Understanding FHA Loans: The 2026 Requirements Explained

An FHA loan is a mortgage insured by the Federal Housing Administration, part of HUD. The government doesn't lend the money; it insures the lender against default, which is why approved lenders can accept lower credit scores and smaller down payments than most conventional loans allow. The trade-off is mortgage insurance, a loan-size cap set county by county, and stricter rules about the property itself.

This guide covers the requirements that decide whether a buyer gets approved: credit score, down payment, debt-to-income ratio, employment, mortgage insurance, property standards, and the 2026 FHA loan limits for every Utah county, taken from HUD's official lookup.

FHA Loan Requirements at a Glance

• Credit score: 580 or higher for the minimum 3.5% down payment; 500–579 is allowed with 10% down.
• Down payment: at least 3.5% of the purchase price (HUD calls it the Minimum Required Investment). Gift funds from family can cover it.
• Debt-to-income: a standard benchmark of 31% for housing and 43% for total monthly debt, with higher ratios possible when the file has strengths such as cash reserves.
• Mortgage insurance: a 1.75% upfront premium plus an annual premium, usually 0.55% on a 30-year loan with less than 5% down.
• Occupancy: the home must be a primary residence; at least one borrower moves in within 60 days of closing and plans to live there for at least a year.
• Loan limit: the loan can't exceed the FHA limit for the county. In 2026 that ranges from $541,287 to $1,163,800 for a single-family home in Utah.
• Property: the home must pass an FHA appraisal that checks basic safety, soundness and security, and condos must sit in an FHA-approved project (or qualify for single-unit approval).
• Residency: U.S. citizens and lawful permanent residents qualify. Since May 25, 2025, non-permanent residents are no longer eligible for FHA financing.

Who Can Use an FHA Loan?

FHA loans are not limited to first-time buyers, and there is no income cap. Repeat buyers, people relocating for work, and buyers who simply want a low down payment all use them. The real limits are that the home has to be a primary residence and, in most cases, a borrower can hold only one FHA-insured mortgage at a time.

The program fits buyers whose credit history is short or bruised, buyers who have savings for a small down payment but not 10% or 20%, and buyers purchasing a two- to four-unit property they plan to live in. Buyers with strong credit and 10% or more down often come out ahead with a conventional loan, because conventional mortgage insurance can be removed once the balance falls to 80% of the home's original value, while most FHA premiums can't.

Credit Score Requirements

HUD's handbook sets two credit tiers. A borrower with a minimum decision credit score of 580 or higher qualifies for maximum financing, which is the 3.5% down payment. A score between 500 and 579 limits the loan to 90% of the home's value, so the buyer needs 10% down. Below 500, the borrower isn't eligible.

Those are FHA's floors, not every lender's. Many lenders add their own stricter rules, called overlays, and a 620 or 640 minimum is common. A buyer turned down at one lender can sometimes qualify at another without any change to the file. For a closer look at how scores are pulled and weighed, see this explainer on how credit scores affect mortgage approval.

One change is coming: for FHA case numbers assigned on or after January 1, 2027, lenders will be able to use VantageScore 4.0 and FICO 10T alongside Classic FICO. A tri-merge credit report is still required.

Past credit events don't automatically disqualify a borrower. Under HUD's rules, a Chapter 7 bankruptcy is acceptable once two years have passed since the discharge date, and a foreclosure generally needs three years from the date title transferred, with good credit re-established in the meantime.

Down Payment Requirements

The minimum is 3.5% of the purchase price with a 580+ score, or 10% with a score of 500–579. On a $400,000 home, that is $14,000 at 3.5% or $40,000 at 10%.

The down payment can come from savings, a documented gift from a relative or employer, or an approved down payment assistance program. Lenders verify the source of large deposits, so buyers should keep bank statements clean and avoid moving cash around in the months before applying. Utah-specific grant and assistance options are covered in the Utah first-time buyer guide to grants and the buying process.

Closing Costs and Seller Concessions

Closing costs are separate from the down payment and typically include lender fees, the appraisal, title insurance, prepaid taxes and insurance, and escrow deposits. FHA allows the seller, builder or other interested parties to contribute up to 6% of the sales price toward the buyer's closing costs, prepaid items and discount points. Those contributions can't be used for the 3.5% minimum down payment, and anything over 6% is treated as an inducement that lowers the price used to size the loan.

