FHA Loans — 3.5% Down, 580 Credit Score, Six Programs Under One Roof
FHA loans let you buy a home with as little as 3.5% down and a credit score of 580, or buy with a 500 score at 10% down. Beyond the standard purchase loan, FHA also covers streamline refinances with no appraisal, cash-out refinances to 80% loan-to-value, 203(k) rehab loans that fold renovation costs into the mortgage, down payment assistance up to 5% of the purchase price, and gift of equity transactions between family members. Mortgage-World.com (NMLS #1630225) is a licensed mortgage broker offering every FHA program in one place. No hard credit pull to get started.
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Your Answer Right Here
FHA Loans — The Short Answer
FHA loans are mortgages insured by the Federal Housing Administration that let you buy or refinance a home with lower credit and down payment requirements than a conventional loan. The core numbers: a credit score of 580 or higher qualifies for 3.5% down, while a score between 500 and 579 still works at 10% down. Below 500, FHA is not an option. Beyond the standard purchase loan, FHA covers six distinct programs, and most borrowers only know about one or two of them. A standard purchase loan works for any 1–4 unit owner-occupied home. A streamline refinance lowers your rate on an existing FHA loan with no appraisal and minimal paperwork. A cash-out refinance lets you pull equity out up to 80% of your home’s value. A 203(k) rehab loan rolls renovation costs into your purchase or refinance, so you don’t need a separate construction loan. Down payment assistance through Mortgage-World.com can cover up to 5% of the purchase price for buyers short on cash to close. And a gift of equity lets a family member sell you their home below market value, with the difference counting toward your down payment.
Those six programs cover nearly every situation a borrower runs into, whether you’re buying your first home, helping a parent downsize into a smaller place, refinancing a high rate, or buying a fixer-upper that needs work before you can move in. Every program is backed by the same federal agency, the U.S. Department of Housing and Urban Development, which sets the underlying eligibility rules every approved lender has to follow. Mortgage-World.com (NMLS #1630225) is a licensed mortgage broker in New Jersey, Connecticut, and Florida, and we can usually tell you within minutes which FHA program fits your situation and what your monthly payment would look like. Call 888.958.5382 or start your application online with no hard credit pull.
At a Glance
FHA Loans — 2026 Program Snapshot
Every FHA loan program offered through Mortgage-World.com (NMLS #1630225), side by side.
| FHA Loan Program | Minimum Credit Score | Minimum Down Payment |
|---|---|---|
| Standard Purchase Loan | 580 (500–579 allowed at 10% down) | 3.5% |
| FHA Streamline Refinance | No new credit pull typically required; existing FHA loan must be current | N/A — no new down payment, no appraisal in most cases |
| FHA Cash-Out Refinance | 580 (some lenders require 600+) | N/A — max 80% loan-to-value retained |
| FHA 203(k) Rehab Loan | 580 for limited 203(k); 580–620 typical for standard 203(k) | 3.5% |
| FHA Down Payment Assistance | 580 | As low as $0 out of pocket; assistance up to 5% of purchase price |
| FHA Gift of Equity | 580 | Equity gift from a family seller can satisfy some or all of the down payment |
| Eligible Properties | 1–4 unit owner-occupied primary residence; FHA-approved condos and PUDs | |
| Maximum DTI (Standard) | 43% back-end ratio; up to 56–57% with compensating factors and AUS approval | |
| Upfront MIP | 1.75% of the loan amount; can be financed into the loan | |
| States Licensed | New Jersey, Connecticut, Florida | |
Choosing the Right Program
Why FHA Loans Aren’t Just One Product
Most people hear “FHA loan” and picture a single product: low down payment, first-time buyer, that’s it. In practice FHA insures six distinct loan types, and picking the wrong one — or not knowing the right one exists — costs borrowers money and time every single day. A buyer who needs a kitchen gutted before move-in doesn’t need a separate construction loan if they know about the 203(k) program. A homeowner with an existing FHA loan sitting at a rate from two years ago doesn’t need a full refinance application if they qualify for a streamline. And a buyer who’s a few thousand dollars short of closing costs often doesn’t realize Mortgage-World.com offers down payment assistance covering up to 5% of the purchase price directly, before they even look at outside grant programs.
Standard FHA Purchase Loans
This is the program most people mean when they say “FHA loan.” A credit score of 580 or higher unlocks 3.5% down. Drop to a score between 500 and 579 and you can still buy, but the down payment requirement rises to 10%, and the loan moves to automated underwriting only. The property has to be a 1 to 4 unit home you’ll occupy as your primary residence, and it has to pass an FHA appraisal confirming it meets HUD’s minimum property standards. For a full breakdown of who qualifies, see our page on FHA first-time homebuyer requirements, and for the credit specifics, our FHA credit score page covers exactly where the 500 and 580 thresholds come from.
FHA Streamline Refinance
If you already have an FHA loan and rates have dropped since you closed, a streamline refinance is usually the fastest and cheapest way to lower your payment. The defining feature is right in the name: streamlined. Most streamline refinances skip the new appraisal entirely, which means your closing costs come down and your timeline shortens. Documentation requirements are lighter than a standard refinance too, since FHA already has your loan performance history on file. The trade-off is that you need an existing FHA loan in good standing, current on payments, to qualify. This isn’t a program for buyers; it’s strictly for borrowers refinancing an FHA loan they already hold.
