3.5% down.
Not a step down.

FHA Loans at a glance

An FHA loan is originated by a private lender and insured by the Federal Housing Administration, a part of HUD, the government doesn't lend the money, it insures the lender against loss, which is what allows more flexible terms than most conventional financing. Minimum down payment is 3.5% with a credit score of 580 or higher, or 10% down with a score between 500 and 579; scores below 500 aren't eligible. Debt-to-income can run well above the 43% most people associate with mortgages when the file is approved through HUD's automated TOTAL Scorecard, and manual underwriting allows up to 40%/50% (housing/total) with strong compensating factors. Every FHA loan carries mortgage insurance: an upfront premium of 1.75% of the loan amount (financeable into the loan) plus an annual premium of 0.50%–0.75% depending on loan size and LTV, paid monthly. On loans with a loan-to-value of 90% or below at closing, that annual premium cancels after 11 years (132 payments); above 90% LTV, which covers nearly every loan at the 3.5% minimum down payment, it runs for the life of the loan, and the only way off is a refinance. 2026 loan limits range from a national floor of $541,287 to a high-cost ceiling of $1,249,125 for a 1-unit home, both unit count and county. FHA finances 1–4 unit primary residences, FHA-approved condos, and eligible manufactured homes, and includes dedicated renovation financing (203(k)) and reduced-documentation refinancing (Streamline) that conventional loans don't offer in the same form. It is also assumable, a qualified buyer can take over an existing FHA loan's rate and terms, a feature that matters more than usual when today's rate is well below where new loans are pricing.

Insurance for the lender, flexibility for you

FHA doesn't lend money. The Federal Housing Administration, part of the U.S. Department of Housing and Urban Development, insures the lender against loss if the loan defaults. Because the lender is protected, it can afford to approve borrowers that a conventional loan, which carries no such federal backstop, often can't: lower credit scores, higher debt-to-income ratios, thinner credit files, and more recent credit events like a bankruptcy or foreclosure. That insurance isn't free; it's the mortgage insurance premium you pay, both upfront and annually, for the life of the arrangement (see Mortgage Insurance below).

FHA financing is often framed as a first-time-buyer program, and the numbers lean that way, but there's no first-time-buyer requirement. Repeat buyers, buyers rebuilding credit after a financial setback, buyers who want 3.5% down instead of tying up more cash, and buyers whose income or debt profile doesn't fit a conventional program's ratios all use FHA. The tradeoff is mortgage insurance that, at the minimum down payment, doesn't go away on its own, weigh that against the lower bar to qualify and decide which matters more for your situation.

This page is meant as a general guide to how FHA financing typically works, built from HUD's published Single Family Housing Policy Handbook (4000.1) and current Mortgagee Letters, not a quote, a pre-qualification, or the final word on what you qualify for. The TW Team is not affiliated with or endorsed by HUD or the FHA; see the compliance notice at the bottom of this page.

FHA vs. Conventional, Side by Side

This comparison reflects typical FHA and conventional/conforming guidelines; both vary by lender, investor overlay, and individual scenario, so treat it as a general frame of reference rather than a guarantee. Conventional figures shown are for a standard agency loan, not a specific lender's overlay. For a fuller walk through these trade-offs, read FHA vs. conventional for California buyers.

How an FHA loan comes together

1. Confirm credit & down payment tier. 580 or higher gets you to 3.5% down. Between 500 and 579, 10% down is required. We'll pull your file and tell you exactly which tier you're in before anything else.
2. Run your file through TOTAL Scorecard. HUD's automated underwriting system looks at your full credit and income picture, not just a ratio cutoff, it's often more forgiving on debt-to-income than a manual 43% rule of thumb.
3. Confirm the property qualifies. An FHA appraisal checks value and that the home meets HUD's Minimum Property Standards, safety, soundness, and security, not cosmetic condition. Condos need project approval or single-unit approval.
4. Close, with mortgage insurance built in. 1.75% upfront (usually financed into the loan) plus an annual premium paid monthly. We'll show you exactly what that costs over time and whether 10% down is worth it for you, which the next section works through.

Eligibility grid: credit, down payment & DTI

These are HUD's published guidelines, not a lender overlay, a starting point rather than a guarantee of your terms. Automated approval through TOTAL Scorecard is typically more flexible than the manual-underwriting ratios below; manual underwriting applies when TOTAL refers a file, or for certain credit profiles regardless of score.

