FHA loan: down payment, insurance, limits and who qualifies

The FHA loanFHA loanAn FHA loan is a mortgage made by a private lender and insured by the Federal Housing Administration (FHA), an agency of the U.S. government. That insurance protects the lender if you stop paying, which is why the lender can accept a lower down payment and a less-than-perfect credit history than on a conventional loan. Federal law sets the minimum cash investment at 3.5% of the property's value and caps the loan amount at the FHA limit, which changes by county. In exchange for the insurance you pay a mortgage insurance premium.See the full definitionClose is the mortgage many families use for their first home, because it asks for a small down paymentdown paymentThe down payment is the part of the home's price you pay out of your own pocket when you buy; the loan covers the rest. In U.S. Spanish it is also called enganche, cuota inicial or entrada. Each loan type has its own minimum: FHA requires at least 3.5% of the value, VA and USDA loans may require none, and conventional loans ask for more if you want to avoid private mortgage insurance. A larger down payment lowers the loan, the monthly payment and the total interest; many state programs help families put it together.See the full definitionClose and accepts lower credit scores than most conventional loans. Using the rules HUD publishes, this guide explains how much you need to put down, what the insurance costs, how much you can borrow in your county, what gets checked in the home and who can apply today.

Minimum down payment, with a credit score of 580 or higher

3.5%³

Score from which HUD allows maximum financing

580³

Upfront insurance premium, on the base loan amount

1.75%⁴

Lowest FHA limit for a one-unit home, depending on the county

$541,287³

What an FHA loan is

The FHA (Federal Housing Administration) does not lend you the money. A private lenderlenderThe lender is the financial institution that lends you the money for your mortgage. The mortgage is the agreement that gives the lender the right to take your home if you do not repay what it lent you. After closing, it is common for another company, the loan servicer, to collect your payments and keep track of the loan; it may be the same company that lent you the money or a different one. On the Loan Estimate, the lender's name appears on the first page, and the last page lists it as "Lender" with its NMLS or license number.See the full definitionClose makes the loan, and FHA regulates and insures it.¹ That insurance protects the lender if the homeowner stops paying, and you pay for it. Qualifying standards are generally more flexible than for a conventional loan. FHA is part of HUD, the Department of Housing and Urban Development.²

According to the CFPB, an FHA loan:¹

• allows a down payment as low as 3.5%;
• accepts lower scores than most conventional loansconventional loanA conventional loan is any mortgage that is not insured or guaranteed by the federal government: it is not FHA, VA or USDA. The lender, or the companies that buy the loans (Fannie Mae and Freddie Mac), carry the risk. When the amount is within the conforming loan limit the loan is called "conforming"; above it, it is a "jumbo" loan. It usually asks for a higher credit score than an FHA loan and, if your down payment is less than 20% of the price, you are normally required to buy private mortgage insurance (PMI) until you build enough equity in the home.See the full definitionClose;
• has a maximum loan amount that varies by county;
• always carries mortgage insurance.

Is it cheaper than a conventional loan? That depends on you. The CFPB says that with good credit and a medium down payment (10 to 15 percent), FHA tends to cost more. With a lower score or a small down payment, it can often be the cheapest option. There is no fixed rule: get quotes for both and compare the total cost.¹ The conventional loan guide covers the other half of that comparison, and mortgage loan types puts all four types side by side.

Down payment and credit score: what HUD requires

HUD publishes its rules in Handbook 4000.1. What you put in from your own pocket is called the Minimum Required Investment (MRI)FHA minimum required investment (MRI)The minimum required investment (MRI) is the cash, or its equivalent, that you must put in yourself when you buy with an FHA loan. Federal law sets it at no less than 3.5% of the property's adjusted value, which is the lower of the purchase price (minus any inducements to purchase) and the appraised value. That money cannot come from the seller, from anyone who benefits from the sale, or from anyone they reimburse. It is not everything you pay: your total required investment also includes the closing costs you pay.See the full definitionClose: at least 3.5% of the “Adjusted Value.” On a purchase, that value is the lower of the price (minus any inducements to buy) and the home’s value. The loan can reach 96.5% of that value, which is the maximum loan-to-value ratioloan-to-value ratio (LTV)The loan-to-value ratio (LTV) compares the amount of your mortgage with the appraised value of the property. It is expressed as a percentage: a loan that covers almost the whole value has a high LTV; one with a large down payment, a low LTV. Lenders use it to measure risk: the higher the LTV, the stricter the requirements and the more likely you will be asked for mortgage insurance. Over time, as you pay down principal or the home gains value, your LTV falls, which can let you cancel PMI on a conventional loan.See the full definitionClose.³ On a $332,700 home, the typical US value, 3.5% comes to $11,645.

