Note: FHA guidelines are subject to change and lenders can apply additional “overlays.” Always verify current requirements with your loan officer.

FHA Loans in 2026: What They Really Are (And What They’re Not)

If you’re trying to buy a home in Huntington Beach or anywhere in Orange County, you’re not just competing with other buyers—you’re competing with high prices, strict underwriting, and the reality that a conventional loan doesn’t work for everyone.

That’s where the FHA loan comes in. FHA financing is not “only” for first-time buyers or people with low credit. The simplest definition is:

You can be a first-time buyer, a repeat buyer, recently divorced, relocating, or even buying again after a previous homeownership experience. The key is that the home must be your primary residence(at least initially) and it must meet the FHA’s basic lending standards.

FHA Minimum Down Payment Requirements for 2026

The headline benefit most people know is the low down payment. FHA allows you to purchase with as little as 3.5% down —but the down payment you’re allowed depends heavily on your credit score.

3.5% Down (Credit Score 580+)

If your credit score is 580 or higher, you can use the minimum down payment of 3.5%.

• $400,000 home → $14,000 down
• $600,000 home → $21,000 down
• $800,000 home → $28,000 down

10% Down (Credit Score 500–579)

If your score is below 580, FHA requires at least 10% down(as long as your score is 500 or higher).

• $400,000 home → $40,000 down
• $600,000 home → $60,000 down
• $800,000 home → $80,000 down

Where Your Down Payment Can Come From

FHA is flexible about the source of funds. Your down payment can come from:

• Your savings or checking account
• A gift from an eligible family member
• Down payment assistance (when available and you qualify)

FHA Credit Score Rules in 2026 (And Why Scores Still Matter)

FHA guidelines are simple on paper:

• 580+ → qualifies for 3.5% down
• 500–579 → requires 10% down
• Below 500 → not eligible

But here’s the practical reality in a high-cost market like Orange County: even if you technically qualify, your experience (and rate) will be heavily impacted by credit score. A higher score can mean:

• Better interest rate
• Lower monthly payment
• More buying power
• More lenders willing to approve the loan

If your score is in the low range, it may be smarter to improve your credit first—especially if you’re planning to buy in a competitive market like Huntington Beach, where monthly payment matters just as much as price.

Lender Overlays: Why One Lender Says “No” While Another Says “Yes”

FHA sets the baseline rules, but lenders can add extra restrictions called overlays. This is why you might hear:

• “FHA allows 580, but we require 620.”
• “We don’t offer FHA for scores under 640.”
• “We only do FHA for certain property types.”

Overlays happen because lower credit scores generally mean higher perceived risk for the lender. In practice, this means working with a lender who actually understands FHA and has access to FHA-friendly options matters—especially in Orange County.

FHA DTI Limits for 2026: How Debt-to-Income Works

The most underrated benefit of FHA is that it often allows buyers to qualify for more home because it allows higher debt-to-income ratios (DTI).

DTI Step-by-Step Example

Let’s use an easy example: you earn $100,000/year.

• Gross monthly income: $100,000 ÷ 12 = $8,333

Front-End DTI (Housing Only)

Say your total housing payment (mortgage, taxes, insurance, HOA) is $3,500/month.

• $3,500 ÷ $8,333 = 0.42 → 42% front-end DTI

That’s within FHA’s typical allowance.

Back-End DTI (Housing + Other Debts)

Now add monthly debts that show on your credit report (car, credit cards, student loans, installment loans). Example: $700/month.

• ($3,500 + $700) = $4,200
• $4,200 ÷ $8,333 = 0.50 → 50% back-end DTI

Also within FHA guidelines (and a big reason FHA can work when conventional doesn’t).

FHA Mortgage Insurance: Upfront + Monthly (Explained Simply)

Mortgage insurance is the tradeoff with FHA. It’s part of why FHA can offer low down payment options and more flexible guidelines. FHA mortgage insurance has two parts:

1) Upfront Mortgage Insurance Premium (UFMIP)

FHA charges an upfront fee of 1.75% of the base loan amount. Most buyers roll it into the loan rather than paying it out of pocket.

Example UFMIP Calculation

Buying a $350,000 home with 3.5% down:

• Down payment: $12,250
• Base loan amount: $350,000 - $12,250 = $337,750
• UFMIP: $337,750 × 1.75% = $5,910
• Final loan amount (with UFMIP): $343,660

2) Monthly Mortgage Insurance Premium (MIP)

On top of the upfront fee, FHA also charges monthly mortgage insurance. For many 3.5% down FHA loans, the annual factor is about 0.55%(your lender will confirm exact numbers).