Credit Score & Minimum Down Payment

These are HUD's published minimums. Many lenders set a higher overlay, commonly 580 as a hard floor regardless of down payment, so confirm current program guidelines with us for your exact scenario.

Manual Underwriting DTI Tiers

These ratios apply when a file is manually underwritten, after a TOTAL Scorecard referral, or for certain credit histories that require it regardless of score. A file that receives an Accept/Approve from TOTAL Scorecard is not bound by a fixed ratio ceiling in the same way; debt-to-income in the 50s is sometimes approved with strong compensating factors elsewhere in the file, though individual lenders may apply their own overlay. Compensating factors recognized by HUD include verified cash reserves after closing, minimal increase in housing payment, residual income exceeding regional guidelines, significant additional income not used for qualifying, and a documented history of successfully managing comparable obligations.

580 and 500 are HUD's published floors, not a promise of approval, and not the whole underwriting picture below 620.

The score tiers on this page are HUD's own published program parameters, and we apply them the same way to every applicant. Consistent with the Equal Credit Opportunity Act (ECOA) and Regulation B, credit scoring criteria are applied without regard to race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, or the good-faith exercise of any right under the Consumer Credit Protection Act. Meeting a published score threshold is not an approval, a pre-qualification, or a guarantee of any specific rate, fee, or term, full-file underwriting, covering income, assets, liabilities, employment, reserves, and the property itself, determines actual eligibility, and a file can still be denied at a qualifying score.

Scores from 580 to 619. HUD's AUS does not itself impose a 620 floor, but in practice this band commonly receives closer underwriting scrutiny than 620+: many investors require full manual underwriting rather than relying on an automated Accept/Approve at this tier, which typically means the manual compensating-factor and reserve standards shown above apply in full, and pricing can differ meaningfully from a 620+ file. Treat 620 as a practical pricing and process line, even though it is not HUD's own minimum.

Scores from 500 to 579. Manual underwriting is required in every case, the minimum down payment rises to 10%, documented compensating factors are reviewed closely, and not every lender offers this tier at all, some set 580 as a hard floor regardless of down payment. Approval at this band is materially less certain than at 580 or above, and should not be assumed.

If your credit score affects the rate, fees, or other terms we're able to offer, federal law (the risk-based pricing rule under Regulation V, or the alternative credit score disclosure exception) may require we provide you a separate risk-based pricing or credit score notice during the application process, that notice, not this page, governs your specific pricing. Nothing on this page is an extension of credit, a commitment to lend, or a statement of your individual terms.

Mortgage insurance premium (MIP), in full

Every FHA loan carries two premiums: one upfront, one annual, paid monthly as part of your payment. This is the single most important number to understand before choosing FHA, and the one detail that most changes your long-term cost.

Upfront MIP (UFMIP)

Annual MIP: 30-Year Term

Annual MIP: 15-Year Term (or Less)

Rates per HUD Mortgagee Letter 2023-05, unchanged through 2026 as of this page's publication, confirm current rates before quoting a payment. Like the 30-year table above, the 15-year-or-less schedule is also split by the same $726,200 base-loan-amount threshold, it is not a single flat table regardless of loan size, and the LTV breakpoint itself shifts depending on which side of that threshold your loan falls on. That threshold is fixed in the Mortgagee Letter and does not move with the annual conforming loan limit changes, even though both have risen since 2023. Annual MIP is charged on the average outstanding balance, generally collected in 12 equal monthly installments as part of your mortgage payment.

Put down 10% or more, and MIP ends after 11 years. Put down less, and it runs for the life of the loan.

This is the detail almost no first-time FHA borrower hears before closing. Loan-to-value at closing of 90% or below, meaning at least 10% down, puts your annual MIP on an 11-year (132-payment) clock; it cancels automatically once that clock runs out, as long as you're current. At the 3.5% minimum down payment, your LTV is 96.5%, which lands you in the "life of loan" bucket: that annual premium never cancels on its own, no matter how much equity you build through payments or appreciation. The only ways off at that point are a refinance into a loan without FHA mortgage insurance, or selling.

The math is worth running before you assume 3.5% down is automatically the right move: more cash down means a smaller loan and a time-limited premium; less cash down keeps more money in your pocket at closing but commits you to that premium indefinitely unless you refinance later. Ask us to run both scenarios side by side for your numbers. If the early payment is the pressure point, a seller-paid buydown can lower it for the first years of the loan using funds the seller contributes at closing.

