FHA Loans: 2026 Complete Guide for Home Buyers

If you're a first-time buyer in Hampton Roads — or anywhere in Virginia — and you don't have 20% down or a 740 credit score, an FHA loan is probably one of your best options. The Federal Housing Administration insures FHA loans, which lets lenders accept smaller down payments (3.5%), lower credit scores (580+), and higher debt-to-income ratios than conventional financing.

This 2026 guide breaks down exactly how FHA loans work, the current limits in Virginia, the mortgage insurance math (the catch most first-time buyers miss), how FHA stacks up against VA and conventional 97 loans, and the specific things first-time FHA borrowers regret not asking before signing.

FHA loans are a stepping stone, not a destination. Buy with FHA today, refinance to conventional once you cross 20% equity to drop the lifetime mortgage insurance premium.

What is an FHA loan?

An FHA loan is a mortgage insured by the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (HUD). FHA doesn't make the loan — banks, credit unions, and mortgage lenders do. FHA insures the lender against borrower default, which lets lenders accept smaller down payments, lower credit scores, and higher debt-to-income ratios than they would on a conventional loan.

The program was created in 1934 and has been the workhorse of first-time-buyer financing in America for decades. In 2026 it remains the most accessible mortgage program available to buyers without military eligibility — particularly important in Hampton Roads, where roughly half of first-time buyers use either FHA or VA financing.

FHA loan eligibility (2026)

To qualify for an FHA loan in 2026 you must:

• Be a U.S. citizen or eligible non-citizen with a valid Social Security number
• Have steady employment — typically two years in the same field (gaps are allowed with explanation)
• Meet the credit score minimum — 580 for 3.5% down, 500–579 for 10% down (lenders apply overlays around 620)
• Demonstrate ability to repay — debt-to-income ratio typically under 50%, sometimes higher with strong compensating factors
• Use the home as a primary residence — FHA cannot be used for investment property or pure vacation homes
• Be free of recent serious credit events — bankruptcy must usually be 2+ years discharged; foreclosure 3+ years
• Have any past federal debt resolved — student loans in default, unpaid taxes, or other delinquent federal obligations are disqualifying

Down payment, credit score & DTI requirements

Down payment

3.5% with a credit score of 580+, or 10% with a credit score of 500–579. The down payment can come from:

• Your own savings (must be seasoned 60+ days)
• Gift funds from a relative, employer, or close friend (gift letter required)
• Down payment assistance programs (Virginia Housing offers both grants and second-mortgage DPA)
• Sale of an existing asset (with paper trail)

For a $325,000 Hampton Roads home, that's a $11,375 down payment at 3.5% — much more accessible than the $65,000 required for a 20% conventional down.

Credit score

FHA's published minimum is 580 for 3.5% down. In practice, most Hampton Roads lenders set their floor at 620–640 to get competitive pricing. Higher scores get better rates. See our credit score breakdown by loan type.

Debt-to-Income (DTI)

FHA's DTI guidelines are flexible — typically up to 50% with strong compensating factors (large savings, long job history, low payment shock). A 36% DTI gives the cleanest approval; above 45% expect more scrutiny.

Feature	FHA	VA	Conventional 97
Min. Down Payment	3.5%	$0	3%
Min. Credit Score	580 (3.5%) / 500 (10%)	No min* / 580–620 typical	620
Mortgage Insurance	UFMIP 1.75% + monthly MIP	None (funding fee)	PMI, drops at 78% LTV
Max DTI	~50% (case by case)	~41% (with comp factors)	~45–50%
Loan Limit (most VA counties 2026)	$524,225	No limit (full entitlement)	$806,500
Property Type	Owner-occ only	Owner-occ only	Owner-occ + 2nd home + investment
Best For	Lower credit, smaller savings	Active duty, vets, eligible spouses	Solid credit, plans to stay

*VA program does not set a credit minimum but lenders apply overlays. UFMIP = Up-Front Mortgage Insurance Premium. MIP = Mortgage Insurance Premium. PMI = Private Mortgage Insurance. LTV = Loan-to-Value.

