How to Apply for an FHA Loan
FHA loans require 3.5 percent down with a 580 credit score, or 10 percent with 500. Apply through any FHA-approved lender. The full process takes 30 to 45 days.
FHA loans are a government-insured mortgage program for borrowers with lower credit scores or smaller down payments. Apply through any FHA-approved lender with a 580 credit score for 3.5 percent down, or 500 for 10 percent down. The full process from application to closing takes 30 to 45 days. Expect mortgage insurance for the life of the loan if your down payment is less than 10 percent.
Who FHA Loans Are For
FHA was created in 1934 to expand homeownership during the Great Depression. Today, it serves borrowers who do not fit conventional underwriting:
- First-time buyers with limited cash for a down payment
- Borrowers with credit scores below 680 who get worse rates on conventional loans
- Borrowers recovering from bankruptcy or foreclosure (FHA has the shortest waiting periods)
- Self-employed borrowers with variable income (FHA is sometimes more flexible than conventional)
- Buyers in high-cost areas that exceed conforming loan limits but still fit under the higher FHA ceilings
FHA loans are not the cheapest option for borrowers with strong credit and 5 to 10 percent down. A conventional loan in that range usually has a lower rate and cancellable PMI. Run both scenarios.
For the credit-score-based comparison, see how to choose a mortgage lender and the first-time buyer hub.
FHA Eligibility Snapshot
| Requirement | FHA standard | Common lender overlay | |---|---|---| | Minimum credit score | 500 (with 10% down) or 580 (with 3.5% down) | 620 to 640 | | Maximum DTI | 43% (up to 57% with compensating factors) | 50 to 55% | | Maximum loan amount | $524,225 to $1,209,750 by county | Same | | Down payment | 3.5% (580+) or 10% (500-579) | Same | | Property type | 1 to 4 unit, condo, manufactured home (with conditions) | Same | | Occupancy | Primary residence only | Same |
Lender overlays are stricter rules added by individual lenders on top of FHA minimums. If your credit is below 620, you will need to shop multiple lenders to find one at the 580 FHA floor.
Step 1: Confirm You Meet the Basics
Pull your credit report at AnnualCreditReport.com. Lenders use the mortgage-specific FICO models (Equifax 5, Experian 2, TransUnion 4), which can differ from the FICO 8 in your banking app.
Calculate your debt-to-income ratio. Add all monthly debt payments (housing, auto, student loans, credit card minimums, child support) and divide by gross monthly income. FHA allows up to 43 percent by default, higher with compensating factors (significant cash reserves, minimal payment shock, long employment history).
Confirm property type. FHA loans cover 1 to 4 unit primary residences (you can owner-occupy a 4-unit, rent out 3), FHA-approved condos (a smaller subset of the condo market), and some manufactured homes with permanent foundations.
Step 2: Find an FHA-Approved Lender
Most major lenders are FHA-approved. The HUD lender locator at https://www.hud.gov/ lists all approved lenders by state.
Categories of FHA lenders:
- National banks. Chase, Wells Fargo, US Bank. Conservative overlays, slower closings, sometimes 0.125 percent higher rates.
- Online lenders. Rocket, Better, LoanDepot. Faster pre-approvals, competitive pricing, sometimes more lenient overlays.
- Credit unions. Often the lowest rates for members, especially PNC for non-members and Navy Federal for military.
- FHA specialists. Smaller shops that focus on government loans. Best for credit-challenged borrowers (580 to 620 range).
Apply with 3 lenders inside a 14-day window. FICO bundles all mortgage inquiries in that window as a single inquiry. Compare Loan Estimates side by side. See how to compare mortgage offers.
Step 3: Get Pre-Approved With FHA Underwriting
The lender will:
- Pull your tri-merge credit report
- Verify income (2 years W-2s plus 30 days pay stubs, or 2 years tax returns if self-employed)
- Verify assets (2 months bank statements, retirement account statements)
- Submit your file to FHA's Total Mortgage Scorecard automated underwriting
A successful AUS approval issues a pre-approval letter listing the loan amount, type (203(b) is the standard FHA), and term. Pre-approval letters last 60 to 90 days.
If the AUS does not approve, the file may go to manual underwriting, which has stricter requirements (lower DTI cap, higher reserve requirements, more compensating factors documented).
Full pre-approval walkthrough: how to get pre-approved for a mortgage.
Step 4: Find an FHA-Eligible Home
The FHA appraiser performs a more thorough inspection than a conventional appraiser. The home must meet Minimum Property Standards (MPS): safe, sound, and sanitary. Common deal-killers:
- Peeling lead paint on homes built before 1978
- Missing or non-functional smoke detectors
- Exposed wiring or unsafe electrical
- Broken windows or doors that do not close
- Major roof damage
- Standing water in the basement
- Active termite or pest infestation
- Missing handrails on stairs of 4-plus risers
- Non-functional kitchen, bathroom, or HVAC
In hot markets, sellers may refuse to make these repairs. Your agent should pre-screen listings. Avoid old, neglected homes unless the seller agrees to make FHA-required repairs as a condition of sale.
Condos must be on the FHA-approved condo list. Check the FHA Condo Lookup tool at https://www.hud.gov/. Many condo projects are not approved, and getting a new project approved takes 90-plus days.
