In this explainer

An FHA loan can get you into a home with just three and a half percent down and a 580 credit score - but there is a catch most buyers miss: the mortgage insurance can last the entire life of the loan. Here is how FHA really works in 2026.

General information, not professional financial, tax, legal, or insurance advice. The Dreamy Leads Research Desk is an editorial and data team, not a licensed advisor.

Chapters

  1. 0:05 What an FHA loan is
  2. 0:25 The score that unlocks 3.5% down
  3. 0:34 The minimum down payment
  4. 0:42 The 500 to 579 tier
  5. 0:58 The upfront mortgage-insurance premium
  6. 1:08 The MIP catch
  7. 1:33 How common FHA really is

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Full transcript

What an FHA loan is

An FHA loan is a mortgage insured by the Federal Housing Administration, part of HUD. That government backing is what lets lenders approve buyers with smaller down payments and lower credit scores than a conventional loan allows. It is built for first-time and moderate-credit buyers. This is general information, not advice.

The score that unlocks 3.5% down

With a credit score of 580 or higher, the FHA down payment can be as little as three and a half percent.

The minimum down payment

That three and a half percent is the FHA minimum down payment, far below what most conventional loans expect.

The 500 to 579 tier

If your score falls between 500 and 579, FHA can still work, but the down payment jumps to 10 percent. Below 500, FHA financing is generally off the table. Your score sets your down payment, not just your rate.

The upfront mortgage-insurance premium

Every FHA loan carries an upfront mortgage-insurance premium of about one and three-quarters percent of the loan, which you can roll into the balance.

The MIP catch

On top of that, FHA charges an annual mortgage-insurance premium of roughly 0.55 to 0.85 percent. Here is the catch: with less than 10 percent down on a 30-year loan, that annual premium is permanent and lasts the life of the loan. Many borrowers refinance into a conventional loan once they have enough equity to drop it. This is general information, not advice.

How common FHA really is

FHA is not a niche product - in a large market it makes up close to a quarter of new loans.

Frequently Asked Questions

What credit score do you need for an FHA loan in 2026?

With a credit score of 580 or higher you can qualify for an FHA loan with as little as 3.5 percent down. Between 500 and 579 you can still qualify but must put 10 percent down, and below 500 FHA financing is generally unavailable. Individual lenders may set higher minimums. This is general information, not advice.

Does FHA mortgage insurance ever go away?

It depends on your down payment. On a 30-year FHA loan with less than 10 percent down, the annual mortgage-insurance premium is permanent and lasts the life of the loan. The common way to remove it is to refinance into a conventional loan once you have roughly 20 percent equity. This is general information, not advice.

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