FHA Loan Requirements in 2025: An Updated Guide for Home Buyers

This guide explains the minimum requirements for an FHA loan in 2025, based on the latest official guidance from the Department of Housing and Urban Development (HUD).

HUD has made no major changes to the Federal Housing Administration (FHA) loan program over the past year. As a result, FHA loan guidelines and requirements for 2025 will be the same as in previous years.

Summary: Borrowers who want to use an FHA-insured mortgage loan need a credit score of at least 500, a down payment of at least 3.5%, and mortgage insurance. The house must also pass an evaluation.

Minimum FHA Loan Requirements for Borrowers

The Federal Housing Administration (FHA) home loan program is a government-backed mortgage program. The funding comes from a bank or lender in the private sector, the same as other types of home loans.

But FHA loans receive insurance backing from the government. That’s what makes them unique.

This insurance protects the lender, not the borrower. But it also allows lenders to be a bit more flexible when approving loan applications, which directly benefits borrowers.

The rest of this guide explains six key requirements for an FHA-insured home loan in 2025: (1) down payments, (2) credit scores, (3) debt ratios, (4) stable income, (5) home appraisals, and (6) mortgage insurance premiums.

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1. A Minimum Down Payment of at Least 3.5%

If you plan to use an FHA loan to buy a house, you will have to make a down payment of at least 3.5%. Specifically, that’s 3.5% of the purchase price or appraised home value, whichever is less.

In contrast, many conventional loan products (that are not insured by the government) require a larger down payment anywhere from 5% to 20%. This is what attracts some borrowers to the FHA program in the first place, the ability to make a smaller upfront investment.

There is no getting around the down payment requirement. It’s a hard and fast rule.

But the Department of Housing and Urban Development does allow the down payment funds to be gifted from an approved donor, such as a family member. So you don’t necessarily have to come up with all of the money on your own.

The down payment money can come from a variety of sources, including checking and savings accounts, cash saved at home, stocks and bonds, retirement accounts, and the gift money mentioned above.

2. A Credit Score of 580 for the Low Down Payment

HUD requires a minimum credit score of 500 for FHA loans, and a score of 580 or higher for the low down payment option mentioned above.

Most borrowers who use this program aim to take advantage of the low 3.5% down payment. This means that borrowers who use FHA loans to buy a house typically have credit scores of 580 or higher.

In fact, many mortgage lenders won’t even offer home loans to borrowers with scores in the low-500 range. So the 500 number allowed by HUD doesn’t mean very much in the marketplace.

The bottom line here is that you’ll need a credit score of at least 580 to qualify for an FHA loan with the minimum down payment in 2025. A higher score could make it even easier to get approved and might help you qualify for a lower interest rate as well.

HUD imposes a credit score requirement for FHA loans because these scores show how a person has borrowed and repaid money in the past. And that’s important for lenders to know.

Think of it as a kind of risk indicator. People who pay their bills on time end up with higher credit scores and are therefore considered to be a lower risk for lenders. On the other hand, borrowers with a pattern of missed payments and delinquencies typically have lower scores and present a bigger risk.

3. A Manageable Level of Debt in Relation to Income

FHA loans also have specific requirements for the borrower’s debt-to-income ratio. Ideally, this ratio should not exceed 43%. But it can be higher if there are compensating factors.

A debt-to-income (DTI) ratio is a percentage that compares a borrower’s total monthly debt payments to their gross monthly income. For example, if a borrower has $2,000 in monthly debt payments and a gross monthly income of $6,000, their DTI ratio would be 33% ($2,000 / $6,000).

Debt ratios help mortgage lenders assess a borrower’s ability to take on additional debt, like a mortgage payment. This is true for conventional and FHA loans alike. But the FHA program has specific requirements and guidelines when it comes to DTI ratios.

Generally speaking, they limit the borrower’s total debt to no more than 43% of gross monthly income. But there are exceptions to this rule as well, which could allow for a DTI ratio as high as 50%. In FHA lingo, these exceptions are known as “compensating factors.”

Example: If a borrower has cash reserves in the bank, plus extra money left over each month after paying the bills, they might be allowed to have a debt ratio up to 50%.

Without those compensating factors, the DTI would probably be capped at 43%.

4. Stable Income That’s Likely to Continue

It should come as no surprise that FHA loans have income requirements as well. After all, borrowers need some form of income to manage their monthly payments and repay the loan over time.

While the FHA does not require a specific minimum income in 2025, they do impose debt-to-income ratio limits as discussed previously. They also require mortgage lenders to assess the borrower’s income situation, to determine whether or not it’s likely to continue going forward.

The phrase “likely to continue” appears several times throughout HUD Handbook 4000.1. For example, a chapter relating to FHA mortgage underwriting requirements states the following:

“Effective Income must be reasonably likely to continue through at least the first three years of the Mortgage, and meet the specific requirements described below.”

Mortgage lenders make this determination by reviewing a variety of financial documents, such as bank statements, W-2 forms, and IRS tax returns.

5. Home Appraisals and Property Requirements

Home appraisals are another important requirement for FHA loans, and this is a subject that causes confusion among home buyers and sellers alike.

Before the Federal Housing Administration will insure a home loan, they need to ensure that the property is safe and habitable for the new occupant.

They also want to make sure the property is worth the amount that the buyer has agreed to pay for it. The home appraisal can determine both of these things.