Your credit scorecredit scoreA credit score is a number that predicts how likely you are to pay back a loan on time. It is computed from the information in your credit report: whether you pay on time, how much you owe relative to your limits, how long you have used credit and how many new accounts you opened. FICO is one brand of score; VantageScore is another, and each lender decides which one it uses. A higher score usually brings a lower interest rate and more loan options; each program publishes the minimum it accepts. You can check your report for free and dispute errors.See the full definitionClose decides how much you can borrow. HUD uses a “Minimum Decision Credit Score”: if your report shows three scores, the middle one counts; if it shows two different ones, the lower one counts. If several people apply together, the lowest of all counts.³

Your score	What FHA allows
580 or higher	Maximum financing: down payment from 3.5%
500 to 579	A loan of up to 90% of the value: you put down at least 10%
Below 500	Not eligible
No score (non-traditional or insufficient history)	Maximum financing, but your loan is underwritten by hand

That table sums up HUD’s handbook.³ If your loan is manually underwrittenmanual underwritingManual underwriting is when the lender evaluates your mortgage application by reviewing your credit, income, savings and debts itself, instead of relying on an automated system's recommendation. Fannie Mae allows both: its automated system (Desktop Underwriter) or manual underwriting. For FHA loans, HUD requires manual underwriting when the automated system returns a “Refer” or the file must be downgraded to a manual review, and also for borrowers with no credit score who use nontraditional credit. The rules can be stricter: at Fannie Mae, the maximum debt-to-income ratio is lower.See the full definitionClose, HUD caps your debt-to-income ratio (DTI)debt-to-income ratio (DTI)Your debt-to-income ratio (DTI) is all your monthly debt payments divided by your gross monthly income, that is, income before taxes. If you pay a certain amount each month across a car, cards, student loans and the mortgage you are asking for, and you earn three times that, your DTI is one third. Lenders use it to measure whether you can manage the payment; each loan type and lender sets its own limit, and assistance programs usually publish theirs. Paying down debt before applying improves your DTI.See the full definitionClose. With a score below 580 or no score, the house payment cannot exceed 31% of your income and your total fixed payments cannot exceed 43%.³ The guide debt-to-income ratio and how to lower it explains the math, and nontraditional credit for a mortgage explains which history counts if you have no score.

Where can the money come from? Your minimum investment cannot come from the seller or anyone who profits from the sale. It can be a gift from a relative, your employer or union, a close friend with a documented interest, a charity or a government homebuying program.³ The gift money from family guide covers the paperwork. Many down payment assistancedown payment assistance (DPA)Down payment assistance (DPA) is money a public or nonprofit program contributes toward your down payment and sometimes your closing costs. Many states, local governments and nonprofits offer programs to make homeownership more affordable; most focus on low- and moderate-income families buying their first home, and some target teachers, firefighters and other public service employees. The help can be a grant you never repay, a second loan with no payments that is forgiven over the years or repaid when you sell, and many can be used with a regular FHA or conventional loan.See the full definitionClose programs can be used with an FHA loan.¹¹

What about closing costs? The seller, the agents and other interested parties can contribute up to 6% of the sales price toward your closing costs, prepaids and points. Anything above that cap counts as an inducement to buy, and none of that money can be used for your minimum investment.³

FHA mortgage insurance (MIP)