2026 FHA loan limits, by unit count

FHA sets a loan limit for every county in the country, between a national floor and a high-cost-area ceiling, based on local median home prices. Most of Southern California, including Orange County and Los Angeles County, sits at the high-cost ceiling. For the conforming side of the same question, see our California loan limits for 2026, listed county by county.

2026 National FHA Loan Limits

Effective for FHA case numbers assigned on or after January 1, 2026, up from a 2025 floor of $524,225 for a 1-unit home. Nearly every county nationwide saw an increase from 2025; a small number of jurisdictions decreased. Your property's specific county, not state or metro area generally, sets which figure applies between the floor and ceiling.

Orange County, CA: 2026 FHA Limit

Both counties sit at the 2026 national high-cost ceiling, the same figure as the conforming high-cost ceiling. A high FHA limit doesn't change the down payment math: 3.5% of $1,249,125 is still $43,719, so FHA's real draw in a high-cost county is often more about credit and DTI flexibility than about low down payment on a bigger loan.

FHA 203(k) renovation financing

A standard mortgage won't finance a home that needs real work before it's livable or financeable on its own. FHA 203(k) rolls the purchase (or refinance) and the renovation cost into a single loan, with one closing and one payment, in two tiers depending on the scope of work.

Limited 203(k)

For cosmetic and minor repairs, no structural work.

• Up to $75,000 in repair costs, no stated minimum
• HUD consultant optional, not required
• Up to four draws; nine-month completion window
• Kitchens, baths, flooring, HVAC, roofing, windows, energy upgrades

Standard 203(k)

For structural and major rehab work.

• $5,000 minimum in eligible repair costs, no separate FHA maximum beyond property value and county loan limit
• HUD-approved 203(k) consultant required on every file
• Up to five draws; 12-month completion window
• Foundation and structural repairs, room additions, ADUs, converting unit count

Neither program finances luxury, non-permanent features, new pools, hot tubs, saunas, tennis courts, outdoor fireplaces, or purely commercial improvements. Both require the work to begin promptly after closing and the home to generally remain habitable; if it can't be occupied during the renovation, a contingency and mortgage-payment reserve may be built into the loan, subject to HUD and lender limits. Ask us which tier fits your scope of work before you assume either is or isn't an option. If 203(k) is not the right fit, a renovation loan is another way to fund the purchase and the repairs in one mortgage.

Refinancing options

FHA Refinance Programs

Streamline refinancing is FHA-to-FHA only and exists to lower your rate or move off an ARM with minimal paperwork; it requires a documented net tangible benefit (commonly a rate drop of at least 0.5%, or moving from an adjustable to a fixed rate), the current loan must be current with no more than one late payment in the last 12 months, and typically six months of payment history with at least 210 days since your original closing. A portion of your original upfront MIP may be credited back on a refinance within the first three years, declining the longer you've had the loan, ask us for the exact percentage based on your closing date. Cash-out refinancing is available to both current FHA borrowers and borrowers refinancing out of a conventional loan into FHA, up to 80% LTV, and carries full underwriting, appraisal, and new mortgage insurance.

Qualifying requirements

• Credit score of 580+ for 3.5% down, or 500–579 for 10% down
• Loan-to-value up to 96.5%
• Debt-to-income up to 43%–50% depending on compensating factors and AUS findings
• Steady 2-year employment/income history, with documented explanations for gaps
• Valid Social Security number and lawful residency in the U.S.
• Property must be your primary residence, occupied within 60 days of closing
• Property must meet HUD's Minimum Property Standards (safety, soundness, security)
• Minimum cash investment of 3.5% from acceptable sources, savings, gift funds, or down payment assistance
• No outstanding federal debt, judgments, or delinquent federal student loans in default
• Generally, one FHA loan at a time per borrower, with limited exceptions

Property & borrower eligibility

Eligible

• 1–4 unit primary residences (you must live in one unit if multi-unit)
• FHA-approved condos, or a single unit via FHA's Single-Unit Approval process in an otherwise non-approved project
• PUDs (planned unit developments)
• Manufactured homes on a permanent foundation, taxed as real property, meeting HUD Code
• New construction, with required builder certifications and inspections
• U.S. citizens, permanent residents, and non-permanent residents with valid work authorization and established U.S. credit

Not Eligible

• Investment properties and second/vacation homes, FHA is owner-occupied primary residence only
• Co-ops (cooperative housing)
• Properties with health or safety hazards that don't meet Minimum Property Standards, until repaired
• Condo projects below required owner-occupancy thresholds and without single-unit approval
• Mobile homes not on a permanent foundation or not taxed as real property
• Properties with any illegal use, or unresolved title issues

How FHA condo approval works

Not every condo project is FHA-eligible, and this trips up more condo buyers than almost any other FHA rule. There are three paths.

