FHA Loans California 2025: Complete Guide to Requirements, Limits & Down Payment Options
Quick Answer
FHA loans are government-backed mortgages that allow California homebuyers to purchase with 3.5% down payment and credit scores as low as 580 (though most lenders require 620+). The 2025 California FHA loan limits range from $524,225 in standard counties to $1,209,750 in high-cost areas like Los Angeles, Orange County, and San Francisco. FHA loans require mortgage insurance: 1.75% upfront premium (can be financed) plus 0.45%-1.05% annual premium. Mortgage insurance is required for the life of the loan if you put down less than 10%. FHA loans are best for buyers with credit scores under 700 and limited down payment savings.
By Aditya Choksi, NMLS #2055084 | California Licensed Mortgage Loan Officer | 21st Century Lending
Published: January 19, 2026 | Updated: January 26, 2026
In 2025, FHA loans let California homebuyers purchase a $500,000 home with just $17,500 down. For many buyers, that is the difference between renting indefinitely and building equity in their own home. This guide breaks down everything you need to know about FHA loans in California, from current loan limits to down payment strategies.
What Is an FHA Loan?
An FHA loan is a mortgage backed by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development (HUD). The FHA does not lend money directly. Instead, it insures loans made by approved lenders, which reduces the risk for those lenders and allows them to offer more flexible terms to borrowers.
This government backing is why FHA loans have lower credit score requirements and smaller down payments than most conventional loans. The trade-off is that you pay mortgage insurance premiums, which protect the lender if you default.
FHA loans were created in 1934 to make homeownership accessible to working families. Today, they remain one of the most popular loan types for first-time homebuyers and anyone who does not have a large down payment saved or perfect credit.
Who FHA Loans Are Designed For
FHA loans work well for several types of borrowers:
- First-time homebuyers who have not saved 10-20% for a down payment
- Buyers with credit scores between 580 and 680 who may not qualify for the best conventional rates
- Buyers recovering from financial setbacks such as bankruptcy or foreclosure (with waiting periods)
- Buyers with higher debt-to-income ratios who need more flexibility than conventional loans offer
If you have excellent credit and 20% down payment saved, a conventional loan may save you money over time. But for most California buyers, FHA loans provide a realistic path to homeownership.
2025 FHA Loan Limits for California Counties
FHA loan limits vary by county and are updated annually based on median home prices. For 2025, California FHA loan limits range from $524,225 in lower-cost areas to $1,209,750 in high-cost areas.
How FHA Loan Limits Work
The FHA sets a national floor and ceiling for loan limits. The floor is $524,225 for 2025, which applies to areas with lower median home prices. The ceiling is $1,209,750, which applies to high-cost areas where median home prices are significantly above the national average.
Most major California counties qualify for the high-cost ceiling or limits close to it because housing prices across the state exceed national averages.
California County Loan Limits (2025)
Here are the FHA loan limits for major California counties in 2025:
| County | Single-Family Limit | 3.5% Down Payment |
|---|---|---|
| Los Angeles | $1,209,750 | $42,341 |
| Orange | $1,209,750 | $42,341 |
| San Diego | $1,006,250 | $35,219 |
| San Francisco | $1,209,750 | $42,341 |
| Alameda | $1,209,750 | $42,341 |
| Santa Clara | $1,209,750 | $42,341 |
| Riverside | $644,000 | $22,540 |
| San Bernardino | $644,000 | $22,540 |
| Sacramento | $630,000 | $22,050 |
| Fresno | $524,225 | $18,348 |
Limits shown are for single-family properties. Multi-unit limits are higher. Source: HUD FHA Mortgage Limits
If you are buying a home priced above your county's FHA limit, you will need a conventional loan, jumbo loan, or a combination of financing options. You can check your county's exact limit on the HUD website.