Every FHA loan carries mortgage insurancemortgage insuranceMortgage insurance protects the lender, not you, if you fall behind on your loan payments. You pay for it, as part of the monthly payment and sometimes also as an upfront charge. It exists because it lets the lender accept a lower down payment. On an FHA loan it is called the mortgage insurance premium (MIP) and is charged by the FHA; on a conventional loan with a small down payment it is called private mortgage insurance (PMI) and comes from a private insurer. The rules for when you can stop paying it differ in each case.See the full definitionClose, called MIPFHA mortgage insurance premium (MIP)The FHA mortgage insurance premium (MIP) is what you pay for the insurance the FHA requires on all of its loans. That insurance protects the lender, not you, if you fall behind. It has two parts: an upfront premium (upfront MIP or UFMIP), paid with your closing costs or added to the loan, and an annual premium collected in your monthly payment. Federal law authorizes HUD to charge both and caps them. According to the CFPB, it costs the same no matter your credit score. If you add the upfront premium to the loan, the loan amount and the total cost go up.See the full definitionClose. The CFPB points out that it protects the lender, not you, and that it raises the cost of your loan.⁶ It has two parts:

1. Upfront premium (UFMIP). It is 1.75% of the base loan amount.⁴ It can be added to the loan,³ but then the loan amount and the total cost go up.⁶
2. Annual premium. It is paid monthly, inside your payment. Its rate and how long it lasts depend on the loan-to-value ratio, the base loan amount and the term.³

On a loan of more than 15 years whose base amount is at or below HUD’s threshold, the annual premium works like this. HUD set that threshold at the national conforming loan limitconforming loan limitThe conforming loan limit is the maximum mortgage amount Fannie Mae and Freddie Mac may buy from lenders. Those two companies back most conventional loans, so a loan within the limit ("conforming") usually gets better terms than a larger one ("jumbo"). The Federal Housing Finance Agency (FHFA) sets it every year using the formula in the HERA law, and high-cost areas have a higher limit. Each county's FHA loan limit is computed from this number.See the full definitionClose; above it, premiums are higher, and on loans of 15 years or less they are lower.⁴

Your down payment	Loan-to-value (LTV)	Annual premium	How long it lasts
10% or more	90% or less	50 basis points (0.50%)	11 years
5% to under 10%	Above 90% up to 95%	50 basis points (0.50%)	Life of the loan
Under 5%	Above 95%	55 basis points (0.55%)	Life of the loan

According to the CFPB, FHA insurance costs the same no matter your score, with only a slight increase if you put down less than 5%. On a conventional loan, private mortgage insurance (PMIprivate mortgage insurance (PMI)Private mortgage insurance (PMI) is a type of mortgage insurance you might be required to buy on a conventional loan when your down payment is less than 20% of the purchase price. It protects the lender, not you, if you stop making payments. It is normally paid monthly as part of your payment, and the cost depends on your credit score and how much you put down. Unlike FHA insurance, PMI can be canceled once your balance falls far enough relative to the home's value; the lender must explain the rules to you.See the full definitionClose) varies with your down payment and score, and for borrowers with good credit it is generally cheaper than FHA’s.⁶

How long the annual premium lasts, by down payment

Loan-to-value of 90% or less

You put down 10% or more

• The annual premium is charged for 11 years.⁴
• On a loan of more than 15 years, it is 50 basis points a year.⁴
• With a score from 500 to 579, this is the minimum you must put down.³

Loan-to-value above 90%

You put down less than 10%

• The annual premium lasts for the life of the loan.⁴
• With less than 5% down, the premium goes up slightly.⁶
• This is where the 3.5% minimum down payment lands.³

If you wonder when your FHA insurance ends, the CFPB says to ask your loan servicer.⁷

Example with real numbers

What an FHA loan costs per month on a typical home

With the typical US home value, the minimum down payment and the average 30-year rate of 7.18% (November 5, 2026).

Home price (typical US value)

$332,700

Minimum down payment (3.5%)

$11,645

Upfront premium (1.75%), added to the loan

$5,618

Loan with the upfront premium

$326,674

Principal and interest per month

$2,213

FHA annual premium, the monthly share

$147

Property tax and homeowners insurance, per month

$261 and $139

Estimated monthly payment

$2,759

This is an example with national numbers; the homeowners insurance is a sample estimate.⁴³ Your rate, taxes and insurance will differ: enter yours in the calculator.