Step 5: Submit the Full Loan Application
Once you have an accepted offer, the lender submits the formal Uniform Residential Loan Application (URLA). They will order:
- FHA appraisal. $500 to $700, paid up front. The appraiser is on the FHA-approved list and conducts the MPS inspection.
- Title search. Confirms clear title. Paid at closing.
- Homeowners insurance binder. You select the carrier; the lender needs proof of coverage.
Submit the document stack:
- Two most recent pay stubs
- Last 2 years of W-2s or 1099s
- Last 2 years of tax returns
- Last 2 months of bank statements (all accounts)
- Statements for retirement and investment accounts
- Photo ID and Social Security card
- Gift letter and donor bank statements (if any down payment is gifted)
Underwriting typically issues 5 to 15 conditions: additional documentation requests like an updated pay stub, an explanation letter for a credit inquiry, or sourcing for a large bank deposit. Respond same-day to keep the file moving.
Step 6: Close on the Loan
You sign closing documents at a title company, attorney's office, or with a mobile notary. The Closing Disclosure must be delivered to you at least 3 business days before signing, per CFPB rules.
On a primary residence, you have a 3-business-day right of rescission after signing. The loan does not fund until that window closes.
After funding, you make your first payment to the new servicer, usually on the first of the second month after closing. So if you close on June 15, your first payment is due August 1.
FHA Mortgage Insurance: The Catch
FHA charges two types of mortgage insurance:
- Upfront MIP (UFMIP). 1.75 percent of the loan amount, paid at closing. Usually rolled into the loan balance. On a $300,000 loan, that is $5,250.
- Annual MIP. 0.15 to 0.55 percent of the loan balance, paid monthly. Depends on loan term, LTV, and loan amount. On a typical 30-year loan with less than 10 percent down, MIP is 0.55 percent annually, or about $137 per month on a $300,000 loan.
Annual MIP rules:
- Down payment less than 10 percent. MIP lasts the life of the loan. Only way out is to refinance into conventional once you have 20 percent equity.
- Down payment 10 percent or more. MIP terminates after 11 years.
If you have an FHA loan and now have 20 percent equity, see how to remove PMI from your mortgage for the refinance path.
FHA vs. Conventional 97
For borrowers with credit in the 660 to 720 range and 3 to 5 percent to put down, the FHA vs Conventional 97 decision is a real comparison.
| Factor | FHA | Conventional 97 | |---|---|---| | Minimum credit score | 580 | 620 (often 660 with PMI providers) | | Down payment | 3.5% | 3% | | Upfront mortgage insurance | 1.75% (rolled in) | None | | Annual mortgage insurance | 0.55% (lifetime if less than 10% down) | 0.5 to 1.5% (cancels at 80% LTV) | | Property standards | Strict (MPS inspection) | Standard appraisal |
Run both Loan Estimates. For most borrowers above 700 credit, Conventional 97 wins on total cost because PMI cancels. For credit between 580 and 660, FHA usually wins on rate.
What to Do Next
If you are FHA-eligible and ready to shop, get 3 Loan Estimates this week. Compare with our framework in how to compare mortgage offers.
If you have stronger credit (680-plus) and 5-plus percent to put down, compare FHA against Conventional 97 in the first-time buyer hub.
If you are eligible for VA, that beats FHA almost every time. See how to qualify for a VA loan.
Use the mortgage payment calculator to model the FHA payment including UFMIP and annual MIP.
Citations
- HUD FHA program overview: https://www.hud.gov/program_offices/housing/fhahistory
- HUD FHA Handbook 4000.1: https://www.hud.gov/
- Consumer Financial Protection Bureau, FHA loans: https://www.consumerfinance.gov/
VA loans and USDA loans allow 0 percent down for eligible buyers. Down payment assistance programs can cover the rest. Closing costs still apply but are often negotiable.
Compare 3 lenders across rate, APR, lender fees, and closing speed. The right pick saves $5,000 to $20,000 over a 30-year loan, not just the lowest advertised rate.
Compare Loan Estimates side by side using APR, total cash to close, lender fees, and 5-year cost. The lowest rate is rarely the cheapest loan.
A pre-approval verifies your income, credit, and assets so sellers take you seriously. Apply with 2 to 3 lenders within 14 days to protect your credit score.
Lower your mortgage payment by refinancing, recasting, removing PMI, appealing taxes, or shopping insurance. Each lever saves $50 to $400 per month.
Pay biweekly, add 1/12 of your payment monthly, recast after lump sums, or refinance to 15 years. Each cuts 4 to 15 years and saves $30,000 to $150,000 in interest.
VA loans require eligible military service, a 580 to 620 credit score from most lenders, and a Certificate of Eligibility. Zero down payment and no PMI.
Refinancing replaces your current mortgage with a new one. Refinance when rates drop 0.75 percent or more and you will stay long enough to recoup closing costs.
Cancel PMI by requesting it at 80 percent LTV with an appraisal, waiting for auto-cancellation at 78 percent, or refinancing into a non-PMI loan. Saves $50 to $300 per month.
Step-by-step guides to pre-approval, refinance, PMI, and getting the lowest rate.