• HRAP (HUD Review and Approval Process). The developer, HOA, or management company submits the whole project directly to FHA for approval, open to any project.
• DELRAP (Direct Endorsement Lender Review and Approval Process). An FHA-approved lender reviews and approves the project itself, without a direct HUD submission, faster, but not every project qualifies (recent conversions and projects with significant financial issues often don't).
• Single-Unit Approval. Lets a single condo unit qualify for FHA financing even when the overall project isn't approved, provided the project has at least 5 units, is complete in its current phase, at least 35% owner-occupied, no single owner holds more than 10% of units (or more than one unit in a project under 20 units), and the specific unit received its certificate of occupancy more than 12 months ago.

Ask your real estate agent or HOA whether the project is already FHA-approved before you write an offer, an unapproved project without single-unit eligibility can derail a closing timeline fast. We can check a project's current FHA approval status for you. Our guide to FHA condo approval in Orange County covers what lenders and HOAs review on the project side.

Good to know before you apply

These are the FHA-specific rules that most often catch borrowers off guard, worth knowing going in, even though your exact terms depend on your scenario.

• Gift funds can cover 100% of your down payment and closing costs, sourced from family, an employer, a labor union, a charitable organization, or a government down-payment assistance program, not from the seller, builder, real estate agent, or anyone else with a financial interest in the transaction.
• Seller concessions toward closing costs are capped at 6% of the sales price, a higher ceiling than most conventional programs allow.
• Non-occupant co-borrowers are allowed, but generally limit the loan to 75% LTV unless the co-borrower is an immediate family member, in which case standard LTV limits apply.
• Identity-of-interest transactions, buying from a family member, business partner, or other related party, are generally capped at 85% LTV, with exceptions for a family member purchasing a primary residence, an employee buying from their builder/employer, or a tenant purchasing after renting the property for at least six months.
• The 90-day flipping rule. A seller must have owned the property more than 90 days before an FHA buyer's contract date. Resales 91–180 days after the seller's purchase, at 100% or more of what the seller paid, generally trigger a required second appraisal by a different appraiser, at no cost to the buyer.
• Student loan payments count toward your DTI even in deferment or forbearance, generally the greater of your actual documented payment or a flat percentage of the balance if no payment amount is reported on credit.
• Temporary rate buydowns (2-1, 3-2-1) are permitted, funded by a seller, builder, or other interested third party, subject to standard FHA concession limits.
• Credit events are more forgiving than conventional financing, but not waived: generally around 2 years from a Chapter 7 discharge, as little as 12 months into an on-time Chapter 13 repayment plan (with trustee permission) or immediately after Chapter 13 discharge, and around 3 years from a completed foreclosure or deed-in-lieu, each potentially shortened with documented extenuating circumstances beyond your control.
• Below 620 FICO, expect closer underwriting even though HUD's own floor is 580. Many investors require full manual underwriting rather than an automated approval in the 580–619 band, and scores from 500–579 require manual underwriting and 10% down in every case. Neither tier is a guaranteed approval, see the credit score disclosure above for the full picture.
• A 10-day pre-closing verification re-checks credit and employment shortly before closing, avoid new credit accounts, new debt, or job changes during underwriting.
• Generally one FHA loan at a time. Exceptions exist for relocation for work (typically 75+ miles away), an increase in family size that the current home can't accommodate, vacating a jointly owned property due to divorce, and a few other documented circumstances.
• FHA loans are assumable. A qualified buyer can take over your rate and remaining term through a standard qualification process, a meaningful selling point if your rate is well below where new loans are pricing when you eventually sell.
• Mixed-use and live/work properties are eligible in limited cases, generally capped around 25% of the structure's floor area for commercial use, with the residential use predominant.