Run it with your numbersMortgage calculator

How much you can borrow: your county’s FHA limit

The FHA loan limitFHA loan limitThe FHA loan limit is the maximum mortgage amount the Federal Housing Administration can insure in a county or metropolitan area. The law computes it from the area's median home price: in general it is 115% of that price, but never less than a national floor (65% of the conforming loan limit) nor more than a national ceiling (150% of that limit). That is why expensive counties have higher limits. There is a separate limit for one-, two-, three- and four-unit homes. HUD publishes the limits every year and we show them for every county.See the full definitionClose is the most FHA will insure in your area. An FHA loan cannot exceed that limit, and under most programs the maximum loan is the lesser of the area limit and the percentage of value HUD allows.³ The law sets it from each area’s prices: for a one-unit home, 115% of the area’s median home price, with a floor and a ceiling set by the same law.⁸

HUD calculates limits by metropolitan area and county and publishes new limits for each calendar year. Each limit sits at the low-cost area limit, at the high-cost area limit or somewhere in between.³ In the data we publish, the limit for a one-unit home ranges from $541,287 in the lowest-cost counties to $1,299,500 in the highest-cost ones.

If the home has 2 to 4 units (for example, a duplex where you live in one unit and rent the other), the limit is higher. But the building cannot have more than four units, and you must buy all of it.⁹ Look up your county on our FHA loan limits page, or in the HUD tool the CFPB walks through.⁹

FHA limit and typical home value, by state

State	FHA limit (1 unit)	Typical home value
Alabama	$541,287	$209,900
Alaska	$541,287 – $596,850	$352,900
Arizona	$541,287 – $609,500	$394,500
Arkansas	$541,287	$188,000
California	$541,287 – $1,249,125	$734,700
Colorado	$541,287 – $1,249,125	$539,400
Connecticut	$541,287 – $977,500	$366,900
Delaware	$541,287 – $630,200	$352,000
District of Columbia	$1,249,125	$737,100
Florida	$541,287 – $990,150	$359,000
Georgia	$541,287 – $718,750	$303,300
Hawaii	$586,500 – $1,299,500	$839,100
Idaho	$541,287 – $1,249,125	$418,600
Illinois	$541,287	$263,300
Indiana	$541,287	$218,200
Iowa	$541,287	$208,000
Kansas	$541,287	$217,200
Kentucky	$541,287	$205,600
Louisiana	$541,287	$216,500
Maine	$541,287 – $615,250	$296,600
Maryland	$541,287 – $1,249,125	$419,900
Massachusetts	$541,287 – $1,249,125	$562,100
Michigan	$541,287	$231,600
Minnesota	$541,287 – $552,000	$329,300
Mississippi	$541,287	$169,800
Missouri	$541,287	$230,300
Montana	$541,287 – $754,400	$375,800
Nebraska	$541,287 – $603,750	$238,600
Nevada	$541,287 – $736,000	$435,400
New Hampshire	$541,287 – $962,550	$402,500
New Jersey	$541,287 – $1,249,125	$454,400
New Mexico	$541,287 – $692,300	$248,100
New York	$541,287 – $1,249,125	$423,800
North Carolina	$541,287 – $805,000	$288,900
North Dakota	$541,287	$249,900
Ohio	$541,287 – $591,100	$214,800
Oklahoma	$541,287	$199,800
Oregon	$541,287 – $762,450	$477,600
Pennsylvania	$541,287 – $630,200	$254,500
Puerto Rico	$541,287 – $690,000	$131,500
Rhode Island	$787,750	$404,200
South Carolina	$541,287 – $690,000	$259,000
South Dakota	$541,287 – $541,650	$257,400
Tennessee	$541,287 – $1,029,250	$286,700
Texas	$541,287 – $813,050	$283,800
Utah	$541,287 – $1,163,800	$489,400
Vermont	$541,287 – $575,000	$316,600
Virginia	$541,287 – $1,249,125	$383,700
Washington	$541,287 – $1,063,750	$564,600
West Virginia	$541,287 – $1,249,125	$162,600
Wisconsin	$541,287 – $552,000	$266,500
Wyoming	$541,287 – $1,249,125	$309,700

Where there is a range, it runs from the county with the lowest limit to the one with the highest.³ Source: HUD · Census Bureau (ACS)