FHA Loan Requirements in California
Meeting FHA loan requirements is generally easier than qualifying for a conventional mortgage. Here is what lenders look for:
Credit Score Requirements
The FHA has two credit score thresholds that determine your minimum down payment:
- 580 or higher: You can put down as little as 3.5%
- 500 to 579: You must put down at least 10%
That said, most lenders set their own minimum credit scores above the FHA floor. Many require at least 620 or 640, even though the FHA officially allows scores as low as 500. This is called a lender overlay.
If your credit score is below 620, you may need to shop around to find a lender willing to work with lower scores, or you may need to take steps to improve your credit before applying.
Down Payment Requirements
The minimum down payment for an FHA loan is 3.5% of the purchase price if your credit score is 580 or higher. On a $500,000 home, that works out to $17,500.
Your down payment can come from several sources:
- Personal savings
- Gift funds from family members
- Down payment assistance programs
- Retirement account withdrawals (with potential tax implications)
- Sale of other assets
Gift funds are fully permitted for FHA loans. You will need a gift letter stating that the money is a gift and does not need to be repaid.
Debt-to-Income Ratio (DTI)
Your debt-to-income ratio compares your monthly debt payments to your gross monthly income. FHA guidelines allow two types of DTI:
- Front-end DTI (housing ratio): Your proposed monthly housing payment should not exceed 31% of your gross monthly income
- Back-end DTI (total debt ratio): Your total monthly debt payments, including the new mortgage, should not exceed 43% of your gross monthly income
However, FHA allows higher ratios with compensating factors. If you have a strong credit score, significant cash reserves, or a history of paying similar housing costs, you may qualify with a back-end DTI up to 50%.
Employment and Income
Lenders verify your ability to repay the loan by examining your employment history and income:
- Two years of employment history: Gaps may be acceptable with documentation
- Stable income: Salary, hourly wages, commission, self-employment income, and other sources can count
- Documentation: W-2s, tax returns, pay stubs, and bank statements
If you are self-employed, expect to provide two years of tax returns and possibly a profit-and-loss statement.
Primary Residence Requirement
FHA loans are only available for primary residences. You must intend to move into the home within 60 days of closing and live there as your main home. You cannot use an FHA loan to purchase an investment property or vacation home.
There is one exception: you can buy a multi-unit property (up to four units) with an FHA loan if you live in one of the units. This is a popular strategy for house hacking, where rental income from other units helps cover your mortgage payment.
FHA Mortgage Insurance Explained
Every FHA loan requires mortgage insurance, regardless of your down payment amount. This insurance protects the lender if you default on the loan. FHA mortgage insurance has two components: an upfront premium and an annual premium.
Upfront Mortgage Insurance Premium (UFMIP)
The upfront MIP is 1.75% of your base loan amount. On a $400,000 loan, this equals $7,000. Most borrowers roll this cost into their loan balance rather than paying it at closing, which means you pay interest on it over the life of the loan.
Annual Mortgage Insurance Premium
The annual MIP is charged monthly and added to your mortgage payment. For most borrowers in 2025, the rate is:
- 0.55% annually for loans with less than 5% down
- 0.50% annually for loans with 5% or more down
On a $400,000 loan with less than 5% down, you would pay approximately $183 per month in MIP ($400,000 x 0.55% / 12 months).
How Long You Pay MIP
The duration of MIP depends on your down payment:
- Less than 10% down: MIP lasts for the entire life of the loan
- 10% or more down: MIP can be removed after 11 years
This is a significant consideration when comparing FHA to conventional loans. Conventional loans allow you to cancel private mortgage insurance (PMI) once you reach 20% equity, often in 5-10 years for typical homeowners.
Strategies to Eliminate FHA MIP
If you put less than 10% down and want to eliminate MIP, your main options are:
- Refinance to a conventional loan once you have 20% equity in your home
- Wait 11 years if you put 10% or more down at purchase
- Sell and purchase a new home with a conventional loan
Many homeowners refinance out of their FHA loan once they build sufficient equity, especially if interest rates are favorable.
FHA vs. Conventional Loans: Which Is Right for You?