FHA mortgage insurance (UFMIP + MIP) explained

This is the part most first-time FHA borrowers get wrong. FHA loans require two mortgage insurance components:

Up-Front Mortgage Insurance Premium (UFMIP)

1.75% of the loan amount, paid at closing — but typically rolled into the loan balance. On a $325,000 loan, UFMIP is $5,485, financed.

Annual Mortgage Insurance Premium (MIP)

Currently 0.55% of the loan amount per year for most FHA loans (down from 0.85% after the 2023 reduction). Paid in 12 equal monthly installments and added to your mortgage payment. On a $325,000 loan that's roughly $144/month — and it stays on the loan for the life of the loan if your down payment was less than 10%.

FHA loan limits in Virginia (2026)

FHA loan limits vary by county based on local home prices. The 2026 limits in Virginia:

• Most Virginia counties (including Hampton Roads — Norfolk, Virginia Beach, Chesapeake, Suffolk, Hampton, Newport News, Portsmouth, Williamsburg/JCC/York County): $524,225 single-family / higher for 2-4 unit
• Northern Virginia high-cost counties (DC metro): up to $1.21M+ for single-family in counties like Loudoun, Fairfax, Arlington, Prince William, Fauquier

If your purchase price exceeds the FHA limit, FHA isn't available — you'll need a conventional jumbo loan or a VA loan (which has no limit for full-entitlement vets). Read about jumbo loans.

FHA vs. VA vs. Conventional

For Hampton Roads buyers, the practical decision tree:

• Eligible for VA? Use VA. No down payment, no monthly mortgage insurance, capped closing costs. The VA loan beats FHA in almost every case for eligible service members and veterans. VA loan deep-dive.
• Credit 700+ with 5%+ down? Conventional 97 likely beats FHA. PMI on conventional is dropped automatically at 78% LTV; FHA MIP sticks for life.
• Credit under 680, or limited savings, or higher DTI? FHA is your friend.
• Buying in a USDA-eligible area with no down payment? USDA may beat FHA — zero down, lower MIP. USDA loan guide.

How to apply for an FHA loan

1. Check your eligibility

Pull your credit reports at AnnualCreditReport.com. Calculate your DTI. Confirm employment stability.

2. Find an FHA-approved lender

Most national banks, credit unions, and mortgage lenders are FHA-approved. Compare 2–3 lenders side by side using their Loan Estimates.

3. Get pre-approved

Provide W-2s, tax returns, pay stubs, 2 months of bank statements, and ID. The lender produces a fully underwritten pre-approval letter you can put in front of sellers.

4. Find an FHA-eligible home

The home must meet FHA Minimum Property Requirements — safe, structurally sound, no peeling lead paint (pre-1978 homes), working systems. Most modern Hampton Roads homes qualify; older homes may need repairs negotiated as part of the sale.

5. Write an offer

Sellers can pay up to 6% of the purchase price in concessions on FHA loans (vs. 3% on conventional with <10% down). Build that into your offer to reduce cash to close.

6. FHA appraisal

FHA requires its own appraisal that addresses property condition more strictly than a conventional appraisal. Schedule a separate home inspection regardless — the FHA appraisal is for the lender, not for you.

7. Close on the loan

Sign at the title company, wire your down payment and closing costs, receive the keys. Standard 30–45 day timeline.

Closing costs and what you will pay

FHA closing costs typically run 2–4% of the purchase price ($6,500–$13,000 on a $325k home). Common line items:

• Origination + lender fees — varies by lender
• Appraisal — $500–$800
• Credit report — $40–$80
• Title insurance + settlement fee — $1,500–$2,500
• Recording fees + Virginia grantee tax — $300–$700
• UFMIP — 1.75% of loan amount (typically rolled in)
• Escrow set-up — initial property taxes + first year of homeowners insurance
• Per diem interest — closing date through month-end

Use seller concessions aggressively to cover most of these. On a $325k home you can have the seller pay up to $19,500 in concessions, often eliminating most of your out-of-pocket closing costs.