The home has to qualify too

On an FHA loan, the appraisalhome appraisalAn appraisal is a written document that gives a professional appraiser's opinion of how much a property is worth. The lender orders it before approving the mortgage, because the home is the loan's collateral and the lender does not want to lend more than it is worth. If the appraisal comes in below the price you agreed, the bank bases the loan on the lower value and you will have to cover the difference, renegotiate the price or walk away if your contract allows it. An appraisal is not an inspection: it measures value, not the home's condition.See the full definitionClose also checks the home. HUD requires every FHA-insured home to be safe, sound and secure: these are the Minimum Property Requirements (MPR). New homes must also meet the Minimum Property Standards (MPS). If the home falls short, the appraiser notes the repairs needed and their estimated cost. If there are defects that cannot be fixed, the lender must reject the home; if they can be fixed, it approves the home only after confirming they were corrected.³

What counts as a defect? Defective construction, ongoing settlement, excessive dampness, leaks, decay, termites and environmental hazards, among others. If the appraiser cannot confirm the home meets the requirements, an inspection by a qualified person may be required: for example, for standing water against the foundation, faulty electrical or plumbing systems, signs of pests, or a leaking or worn-out roof.³

You must live in the home. At least one borrower must move in within 60 days of signing and intend to live there for at least one year. FHA will not insure more than one home as the same person’s principal residence, with exceptions, nor a loan meant to buy investment properties.³

Who can apply today: residency and Social Security

You do not need to be a citizen to get an FHA loan. But each borrower must give the lender evidence of a valid Social Security number, with a few exceptions, such as people who work for the World Bank or a foreign embassy.³

Residency rules changed in 2025. Under Mortgagee Letter 2025-09, for case numbers assigned on or after May 25, 2025, HUD eliminated eligibility for non-permanent residents. Today, besides citizens, these borrowers can qualify:⁵

• Lawful permanent residents, on the same requirements, terms and conditions as a citizen. Your file must include evidence of your residence, which USCIS provides.
• Citizens of Micronesia, the Marshall Islands and Palau, with evidence of their citizenship.

A Social Security card is not enough to prove your immigration or work status.⁵ If you only have an ITINITIN (Individual Taxpayer Identification Number)An ITIN is a nine-digit number the IRS, the federal tax agency, issues to people who need a U.S. taxpayer identification number to file taxes and are not eligible for a Social Security number. It is for tax purposes only: it does not authorize you to work in the United States, does not qualify you for Social Security benefits or the Earned Income Tax Credit, and says nothing about your immigration status. You apply with Form W-7, and it expires if it goes unused for several years. Some lenders accept an ITIN for a mortgage.See the full definitionClose, the ITIN mortgages guide explains the options that exist.

If you are buying with family. All borrowers, whether or not they will live in the home, take title, sign the note and sign the mortgage documents. A co-signerco-signerA co-signer is a person who signs another person's loan or credit account to back it up, and by doing so becomes responsible for the debt. If the borrower does not pay, the creditor can collect up to the full debt from the co-signer, plus late fees or collection costs, without first trying to collect from the borrower, and the default may become part of the co-signer's credit record. A federal FTC rule calls for the co-signer to get a written notice explaining these risks before signing. On a mortgage, according to Fannie Mae, a co-signer signs the note and shares liability for the debt with the borrower but has no ownership interest in the home on the title.See the full definitionClose is liable for the debt and signs the note but is not an owner. And a co-borrowerco-borrowerA co-borrower is a person who applies for the mortgage with you, signs the note and is responsible for the debt just as you are. On an FHA loan, all borrowers and co-borrowers, whether or not they will live in the home, must take title in their own name or a living trust, be obligated on the note and sign the security documents. It is not the same as a co-signer: according to Fannie Mae, a co-signer signs the note and is liable for the debt but has no ownership interest on the title. Co-borrowers who will not live in the home have their own rules.See the full definitionClose or co-signer who will not live in the home must be a citizen or have their principal residence in the United States.³ The buying with family guide explains how each person’s income counts.

This section describes the rule in force when we verified this guide. Residency rules can change: check the verification date above.

