Key takeaways
- FHA rules allow a credit score as low as 580 with 3.5% down, or 500–579 with 10% down, though many lenders set a higher minimum.
- FHA loans require mortgage insurance: 1.75% upfront plus an annual premium, usually 0.50%–0.55% of the loan.
- On a $300,000 home with 3.5% down at 7%, principal, interest and mortgage insurance come to about $2,092 a month before taxes and homeowners insurance.
- 2026 FHA loan limits for a one-unit home run from $541,287 to $1,249,125, depending on the county.
Yes, you can get an FHA loan with bad credit. FHA guidelines accept credit scores down to 580 with a 3.5% down payment, or 500 to 579 with 10% down, as long as you can document steady income and keep your debt-to-income ratio in range. Expect to shop around, because many lenders require 600 to 620 or higher.
A low credit score doesn’t have to stop you from buying a home. Loans insured by the Federal Housing Administration are designed for buyers with modest savings or past credit problems. With the average 30-year fixed rate at 7.24% (Freddie Mac, Oct. 29, 2026), every point of credit score and every dollar of mortgage insurance matters, so here’s what you need to qualify and what it will cost.
FHA loan requirements at a glance
| Requirement | FHA rule |
|---|---|
| Minimum credit score | 580 for 3.5% down; 500–579 for 10% down |
| Down payment | 3.5% or 10%; can come from gifts or assistance programs |
| Debt-to-income ratio | Typically up to 43%; higher possible with compensating factors and automated approval |
| Upfront mortgage insurance | 1.75% of the base loan (can be financed) |
| Annual mortgage insurance | About 0.50%–0.55% for most borrowers, paid monthly |
| Property | Primary residence; must pass an FHA appraisal |
| Residency | U.S. citizens and lawful permanent residents; non-permanent residents haven’t been eligible since May 25, 2025 |
| Waiting period after bankruptcy | Generally 2 years after Chapter 7 discharge; Chapter 13 possible after 12 months of on-time plan payments with court approval |
| Waiting period after foreclosure | Generally 3 years |
What an FHA loan costs: two examples
Example 1: 3.5% down with a 580+ score
On a $300,000 home with 3.5% down ($10,500), the base loan is $289,500. The 1.75% upfront premium adds $5,066.25, for a total loan of $294,566.25.
- At a 7.0% rate on a 30-year loan, principal and interest is about $1,959.76 a month.
- Annual mortgage insurance at 0.55% adds about $132.69 a month in the first year.
- Property taxes and homeowners insurance come on top.
Example 2: 10% down with a 500–579 score
On the same home with 10% down ($30,000), the base loan is $270,000 and the upfront premium is $4,725, for a total of $274,725.
- At 7.0%, principal and interest is about $1,827.75 a month.
- Annual mortgage insurance at 0.50% adds about $112.50 a month, and with at least 10% down it ends after 11 years.
A lower score often means a higher rate, too. On the $294,566 loan, a rate of 7.5% instead of 7.0% adds about $100 a month. Run your own numbers with our mortgage calculator and see what price range fits with the home affordability calculator.
Know this: with less than 10% down, FHA mortgage insurance usually lasts for the life of the loan. Many borrowers refinance into a conventional loan once they have about 20% equity to drop it.
How the debt-to-income ratio works
Lenders divide your monthly debt payments, including the new mortgage, by your gross monthly income. If you earn $5,000 a month, a 43% limit allows $2,150 in total payments. If your car loan and cards already take $450, that leaves about $1,700 for the mortgage payment, including taxes, insurance and mortgage insurance. FHA also looks at the housing payment on its own, often called the front-end ratio, with a standard guideline of 31% of income, or $1,550 on $5,000 a month. Automated approvals can allow more for strong files. Check your number with the debt-to-income ratio calculator.