Common FHA loan mistakes

• Ignoring the lifetime MIP. Plan to refinance to conventional once you have 20% equity. Set a calendar reminder.
• Choosing FHA when conventional 97 is cheaper. If your credit is 700+ and you have 5%+ down, run both loan estimates. Conventional often wins on total cost over time.
• Picking a non-FHA-approved lender. Confirm explicitly that the lender is FHA-approved before going deep.
• Touring homes that won't pass FHA appraisal. Older Hampton Roads homes with peeling exterior paint, missing handrails, or failing crawlspaces will get flagged. Ask your buyer's agent to filter accordingly.
• Underestimating cash to close. Down payment + closing costs + reserves = your real cash need. Build the full number, not just the down payment.
• Maxing out your DTI just because FHA allows it. Just because the lender approves a 50% DTI doesn't mean you can comfortably carry that payment plus surprises.

FHA Loans — FAQ

What credit score do I need for an FHA loan?

FHA's minimum is 580 for 3.5% down or 500 for 10% down. Most lenders apply overlays around 620–640 to get competitive pricing. Higher scores get better rates.

How much down payment do I need for an FHA loan?

3.5% of the purchase price with a 580+ credit score. On a $325,000 home that's $11,375. Down payment can come from your savings, gift funds, or down payment assistance programs.

What is the FHA loan limit in Virginia for 2026?

$524,225 for single-family homes in most Virginia counties, including all of Hampton Roads. Northern Virginia high-cost counties (Loudoun, Fairfax, Arlington, Prince William, Fauquier) can go up to $1.21M+. Higher limits apply for 2–4 unit owner-occupied properties.

Does FHA mortgage insurance ever go away?

For loans where the down payment was at least 10%, MIP drops after 11 years. For loans where the down payment was less than 10%, MIP stays for the life of the loan. The most common workaround: refinance into a conventional loan once you reach 20% equity (78% LTV).

Can sellers pay closing costs on an FHA loan?

Yes — sellers can pay up to 6% of the purchase price in concessions on an FHA loan, much higher than the 3% allowed on conventional with less than 10% down. Negotiate this into the offer to dramatically reduce cash to close.

What is the difference between FHA and conventional loans?

FHA loans are insured by the federal government, allow lower credit scores (580+), require lower down payments (3.5%), and accept higher DTI ratios — but require lifetime mortgage insurance in most cases. Conventional loans typically need higher credit (620+) and 3–5% down, but PMI drops automatically at 78% LTV. For solid-credit buyers, conventional often costs less over time.

Can I use an FHA loan for an investment property?

No. FHA loans must be used for the buyer's primary residence. You can buy a 2–4 unit property with FHA if you live in one of the units, but pure investment property requires conventional financing.

Can I have two FHA loans at once?

Generally no — FHA's "one FHA loan at a time" rule limits each borrower to one outstanding FHA loan. Exceptions exist for specific scenarios (job relocation, family size increase, divorce, vacating co-borrower) but they require lender documentation and HUD approval.

How long does it take to close an FHA loan?

Typical closing timeline is 30–45 days from offer accepted, similar to conventional. The FHA appraisal can occasionally take a few extra days vs. conventional.

Are FHA loans available in Hampton Roads?

Yes — FHA loans are widely used throughout Hampton Roads and supported by every major local lender. Norfolk, Virginia Beach, Chesapeake, Suffolk, Hampton, Newport News, Portsmouth, and Williamsburg all see significant FHA volume, particularly among first-time buyers and lower-income households.

Should I refinance my FHA loan to conventional?

If you have at least 20% equity (78% LTV), yes — refinancing to conventional drops the lifetime MIP. Run the math: closing costs vs. monthly savings. Most homeowners who refinance from FHA to conventional save $100–$300/month in MIP alone, paying back the closing costs within 24–36 months. See our refinance loans guide.

Sources & further reading

• HUD — FHA Loans overview
• HUD — Buying a Home with an FHA Loan
• FHA — Loan Limits by County (Virginia)
• Virginia Housing — first-time buyer programs
• CFPB — Loan Estimate
• AnnualCreditReport.com — Free credit reports
• HUD — Mortgagee Letter on FHA loan limits
• VA — Home Loan Programs (compare with FHA)

FHA loan limits, MIP rates, and program rules change. Always confirm current details with HUD and your lender.