There’s an important distinction between FHA and conventional loans:

• Conventional financing: The home appraiser estimates the market value of the home based on recent sales data and other factors. But the appraiser will only evaluate the condition of the home as needed to determine the value.
• FHA financing: The home appraisal determines the market value, just like with the conventional loan process mentioned above. But it also goes a step further. The appraiser must also evaluate the home to see if it meets the FHA’s minimum property requirements, or MPRs.

If the property only has minor issues, the seller could fix them to keep the deal on track. But if the home has serious problems like structural and safety issues, it probably won’t qualify for FHA financing.

Home buyers should keep these requirements in mind during the house hunting stage. With a standard FHA purchase loan, buyers should generally focus on well-maintained properties and avoid “fixer-uppers” that aren’t move-in ready.

Note: There’s a separate loan product called the FHA 203(k) rehab loan that allows borrowers to purchase and renovate a home all in one package. The requirements stated above apply to the basic FHA home mortgage loan, also known as the 203(b) program. Note the different letters.

6. Mortgage Insurance Premiums

The Federal Housing Administration is a self-sustaining agency. Despite what many people think, the FHA does not (normally) use taxpayer-derived funds to insure home loans.

They generate their own revenue in the form of mortgage insurance premiums, and they use that capital to pay insurance claims to lenders. This program works like one big insurance fund.

When using an FHA-insured mortgage loan to buy a house in 2025, you’ll probably have to pay two insurance premiums:

• There’s an upfront premium for 1.75% of the base loan amount.
• There’s also an annual mortgage insurance premium that varies based on the length of the term and the loan-to-value ratio. For borrowers, the annual MIP equals 0.55% of the loan amount (divided into 12 monthly installments).

Conventional home loans sometimes require private mortgage insurance (PMI) if the borrower makes a small down payment. But PMI can be canceled later, when the homeowner’s equity reaches a certain level.

FHA mortgage insurance, on the other hand, often has to be paid for the life of the loan.

Borrowers Should Explore All of Their Options

Overall, FHA loans are easier to qualify for than conventional mortgage loans. That’s because lenders have an added layer of protection against default, in the form of government insurance.

But FHA loans also have specific requirements that conventional financing does not. One example is the required home appraisal and the government-imposed property requirements mentioned above.

The truth is that all mortgage loans come with pros and cons. As a borrower, you need to explore all of your financing options and choose the one that meets your specific needs.

Frequently Asked Questions from Home Buyers

Since 2006, the Home Buying Institute has fielded dozens of questions from home buyers relating to the FHA loan program. While we are not associated with the Federal Housing Administration, we do our best to educate our readers with accurate information.

Below, you will find a collection of frequently asked questions (FAQs) that are specific to FHA loan requirements, rules, and guidelines—fully updated for 2025.

1. Who determines the minimum requirements for FHA loans?

The Federal Housing Administration is part of the U.S. Department of Housing and Urban Development (HUD). So HUD establishes the rules and requirements for FHA loans, while the FHA manages the program and the insurance fund that it’s built around.

2. Do the guidelines change from one year to the next?

Occasionally, HUD makes changes to the FHA mortgage insurance program, including the basic requirements for borrowers. But it doesn’t happen very often.

The most important guidelines for this program (e.g., down payments, credit scores, and mortgage insurance) have been in place for many years with only minor adjustments. They’ll likely remain the same throughout 2025 as well.

When HUD does change or update the FHA loan requirements, they announce it through what’s known as a “Mortgagee Letter.” These letters advise mortgage lenders of the change, so they can adjust their procedures going forward.

HUD also incorporates changes into the Single Family Housing Policy Handbook. This is the official set of requirements for the FHA loan program, issued to mortgage lenders.

Note: All of these official resources are available online and can be found via Google search, if you want to explore them in more detail.

3. Are there exceptions to some of these rules?

Yes, many of the FHA loan requirements mentioned above have exceptions and “compensating factors.” This gives mortgage lenders greater flexibility when it comes to qualifying applicants.

For example, we talked about compensating factors in the previous section, when discussing the debt-to-income ratio limit.

However, the down payment and credit score requirements typically do not allow for exceptions. All borrowers have to put down at least 3.5% and have a credit score of 500 or higher. To our knowledge, there are no exceptions for these particular requirements. 

4. Can FHA loan requirements vary by lender?

Yes, FHA loan requirements can vary from one lender to another.

HUD sets the minimum requirements for things like down payment, credit score, and debt-to-income ratio. But mortgage lenders are allowed to impose additional guidelines or “overlays” on top of these federal standards.

Overlays are lender-specific requirements that may include stricter credit score minimums, tighter debt-to-income ratios, or additional income documentation.

Here’s another way to think of it:

• The FHA and HUD establish the minimum requirements for this program, which all mortgage lenders must abide by.
• Participating mortgage lenders can impose their own guidelines as well, as long as they meet or exceed HUD standards.

Credit scores are one of the most common overlays that can vary from lender to lender.

Officially, the FHA allows borrowers with credit scores as low as 500 to qualify, if they make a down payment of 10% or more. But a lot of mortgage lenders set their minimum credit score requirements higher, often somewhere between 580 and 620.

This underscores the importance of shopping around when applying for an FHA loan. Some lenders may have more flexible overlays, while others may impose stricter criteria to minimize risk.

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Disclaimer: This article explains the minimum requirements for an FHA loan and was last updated in spring 2024. Many of these rules have exceptions that allow for flexibility. If you have questions about these requirements, you can contact an approved lender or refer to HUD Handbook 4000.1. You could also contact the FHA Resource Center at 800-CALL-FHA (225-5342), or by email: answers@hud.gov.