In a slower market, asking the seller to cover part of the closing costs is one of the most common ways FHA buyers keep their cash needs down.

Debt-to-Income Ratio

Lenders compare monthly debts to gross monthly income. FHA's manual-underwriting benchmark is 31% for the housing payment (principal, interest, taxes, insurance, mortgage insurance and any HOA dues) and 43% for all monthly debts combined. HUD's manual-underwriting table allows higher ratios, up to 40/50, with documented compensating factors such as cash reserves or minimal increase in housing payment. Most FHA loans run through FHA's automated underwriting system, which can approve ratios above those benchmarks when the rest of the file is strong.

Example: a household earning $7,000 a month gross would hit 31% at a $2,170 housing payment and 43% at $3,010 in total monthly debts.

Employment and Income

Lenders review the most recent two years of employment and income. Job changes are fine; unexplained gaps, especially long ones, need a written explanation. Salaried borrowers usually provide recent pay stubs, W-2s and possibly tax returns. Self-employed borrowers typically need two years of personal and business tax returns, and overtime, bonus or commission income is averaged over its history.

Standard documents for an FHA application include:

• Government-issued ID and Social Security number
• Recent pay stubs and two years of W-2s (or tax returns for self-employed income)
• Recent bank statements showing funds for the down payment and closing
• A gift letter and transfer records if family is helping with the down payment
• Explanations for credit events, employment gaps or large deposits

FHA Mortgage Insurance (MIP)

Every FHA loan carries two mortgage insurance charges, set by HUD Mortgagee Letter 2023-05 and still in effect in 2026:

• Upfront MIP (UFMIP): 1.75% of the base loan amount. Most borrowers roll it into the loan instead of paying it at closing.
• Annual MIP: for a loan term over 15 years, 0.55% when the down payment is under 5% and 0.50% with 5% or more down, on standard loan amounts. Larger high-balance loans pay 0.70%–0.75%. The annual premium is divided into the monthly payment.

Worked example on a $400,000 purchase with 3.5% down: the base loan is $386,000, the upfront premium adds $6,755 to the balance, and the 0.55% annual premium starts around $177 a month.

How long FHA mortgage insurance lasts

With less than 10% down, annual MIP lasts for the life of the loan. With 10% or more down, it ends after 11 years. The usual way out earlier is refinancing into a conventional loan once the home has roughly 20% equity, which avoids private mortgage insurance on the new loan. Rising home values in much of Utah have made that refinance reachable for many owners within a few years, though it depends on rates at the time.

2026 FHA Loan Limits in Utah

FHA loan limits cap how much can be borrowed and are set for each county from local home prices. For FHA case numbers assigned January 1 through December 31, 2026, the national floor for a one-unit home is $541,287 and the national ceiling is $1,249,125. Utah's single-family limits from HUD's FHA mortgage limits lookup:

• Summit and Wasatch counties: $1,163,800
• Wayne County: $997,050
• Grand County: $839,500
• Davis, Morgan and Weber counties: $744,050
• Salt Lake and Tooele counties: $637,100
• Washington County: $607,200
• Utah and Juab counties: $601,450
• Rich County: $579,600
• All other Utah counties (including Cache, Iron, Box Elder, Kane and Uintah): $541,287

Limits are higher for multi-unit properties. In Salt Lake County, for example, the 2026 limits are $815,600 for two units, $985,900 for three and $1,225,200 for four. HUD publishes new limits each December for the following year, so buyers closing in a later year should check the current figures on HUD's FHA mortgage limits page.

To put the limits in context, the recent median sale price in Salt Lake City is $543,500, and in Provo it is $484,100. Buyers using the 3.5% minimum down payment can generally borrow up to the county limit, so price ranges such as Provo homes under $500K fit comfortably. In Park City and the rest of Summit County, the higher limit helps, but many homes there are priced above any FHA limit.

Property Types FHA Will Finance

FHA loans can be used for single-family homes, townhomes, eligible manufactured homes on a permanent foundation, condos, and two- to four-unit properties where the borrower lives in one unit. Every property needs an FHA appraisal, which checks value and also flags health and safety issues such as peeling paint on older homes, missing handrails, roof problems, or broken mechanical systems. Repairs flagged by the appraiser usually have to be completed before closing, which matters when buying a fixer-upper.