FHA Cash-Out Refinance
A cash-out refinance replaces your current mortgage with a larger FHA loan, with the difference paid to you in cash, up to 80% of your home’s appraised value. Homeowners use this for renovations, debt consolidation, or covering a major expense without taking on a second mortgage or a personal loan at a higher rate. Unlike the streamline option, a cash-out refinance does require a new appraisal, since the lender needs to confirm current value before determining how much equity is available to pull out. Compare this directly against our general cash-out refinance page if you’re weighing FHA against a conventional cash-out option, since conventional loans cap cash-out at the same 80% LTV but carry different credit requirements.
FHA 203(k) Rehab Loans
A 203(k) loan rolls the cost of home repairs or renovation directly into your purchase or refinance, so you walk away from closing with both the home and the funds to fix it up, financed under one loan rather than a mortgage plus a separate construction loan or credit card balance. Limited 203(k) loans cover smaller projects, generally up to $35,000 in repairs, with a simpler approval process. Standard 203(k) loans handle larger structural work, including additions and major system replacements, and bring in a HUD consultant to oversee the project, per the program rules in HUD’s 203(k) rehabilitation mortgage insurance program. Down payment requirements mirror the standard FHA purchase loan at 3.5% with a 580 score. This program solves a real problem in older housing stock across New Jersey and Connecticut, where many homes need updated electrical, roofing, or kitchens before they’re truly move-in ready. See our dedicated FHA 203(k) rehab loan page for a full breakdown of limited versus standard 203(k) financing.
FHA Down Payment Assistance
Mortgage-World.com offers down payment assistance directly, covering up to 5% of the purchase price for qualified FHA borrowers. This isn’t a third-party grant program with a waitlist; it’s structured as part of the FHA loan itself, which keeps the process faster and the underwriting more predictable. Combined with the 3.5% minimum down requirement, eligible borrowers can in some cases reduce their out-of-pocket cash to closing costs alone. Full program details, income limits, and how assistance funds get applied at closing are covered on our FHA down payment assistance page.
FHA Gift of Equity
A gift of equity happens when a family member sells you a home for less than its appraised market value, and the difference between the sale price and the appraised value counts toward your down payment, no cash changing hands for that portion. This is common when parents sell a home to a child, or between siblings, and it’s one of the more underused FHA tools available. The seller doesn’t write a check; the equity gap itself does the work. A signed gift of equity letter and a qualifying family relationship are required, along with the standard 580 credit score threshold that applies across FHA’s core programs. Our gift of equity page walks through exactly how the paperwork and appraisal process works.
Full Qualification Picture
FHA Loans — 2026 Requirements Checklist
Credit, Income, Down Payment, and Property in One Place
These are the underwriting standards applied across FHA loan programs through Mortgage-World.com (NMLS #1630225) in 2026.
- 580+ FICO: 3.5% minimum down payment on purchase loans
- 500–579 FICO: 10% minimum down payment; automated underwriting only
- Below 500 FICO: not eligible for FHA financing
- Qualifying score = lowest middle score across all borrowers on the loan
- Streamline refinances generally don’t require a new minimum score if payment history is current
- Personal savings with 60-day account history accepted
- Gift funds from family, employer, or approved organization (gift letter required)
- Mortgage-World.com down payment assistance up to 5% of purchase price
- Gift of equity from a qualifying family seller
- Proceeds from sale of a prior property accepted
- Standard back-end DTI: 43% without compensating factors
- With AUS approval and compensating factors: up to 56–57% allowed
- W-2, self-employed, Social Security, part-time, and rental income accepted
- Two-year employment history required; gaps must be documented
- Down payment assistance payments are included in DTI calculation
- Owner-occupied 1–4 unit only; FHA-approved condos and townhouses eligible
- FHA appraisal required for purchase, cash-out refi, and most 203(k) loans
- 203(k) loans permit homes needing repair that wouldn’t otherwise pass appraisal
- Streamline refinances typically waive the new appraisal requirement
- Investment properties and vacation homes are not eligible
Mortgage Insurance
Mortgage Insurance on FHA Loans
Every FHA loan, regardless of which of the six programs you use, carries mortgage insurance. There’s an upfront premium of 1.75% of the loan amount, which most borrowers finance directly into the loan rather than paying in cash at closing. There’s also an annual premium, typically 0.50% to 0.55% depending on your loan-to-value ratio, built into your monthly payment. On loans with the minimum down payment, that annual premium usually runs for the life of the loan rather than dropping off at a set equity threshold. This is the cost of FHA’s more flexible credit and down payment standards, and many borrowers revisit it two or three years after closing by refinancing into a conventional loan once their credit and equity position improve.
Three Key Facts
Three Things Every FHA Loan Applicant Should Know
A single point of FICO score is the difference between 3.5% down and a 10% requirement on purchase, 203(k), and most other FHA programs. If your score is close to 580, ask Mortgage-World.com to review your tri-merge report before you apply. See our page on the credit score cutoff for more detail.
A 203(k) loan finances the home and the renovation in a single closing, avoiding a separate construction loan or maxed-out credit cards. It’s especially useful on older housing stock that needs updating before move-in.
Mortgage-World.com offers down payment assistance directly, covering up to 5% of the purchase price, structured as part of the FHA loan itself rather than a separate grant application.
Related Resources
Related Mortgage Pages
FHA covers purchase, renovation, and refinance. These pages go deeper on each.
What Clients Say
Real Reviews From Our Clients
Here’s what a few of our clients said about working with Mortgage-World.com.
Common Questions Answered
Frequently Asked Questions — FHA Loans