Using the loan amount above:

• $343,660 × 0.55% = $1,890/year
• $1,890 ÷ 12 = $157.50/month(approximately)

This monthly amount is added to your total housing payment and impacts your DTI qualification.

How Long FHA Mortgage Insurance Lasts (And How to Remove It)

This is one of the biggest “gotchas” with FHA:

• If you put 3.5% down, FHA mortgage insurance typically stays for the life of the loan.
• If you put 10% down, the mortgage insurance can drop off after 11 years.

The good news: you’re not stuck forever. If/when you build enough equity, many buyers refinance out of FHA into a conventional loan and remove mortgage insurance (assuming you qualify).

Occupancy Rules: Primary Residence Requirements

FHA loans are for primary residences. That means you need to move into the home and intend to occupy it as your primary home.

A common question: “Can I rent it out later?”

In many cases, yes—after you’ve lived there as your primary residence for a reasonable period of time. But you cannot buy the property as an investment property from day one.

What You Can Buy With FHA in Orange County

FHA can be used to buy:

• Single-family homes
• Condos and townhomes (must be on the FHA-approved condo list)
• 2–4 unit properties (as long as you live in one unit)

The FHA “House Hack” (2–4 Units)

One of the biggest FHA strategies is buying a 2–4 unit property, living in one unit, and renting the others. FHA may allow the rental income to help you qualify.

However, in high-cost markets like Southern California(including Orange County), multi-unit FHA deals can be difficult due to a self-sufficiency test in some cases—meaning the property has to demonstrate enough rental income relative to the mortgage payment.

FHA Minimum Property Standards (What Can Kill a Deal)

FHA requires the home to meet basic safety and livability standards. Examples of issues that can cause problems:

• Exposed wiring
• Peeling paint
• Significant roof issues
• Major foundation concerns

If you’re buying a fixer, look into an FHA 203(k) loan, which can finance repairs and improvements through the loan (separate program with additional rules).

FHA Loan Limits in 2026 (Orange County Considerations)

FHA loan limits typically change over time and vary by county. High-cost areas like Orange County, CA generally have much higher FHA loan limits than low-cost areas.

If you’re buying a duplex, triplex, or fourplex, the FHA limit increases with each unit count.

Documents You Need to Get FHA Preapproved

To get preapproved, you’ll typically need:

• Last 2 years of W-2s (or tax returns if self-employed)
• Last 2 pay stubs
• Last 2 months of bank statements (checking/savings for down payment funds)
• Government-issued ID (driver’s license or passport)
• Authorization for the lender to pull your credit

If you’re self-employed, income calculations can be more complex due to write-offs, depreciation, and tax structure—so it’s best to have a lender calculate qualifying income accurately.

Credit Pulls + Rate Shopping: The 45-Day Window

Many buyers worry that a credit pull will “ruin” their score. A mortgage inquiry can impact your score slightly, but here’s the key:

If you’re serious about buying a home in Huntington Beach or Orange County, you need accurate numbers. That requires a real preapproval—and that requires credit and documentation.

Orange County Strategy: When FHA Is the Smart Move

In Orange County, FHA often becomes the right choice when one (or more) of these is true:

• You have stable income but limited down payment funds
• Your credit score is decent but not ideal for conventional pricing
• Your DTI is higher and conventional AUS is tight
• You’re buying a primary residence and need flexible qualification

The smartest approach is not to walk into the process thinking “FHA only” or “never FHA.” The right approach is to have your lender run a side-by-side comparison of the programs you qualify for (FHA, conventional, VA if eligible, etc.) and pick the best fit based on cash-to-close, payment, and long-term strategy.

Frequently Asked Questions

Are FHA loans only for first-time home buyers?

No. FHA loans can be used by repeat buyers as long as the home is a primary residence and meets FHA guidelines.

Can I use gift funds for FHA?

Yes—gift funds from eligible donors are commonly allowed. Your lender will document the source and transfer properly.

Do FHA loans work for condos in Orange County?

They can, but the condo project typically must be FHA-approved (or meet approval rules depending on the scenario). This is a common friction point in Orange County—verify early.

Can I get rid of FHA mortgage insurance?

If you put 3.5% down, FHA mortgage insurance is usually for the life of the loan. Many buyers remove it later by refinancing into a conventional loan once they have enough equity and qualify.

What if my lender says they don’t do FHA at my credit score?

That’s often an overlay. It may be worth shopping with a lender or broker that is experienced with FHA guidelines and has access to multiple options.