What are the advantages of an FHA loan?

• 3.5% minimum down payment with a credit score as low as 580
• More forgiving debt-to-income ratios than most conventional programs, especially with strong compensating factors
• Shorter waiting periods after bankruptcy, foreclosure, or short sale than conventional financing typically allows
• 100% of your down payment and closing costs can come from gift funds
• Dedicated renovation financing (203(k)) most conventional programs don't offer in the same form
• Assumable at your rate and terms, a real asset in a higher-rate environment

What are the trade-offs?

• Mortgage insurance on every loan, with no automatic cancellation below 10% down, it can run for the life of the loan
• Upfront MIP of 1.75% adds to your loan balance (or your cash to close)
• Owner-occupied primary residences only, no second homes or investment properties
• Property must meet HUD's Minimum Property Standards, which can complicate buying a fixer-upper without 203(k) financing
• Condo purchases require FHA project approval or single-unit approval, not every building qualifies
• Generally limited to one FHA loan at a time

Figures reflect HUD's published FHA guidelines and vary by credit score, property location, and loan purpose, see the eligibility grid and loan limits above for the full picture. These are program parameters, not loan terms: your rate, APR, and full repayment schedule are disclosed in your personalized Loan Estimate, not on this page. Equal Housing Opportunity. TW Team operates through Lower, LLC, NMLS ID# 1124061, 5950 Symphony Woods Road, Suite 312, Columbia, MD 21044. The team serves borrowers throughout California, with loans in additional states originated through team members licensed in those states; see our licenses page for the current list. This page is intended for consumers in states where TW Team and Lower, LLC are licensed to originate; it does not constitute an offer in any state where such an offer would not be permitted. We consider all qualified applicants for credit without regard to race, color, religion, national origin, sex, marital status, age, disability, or any other basis prohibited by the Equal Credit Opportunity Act. TW Team and Lower, LLC are not affiliated with or endorsed by the U.S. Department of Housing and Urban Development (HUD) or the Federal Housing Administration (FHA). This page is not a HUD publication and has not been reviewed or approved by HUD or the FHA. FHA loans are originated by HUD-approved lenders and insured by the Federal Housing Administration; HUD does not lend money directly to homebuyers. This page is a general, educational guide to how FHA financing typically works and is not a quote, pre-qualification, rate lock, or commitment to lend; loan programs, mortgage insurance rates, loan limits, and underwriting guidelines are set by HUD, are subject to change without notice, and your actual terms depend on your credit, income, property, and the guidelines in effect at the time of application. Not all applicants will qualify. The 2026 FHA loan limits referenced above ($541,287 floor and $1,249,125 ceiling for a 1-unit property, scaling up for 2–4 units as shown) are effective for FHA case numbers assigned on or after January 1, 2026 and are set annually by HUD based on county median home prices and the FHFA conforming loan limit; they are subject to change. Mortgage insurance premium rates referenced above are per HUD Mortgagee Letter 2023-05 and were unchanged as of this page's publication, but are subject to change by HUD at any time; they are not a quote for your specific loan. Debt-to-income, credit score, bankruptcy/foreclosure seasoning, manual-underwriting, condo-approval, flipping-rule, and other underwriting figures referenced above are general summaries of HUD Handbook 4000.1 and current Mortgagee Letters, simplified for a consumer audience; they do not capture every exception, and individual lenders, including TW Team, may apply additional overlays beyond HUD's published minimums. Credit score tiers, including the 580 and 500 FICO thresholds referenced above and any discussion of scores below 620, are HUD's published program parameters, presented for educational purposes only. They are applied without regard to race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, or the good-faith exercise of any right under the Consumer Credit Protection Act, consistent with the Equal Credit Opportunity Act and Regulation B; meeting a published score threshold is not an approval, a pre-qualification, or a guarantee of any specific rate, fee, or term, and a file can be denied at a qualifying score based on the full underwriting picture. Where applicable, a risk-based pricing notice or credit score disclosure required by the Fair Credit Reporting Act and Regulation V is provided separately during the application process, not on this page. Consult HUD's official Single Family Housing Policy Handbook and current Mortgagee Letters, available at hud.gov, for the complete and current requirements.

Sources: HUD Handbook 4000.1 · FHA Mortgage Limits (HUD) · NMLS Consumer Access · View all loan programs