FHA vs. conventional loans
| FHA | Conventional | |
|---|---|---|
| Minimum credit score | 500–580 | Usually 620 |
| Minimum down payment | 3.5% | 3% for some first-time buyer programs |
| Mortgage insurance | Upfront + annual, often for life of loan | PMI only under 20% down; can be removed |
| Bankruptcy wait (Chapter 7) | Generally 2 years | Generally 4 years |
| Best for | Lower scores, higher debt ratios | Higher scores and larger down payments |
For a full cost comparison with a worked $350,000 example, see FHA vs. conventional loans, or compare all loan types in our best mortgages guide.
How to qualify with bad credit
- Check your credit reports for errors at AnnualCreditReport.com and dispute mistakes.
- Pay down credit card balances. Lowering utilization can raise your score quickly. See how to improve your credit score.
- Save for 10% down if your score is below 580.
- Lower your debt-to-income ratio by paying off small debts. Our guide to prioritizing debt can help.
- Look for down payment assistance from your state housing agency. See first-time homebuyer programs.
- Get quotes from several FHA lenders, including credit unions. Lender minimums and rates vary, so a denial at one lender doesn’t mean every lender will say no.
- Document compensating factors, such as cash reserves, steady job history or a small increase over your current rent.
Step-by-step: the FHA loan process
- Get preapproved. The lender pulls your credit, verifies income and assets and runs the file through FHA’s automated underwriting system.
- Shop for a home within your approved budget and the county loan limit.
- Make an offer and sign a purchase contract. Your agent can ask the seller to pay part of your closing costs; FHA allows seller concessions of up to 6% of the sales price.
- Order the FHA appraisal. The appraiser checks value and basic health and safety standards. Required repairs may need to be fixed before closing.
- Finish underwriting. Respond quickly to requests for pay stubs, bank statements or letters explaining past credit problems.
- Close. Review your Closing Disclosure at least three business days before signing, and compare it with your Loan Estimate.
Mistakes that can sink an FHA approval
- Opening new credit or financing furniture or a car before closing, which raises your debt ratio.
- Large, unexplained deposits in your bank account. Gifts need a gift letter and a paper trail.
- Changing jobs mid-process without telling your lender.
- Missing a payment on any account while your loan is in underwriting.
- Unpaid federal debt, such as defaulted federal student loans or back taxes, which generally must be resolved or put on a repayment plan first.
FHA loan limits for 2026
FHA sets maximum loan amounts by county each year. For case numbers assigned on or after Jan. 1, 2026, the one-unit limit is $541,287 in lower-cost areas and up to $1,249,125 in high-cost areas. Limits are higher for two- to four-unit properties. Check your county on HUD’s FHA loan limits lookup before you shop.
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Frequently asked questions
Can I get an FHA loan with a 550 credit score?
FHA rules allow it with 10% down, but many lenders require at least 580 or higher. You may need to shop around.
Are FHA rates higher than conventional rates?
FHA rates are often similar or slightly lower, but mortgage insurance can make the total monthly cost higher.
How long does FHA mortgage insurance last?
With less than 10% down, it usually lasts for the life of the loan. With 10% or more down, the annual premium ends after 11 years.
Can I use an FHA loan for a second home?
No. FHA loans are for primary residences, though you can buy a two- to four-unit property and live in one unit.
Can family help with my down payment?
Yes. FHA allows gift funds from family and other approved sources, documented with a gift letter.
Sources: HUD FHA guidelines and 2026 loan limits (announced Dec. 2025); HUD residency rule (Mortgagee Letter 2025-09, effective May 25, 2025); Freddie Mac Primary Mortgage Market Survey (Oct. 29, 2026). Calculations by FinInfoBlog. Lender requirements may be stricter. This article is for educational purposes and isn’t financial advice.
Written by Chanchala
Founder & Lead Writer · B.Sc. Mathematics (Honors) · 9 years in banking & lending
Chanchala is the founder and lead writer of FinInfoBlog. She holds a B.Sc. in Mathematics (Honors) and has 9 years of experience in banking and lending. She writes plain-English guides on savings, CDs, loans, credit and personal finance for U.S. readers, and makes sure every example shows the math behind the money decision. How we research and fact-check.