and ready to buy. 

5 Make an offer

Not every home qualifies for FHA financing since the house needs to meet HUD’s minimum standards. Once you find a qualifying property, work with your real estate agent to submit an offer. AmeriSave can help ensure your offer addresses all FHA requirements. 

6 Close on your home

After final approval to purchase a home with an FHA loan, you’ll receive closing documents to review. Then it’s showtime — at closing, you’ll sign your papers, provide funds for closing costs (which sellers can contribute up to 6% toward), and officially become the proud owner of your new home. 

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Frequently Asked Questions

FHA home loans open doors for home buyers who might struggle with conventional mortgages. You’ll likely qualify with a 580+ credit score (3.5% down) or even 500-579 (10% down). If you have a steady income and meet your lender’s debt-to-income and credit score requirements, FHA home loans might be for you. 

FHA loans and FHA refinance loans are government-backed mortgages with looser credit requirements (as low as 500) and lower down payments (as low as 3.5%). The lower down payment amount requires buyers to carry mandatory mortgage insurance for the loan’s lifetime. Conventional loans require better credit (620+) but don’t have insurance requirements with 20% down. Conventional loans also work for more than just primary residences. 

Here’s a breakdown of the pros and cons of an FHA loan: 

Pros of an FHA Loan: 

  • Lower credit score requirements allow more borrowers to qualify for homeownership 
  • Minimum down payment of just 3.5% reduces initial out-of-pocket expenses 
  • More forgiving approach to credit history issues and past financial challenges 

Cons of an FHA Loan: 

  • Mandatory mortgage insurance remains for the entire loan term in most cases 
  • Loan limits may restrict purchasing power in higher-priced housing markets 
  • Properties must meet specific HUD standards, limiting options for homes needing repairs 

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