Condos

A condo generally needs to be in an FHA-approved project, or the unit must qualify for single-unit approval. Projects can lose eligibility over issues like a high share of units in arrears on HOA dues, low owner occupancy, or an expired approval. HUD keeps a searchable list of approved projects, and checking it before making an offer saves time when shopping Salt Lake City condos for sale.

Two- to four-unit properties and the self-sufficiency test

A buyer can use an FHA loan on a duplex, triplex or fourplex as long as one unit is the buyer's home. For three- and four-unit properties, HUD adds a self-sufficiency test: the appraiser's fair market rent for all units, including the one the owner will live in, minus the greater of the appraiser's vacancy and maintenance estimate or 25%, must cover the full mortgage payment (principal, interest, taxes and insurance). Duplexes don't have to pass this test. Multi-family homes in Ogden are a common place Utah buyers run these numbers, since the Weber County limits for two- to four-unit properties run from $952,500 to $1,430,900.

FHA Loans Are Assumable

An FHA loan can be taken over by a qualified buyer when the home sells, keeping the original interest rate and balance. Buyers still have to meet FHA credit and income standards and cover the gap between the loan balance and the sale price. Homes with a low-rate FHA loan in place are worth a look; see assumable-loan homes in Salt Lake City and this breakdown of rate buydowns, assumable loans and ARMs.

FHA vs. Conventional: Which Fits?

• FHA tends to win for credit scores under about 680, higher debt-to-income ratios, or buyers who need seller help with closing costs.
• Conventional tends to win for credit scores in the 700s with 5% or more down, because private mortgage insurance can be cancelled and there is no upfront premium.
• Compare loan estimates side by side. The monthly payment including mortgage insurance, the cash needed at closing, and how long the insurance lasts tell the real story.

How to Apply for an FHA Loan

HUD and the FHA do not take loan applications from the public. Buyers apply with an FHA-approved lender, such as a bank, credit union or mortgage company, and most of them accept applications online. HUD's FHA lender search on HUD.gov lists approved lenders by area. The application process usually runs like this:

1. Gather documents. Lenders typically ask for recent pay stubs, two years of W-2s or tax returns (more for self-employed borrowers), recent bank statements, a photo ID and Social Security number, and details on current debts. Gift funds need a signed gift letter and a paper trail.
2. Complete the application. The standard form is the Uniform Residential Loan Application (Fannie Mae Form 1003), which covers income, employment, assets, debts and the property. Online applications use the same form.
3. Get a pre-approval letter. The lender pulls credit and reviews income and assets, then issues a letter showing how much the buyer can borrow.
4. Go under contract and order the FHA appraisal. Once a home is under contract, the lender orders an appraisal from an FHA-approved appraiser, who checks both value and FHA's minimum property standards.
5. Underwriting. The underwriter verifies everything in the file and may ask for updated statements or letters explaining credit items. Avoiding new debt and job changes during this stage keeps the approval on track.
6. Clear to close and sign. The buyer receives a Closing Disclosure at least three business days before closing, then signs and pays the down payment and remaining closing costs.

Comparing two or three lenders on rate, fees and their own credit minimums is worth the effort, since FHA sets the floor but each lender can be stricter.

Steps to Get Approved

1. Check credit early. Pull reports from all three bureaus and dispute errors a few months before applying.
2. Get pre-approved. A pre-approval sets a real budget and shows sellers the financing is solid. Ask each lender about its own credit-score minimum, since overlays vary.
3. Confirm the county limit for where the search is focused.
4. Screen properties for FHA issues before offering: condo approval status, obvious repair items, and multi-unit rent numbers.
5. Negotiate seller concessions where the market allows, up to 6% of the price.

For the broader buying process, from saving to closing, the first-time home buyer tips for Utah cover the steps around the loan.

Sources: HUD Handbook 4000.1; HUD Mortgagee Letters 2023-05 (MIP) and 2025-09 (residency); HUD FHA mortgage limits for calendar year 2026. Lenders can apply stricter standards; confirm current terms with a lender before applying.