The Federal Housing Administration backs mortgages with down payments as low as 3.5%, which makes it the go-to option for first-time buyers who can't scrape together a 20% down payment.
But the math on who qualifies keeps shifting, and plenty of shoppers are walking into lenders with outdated assumptions about what they need.
The 3.5% figure only applies if your credit score lands at 580 or higher.
Drop below that down to 500, and the FHA still backs the loan, but it wants 10% down instead.
Fall under 500 entirely and you're shut out of the program.
Lenders typically want your total debt payments, including the new mortgage, to stay under 43% of your monthly gross income.
Some will stretch to 50% if you have compensating factors like cash reserves or a long history of on-time rent payments.
That flexibility varies wildly by lender, so two banks can quote you very different maximums on the same paycheck.
There's also the mortgage insurance piece that surprises almost everyone.
FHA loans require two premiums: an upfront one equal to 1.75% of the loan amount, which usually gets rolled into the balance, and an annual one paid monthly.
If you put down less than 10%, that monthly premium generally sticks around for the life of the loan unless you refinance into a conventional mortgage later.
That last detail is where the real money hides.
A borrower who puts 3.5% down and pays mortgage insurance for 30 years can hand over tens of thousands of dollars more than someone who refinances once they build enough equity.
It's not a reason to skip the FHA route, but it is a reason to treat the loan as a starting point rather than a forever mortgage.
The home has to pass an FHA appraisal covering safety and soundness, which can kill deals on fixer-uppers with peeling paint, missing handrails, or a faulty roof.
Sellers sometimes balk at the extra inspection, which puts FHA buyers at a disadvantage in competitive markets.
Self-employed buyers face another hurdle.
Lenders want two years of tax returns and often average your income across them, so a single strong year won't carry you.
Gig workers and 1099 earners should expect more paperwork and more scrutiny than a W-2 employee with the same take-home pay.
Then there are the fees you can't finance away as easily.
Closing costs typically run 2% to 6% of the purchase price, and the FHA allows sellers to cover up to 6% of yours.
In a slow market, that concession is negotiable.
In a hot one, asking for it can cost you the house.
The practical move: get pre-approved before you tour anything, and ask the lender directly what score and debt ratio they'll accept.
A hard number beats a brochure every time.
The FHA program exists to widen the door, not to make homeownership cheap.
If you qualify, use it to get in, then run the numbers on a conventional refinance the moment your equity and credit score allow it.
Final Thoughts
Staying in an FHA loan long after you've outgrown it is how a good deal quietly turns into an expensive one.