How to apply for an FHA loan, step by step

From credit score to keys

1. 1. Check your credit

   Before you look at homes

   Review your reports. If the lender sees three scores, HUD uses the middle one; if it sees two different ones, the lower one.³

   Try it with your numbersCredit plan

2. 2. Gather your documents

   Before you apply

   Proof of your Social Security number, pay stubs, W-2 forms and tax returns.³

   Try it with your numbersDocument checklist

3. 3. Find FHA-approved lenders

   Before you make an offer

   HUD publishes a list of FHA lenders. Get quotes from several.²

4. 4. Compare Loan Estimates

   No later than 3 business days after you apply

   Everyone uses the same form: compare the rate, the MIP and the closing costs.¹⁰

   Try it with your numbersCompare loans

5. 5. Make your offer and book your inspection

   When you sign the contract

   The lender should have given you form HUD-92564-CN at first contact.³

6. 6. The appraisal checks the home

   Before closing

   If repairs are needed, they must be done before the lender approves the home.³

7. 7. You sign and move in

   Within 60 days of signing

   At least one borrower must live in the home for at least one year.³

   Try it with your numbersClosing costs

To find lenders, the CFPB says HUD publishes a list of FHA lenders and answers questions at (800) 225-5342.² Ask several for a Loan EstimateLoan EstimateThe Loan Estimate is a three-page form you receive from the lender within days of applying for a mortgage. In the same format at every bank, it sums up the terms of the loan being offered: amount, interest rate, whether the payment can change, the estimated monthly payment with taxes and insurance, the itemized closing costs and how much cash you need at closing. Because every lender uses the same form, it lets you compare offers side by side. It commits you to nothing: requesting one is not accepting the loan.See the full definitionClose: the lender must give it to you within three business days of your application, and getting one does not mean the loan is approved.¹⁰ The guides how to choose a mortgage lender and closing costs explained help you compare.

If this is you

You are buying for the first time

Many state and local programs help with the down payment and can be used with FHA.¹¹ Find your state's in assistance programs.

You have no credit score

You can get maximum financing, but your loan is underwritten by hand³ and your payments cannot exceed the 31% and 43% caps.³

You are buying with family

Every borrower goes on the title,³ and a relative can give you the down payment.³

You have an ITIN or a temporary permit

FHA no longer accepts non-permanent residents.⁵ The ITIN mortgage guide explains other options.

A HUD-approved housing counselorHUD-approved housing counselorA HUD-approved housing counselor works at an agency HUD has approved to provide housing counseling: independent, expert advice customized to your situation about buying a home, renting, a missed mortgage payment, a foreclosure or credit problems. The agencies usually charge little or nothing; many serve in Spanish and offer the homebuyer education course several assistance programs require. They are not lenders or real estate agents and sell you nothing. Your county page lists the official agencies with phone numbers.See the full definitionClose can go over whether an FHA offer fits your goals, often for free or at low cost.¹³

Common mistakes

• Mistake: Thinking FHA lends you the money.

  Instead: A private lender makes the loan: compare several offers.¹

• Mistake: Assuming MIP drops off on its own, like PMI.

  Instead: With less than 10% down, the annual premium lasts the life of the loan.⁴

• Mistake: Asking the seller to cover your down payment.

  Instead: The seller can help with closing costs, up to 6% of the price, but not with your minimum investment.³

• Mistake: Trusting that the appraisal checked everything.

  Instead: The appraisal looks for a safe, sound home; get your own inspection too.³

• Mistake: Showing your Social Security card as proof of status.

  Instead: It is not enough: the lender asks for the permanent residence evidence USCIS provides.⁵

• Mistake: Shopping for homes above your county's limit.

  Instead: Check the FHA limit before you make offers.⁹

What to do this week

1. Review your credit reports with the guide how to read your credit report; remember that HUD uses the middle of the three scores the lender sees.³
2. Look up your county’s FHA limit on FHA loan limits.³
3. Work out your payment with the insurance included in the mortgage calculator.⁴
4. Ask about down payment assistance programs that work with FHA.¹¹
5. Get Loan Estimates from several FHA lenders and compare them.¹⁰
6. If you want to go over your numbers with someone, a HUD-approved housing counselor gives independent advice, often for free or at low cost.¹³