FHA loans, or loans backed by the Federal Housing Administration, are popular among first-time and low-to-moderate-income buyers because of their flexible qualification standards. Understanding FHA loan eligibility is the first step to determining whether this government-insured mortgage option is right for you. From credit scores to income and property type, here's everything you need to know about qualifying.

What is an FHA loan?

An FHA loan is a mortgage insured by the Federal Housing Administration, a part of the U.S. Department of Housing and Urban Development (HUD). These loans are issued by approved private lenders — not the government itself — but are backed by FHA insurance in case the borrower defaults (meaning they stop repaying the loan). Because of this guarantee, lenders are more willing to offer favorable terms to borrowers who may not qualify for conventional loans.

FHA loans are particularly popular among first-time homebuyers and those with lower credit scores or limited savings. They’re also an excellent option for buyers who’ve had past credit issues like bankruptcy or foreclosure.

Who qualifies for an FHA loan?

FHA loan eligibility is broader than many people expect. You don’t need to be a first-time buyer, and your credit doesn’t need to be perfect. However, there are still key requirements you must meet.

Here’s what FHA lenders look for:

1. Credit score: The minimum credit score for FHA eligibility is 500, but if your score is between 500–579, you’ll need to make a 10% down payment and you’ll have few lender options. A score of 580 or higher qualifies you for the minimum 3.5% down and opens up more lender choices.
2. Down payment: All FHA loans require a down payment (either 3.5% or 10%, as mentioned above). This can come from savings, gifts from family, or approved down payment assistance programs.
3. Debt-to-income ratio (DTI) ratio: Most lenders prefer a DTI ratio of 43% or less, but some may allow up to 50% with strong compensating factors, like a high credit score or significant cash reserves.
4. Steady employment: You’ll need to demonstrate a consistent income history, usually through two years of W-2s or pay stubs — or tax returns if you’re self-employed.
5. Primary residence: FHA loans are only available for homes you plan to live in. Investment properties and vacation homes aren’t eligible.
6. Legal residency: You must be a U.S. citizen, lawful permanent resident, or non-permanent resident with a valid Social Security number and proof of eligibility.
7. Property standards: The home must meet HUD’s minimum property standards, verified through an FHA appraisal. Fixer-uppers can qualify under the FHA 203(k) rehab loan program.

Who might benefit most from an FHA loan?

Understanding FHA loan eligibility can help determine if this type of mortgage is the best fit for your situation. FHA loans are ideal for:

• First-time homebuyers who may not have the savings or credit to qualify for conventional financing
• Borrowers with past credit issues, such as bankruptcy (two years after discharge) or foreclosure (three years after completion)
• Buyers with higher debt-to-income ratios who may not meet conventional underwriting standards
• Homebuyers using gift funds or down payment assistance programs to help cover upfront costs
• Self-employed individuals who have at least a two-year income history and can document earnings

FHA loan limits by location

Each year, HUD sets FHA loan limits based on the area’s median home price. These limits vary by county and reflect the cost of housing in different parts of the U.S.

In 2025, FHA loan limits range from:

• $524,225 in most low-cost areas (the “floor”)
• Up to $1,209,750 in high-cost areas (the “ceiling”)

You can check the FHA loan limit in your county using the HUD website or by consulting with a lender. Keep in mind that these limits apply only to the loan amount, not the total purchase price — your down payment covers the difference.

FHA loan requirements vs. conventional loans

If you’re comparing mortgage options, it’s helpful to understand how FHA loan eligibility stacks up against conventional loans.

• Credit score: FHA loans require a minimum score of 500; conventional loans typically require 620 or higher
• Down payment: FHA allows 3.5% down; conventional loans require 3–5% minimum 
• Mortgage insurance: FHA requires both upfront (UFMIP) and ongoing mortgage insurance premiums (MIPs); conventional loans require private mortgage insurance (PMI) only if your down payment is under 20%, and it can eventually be removed
• Debt-to-income ratio: FHA lenders are generally more flexible, often accepting higher DTI ratios than conventional lenders
• Property standards: The FHA has stricter appraisal requirements, which can be a factor in competitive markets

If you have strong credit and a 20% down payment, conventional loans may be more cost-effective in the long run. But if you’re early in your financial journey, an FHA-backed loan can be a great stepping stone to homeownership.

Documents needed to apply for an FHA loan

To verify FHA loan eligibility, lenders will typically ask for the following documents:

• Government-issued ID and Social Security number
• Proof of income (recent pay stubs, W-2s, tax returns)
• Employment verification
• Bank statements and asset information
• Credit history and debt obligations
• Proof of down payment funds (including gift letters, if applicable)

The process is similar to applying for any other mortgage, but your lender will also submit your file to the FHA for insurance approval.

Common misconceptions about FHA loan eligibility

Let’s clear up a few common myths about FHA loans:

• You must be a first-time buyer – False. FHA loans are open to anyone who meets the guidelines, even repeat buyers.
• You need perfect credit – Not true. FHA is designed for borrowers with credit scores as low as 500.
• Only low-income buyers qualify – Incorrect. There's no strict income cap. Many middle-income buyers use FHA to get into a home sooner.
• FHA loans take longer to close – While they require an FHA-specific appraisal, the timeline is typically similar to a conventional loan.

Exploring FHA loans for yourself

If you’re wondering whether you qualify for an FHA loan, the good news is that the eligibility standards are more accessible than those of conventional loans. Whether you’re dealing with credit challenges, limited savings, or high student loan debt, an FHA loan can provide a practical path to homeownership.

Before you apply, it’s smart to compare rates from multiple FHA-approved lenders and evaluate your long-term mortgage costs. Even small differences in rates and fees can add up over the life of your loan.

Use our FHA mortgage comparison tool to check your FHA loan eligibility, compare rates, and connect with top lenders. Find out how much home you can afford — and take the first step toward owning it.