FHA Loans

In 1934, the Federal Housing Administration (FHA) was established to improve housing standards and to provide an adequate home financing system with mortgage insurance. Now families that may have otherwise been excluded from the housing market could finally buy their dream home.

FHA does not make home loans, it insures a loan; should a homebuyer default, the lender is paid from the insurance fund.

• Buy a house with as little as 3.5% down.
• Ideal for the first-time homebuyers unable to make larger down payments.
• The right mortgage solution for those who may not qualify for a conventional loan.
• Down payment assistance programs can be added to a FHA Loan for additional down payment and/or closing cost savings.

FHA Loan Requirements in 2026 

To qualify for an FHA loan in 2026, borrowers typically need verifiable income, acceptable debt-to-income ratios, and a qualifying credit profile. FHA loans are designed to make homeownership more accessible, especially for first-time homebuyers and borrowers who may not meet conventional loan requirements. General FHA loan requirements include: • Minimum 580 credit score for 3.5% down payment eligibility • Primary residence occupancy required • Stable employment and income history • Verification of assets and down payment funds • Debt-to-income guidelines apply • Mortgage insurance required on FHA loans • Gift funds may be used for down payment and closing costs Loan guidelines can vary based on individual circumstances, income, assets, and credit history.

FHA Loans with a 580 Credit Score 

One of the most popular benefits of FHA financing is the ability to purchase a home with a credit score as low as 580 while qualifying for a down payment as low as 3.5%. FHA loans can be an excellent option for: • First-time homebuyers • Borrowers rebuilding credit • Renters looking to become homeowners • Buyers with limited down payment funds • Borrowers who may not qualify for conventional financing Even if your credit score is below 620, you may still have financing options available. Every situation is different, and a full loan review can help determine the best program for your goals.

FHA Down Payment Assistance Programs 

Many homebuyers are surprised to learn that FHA financing can often be combined with eligible down payment assistance programs. Depending on the program and location, assistance may be available for: • Down payment funds • Closing costs • Grants that do not require repayment • Forgivable second mortgages • First-time homebuyer assistance programs Arizona and Florida both offer programs that may help qualified buyers reduce their upfront cash investment. Program availability, income limits, and qualification requirements vary. Contact us to learn which FHA and down payment assistance options may be available for your situation.

Your loan approval depends 100% on the documentation that you provide at the time of application. You will need to give accurate information on:

Employment

• Complete Income Tax Returns for past 2-years
• W-2 & 1099 Statements for past 2-years
• Pay-Check Stubs for past 2-months
• Self-Employed Income Tax Returns and YTD Profit & Loss Statements for past 3-years for self-employed borrowers

Savings

• Complete bank statements for all accounts for past 3-months
• Recent account statements for retirement, 401k, Mutual Funds, Money Market, Stocks, etc.

Credit

• Recent bills & statements indicating account numbers and minimum payments
• Landlord's name, address, telephone number, or 12- months cancelled rent checks
• Recent utility bills to supplement thin credit
• Bankruptcy & Discharge Papers if applicable
• 12-months cancelled checks written by someone you co-signed for to get a mortgage, car, or credit card, this indicates that you are not the one making the payments.

Personal

• Drivers License
• Social Security Card
• Any Divorce, Palimony or Alimony or Child Support papers
• Green Card or Work Permit if applicable
• Any homeownership papers

Refinancing or Own Rental Property

• Note & Deed from any Current Loan
• Property Tax Bill
• Hazard Homeowners Insurance Policy
• A Payment Coupon for Current Mortgage
• Rental Agreements for a Multi-Unit Property

The main difference between a FHA Loan and a Conventional Home Loan is that a FHA loan requires a lower down payment, and the credit qualifying criteria for a borrower is not as strict. This allows those without a credit history, or with minor credit problems to buy a home. FHA requires a reasonable explanation of any derogatory items, but will use common sense credit underwriting. Some borrowers, with extenuating circumstances surrounding bankruptcy discharged 3-years ago, can work around past credit problems. However, conventional financing relies heavily upon credit scoring, a rating given by a credit bureau such as Experian, Trans-Union or Equifax. If your score is below the minimum standard, you may not qualify.

Your monthly costs should not exceed 29% of your gross monthly income for a FHA Loan. Total housing costs often lumped together are referred to as PITI.

P = Principal

I = Interest

T = Taxes

I = Insurance

Examples:

Monthly Income x .29 = Maximum PITI
$3,000 x .29 = $870 Maximum PITI

Your total monthly costs, or debt to income (DTI) adding PITI and long-term debt like car loans or credit cards, should not exceed 41% of your gross monthly income.

Monthly Income x .41 = Maximum Total Monthly Costs
$3,000 x .41 = $1230
$1,230 total - $870 PITI = $360 Allowed for Monthly Long Term Debt

FHA Loan ratios are more lenient than a typical conventional loan.

Yes, generally a bankruptcy won't preclude a borrower from obtaining a FHA Loan. Ideally, a borrower should have re-established their credit with a minimum of two credit accounts such as a car loan, or credit card. Then wait two years since the discharge of a Chapter 7 bankruptcy, or have a minimum of one year of repayment for a Chapter 13 (the borrower must seek the permission of the courts). Also, the borrower should not have any credit issues like late payments, collections, or credit charge-offs since the bankruptcy. Special exceptions can be made if a borrower has suffered through extenuating circumstances like surviving a serious medical condition, and had to declare bankruptcy because the high medical bills couldn't be paid.

Mortgage Financing Available in Multiple States

Frank Roccuzzo, Mortgage Broker with Barrett Financial Group, helps homebuyers, homeowners, and real estate investors explore financing options across multiple markets.

Licensed mortgage financing is available in:

• Arizona
• Florida
• California
• Nevada
• Oregon
• Tennessee
• Pennsylvania
• New Jersey
• Texas

Whether you're purchasing a home, refinancing an existing mortgage, or exploring investment property financing, we can help you compare loan options and identify solutions that fit your financial goals.

NMLS #1286425