Choosing between FHA and conventional depends on your financial situation. Here is a side-by-side comparison:
| Factor | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum down payment | 3.5% (580+ credit) | 3% (some programs) |
| Minimum credit score | 500-580 | 620+ (typically) |
| Mortgage insurance | Required for life (most cases) | Removable at 20% equity |
| DTI limit | Up to 50% with compensating factors | Typically 43-45% |
| Loan limits (CA high-cost) | $1,209,750 | $1,209,750 (conforming) |
| Property requirements | Stricter (HUD standards) | Less restrictive |
| Interest rates | Often lower base rate | Varies by credit score |
When FHA Makes More Sense
Choose an FHA loan if:
- Your credit score is between 580 and 680
- You have limited down payment savings (3.5%)
- Your DTI is higher than 43%
- You are recovering from bankruptcy or foreclosure (after waiting periods)
- You want to use gift funds for your entire down payment
When Conventional Is Better
Choose a conventional loan if:
- Your credit score is 700 or higher
- You can put down 10-20% or more
- You want to eliminate mortgage insurance faster
- You are purchasing a second home or investment property
- The property may not meet FHA standards
For many California buyers, FHA is the better choice initially. As you build equity and improve your credit, refinancing to a conventional loan can make sense down the road.
For a detailed comparison, see our FHA vs. Conventional Loans page.
California Down Payment Assistance Programs
California offers several programs that can help cover your down payment and closing costs. These programs can be combined with FHA loans to reduce the cash you need at closing.
CalHFA MyHome Assistance Program
The California Housing Finance Agency offers the MyHome Assistance Program, which provides a deferred-payment junior loan for up to 3.5% of the purchase price. This loan has no monthly payments and is due when you sell, refinance, or pay off your first mortgage.
Eligibility requirements:
- First-time homebuyer (or have not owned in 3+ years)
- Meet CalHFA income limits for your county
- Complete homebuyer education
- Minimum 660 credit score
CalPLUS FHA with ZIP
CalPLUS FHA offers a slightly higher interest rate in exchange for the Zero Interest Program (ZIP), which provides 3% of the loan amount toward closing costs. This is a true grant that does not need to be repaid.
Dream For All Program
When available, Dream For All offers up to 20% down payment assistance (maximum $150,000) as a shared appreciation loan. This means you repay the assistance plus a share of your home's appreciation when you sell or refinance. This program has limited funding and opens in cycles.
Lender Down Payment Assistance
Many lenders offer their own down payment assistance programs. These programs often have faster processing times and fewer restrictions than state programs. Ask your lender about available DPA options when you apply.
FHA Property Requirements
The property you purchase with an FHA loan must meet HUD's minimum property standards. These standards ensure the home is safe, sound, and secure. An FHA-approved appraiser will inspect the property and flag any issues.
Common Issues That Can Fail FHA Appraisal
- Roof with less than two years of remaining life
- Peeling or chipping paint (especially in homes built before 1978 due to lead paint concerns)
- Exposed wiring or electrical hazards
- Missing handrails on stairs
- Foundation cracks or structural problems
- Non-functional heating or cooling systems
- Evidence of pest damage
If the appraisal identifies issues, the seller may need to make repairs before the loan can close. Alternatively, you can negotiate credits or walk away from the deal.
2025 Appraisal Updates
HUD has made some adjustments to appraisal protocols in recent years to reduce unnecessary repair requirements. Minor cosmetic issues that do not affect safety or livability are less likely to derail your purchase than in the past.
Next Steps
FHA loans provide a realistic path to homeownership for California buyers who do not have 20% down or perfect credit. With loan limits up to $1,209,750 in high-cost counties and down payments as low as 3.5%, you can purchase a home sooner than you might expect.
To see what you qualify for, start with a free pre-qualification with our team. We will review your credit, income, and goals to determine the best loan program for your situation.
Have questions? Use our mortgage calculator to estimate your monthly payment, or contact us directly to speak with a licensed loan officer.
Last verified: January 2025. FHA loan limits and requirements are subject to change. Contact a licensed lender for current information specific to your situation.
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