FHA Loan in 2026: 3.5% Down, 580 Credit — What It Actually Costs Per Month

A $700,000 house. 3.5% down. 580 credit. What does that actually cost you every month?

That’s the question this post answers — with the full payment, not the teaser number. Principal, interest, tax, insurance, and the mortgage insurance FHA charges. All of it, at $600,000, $700,000, and $800,000.

What you need to qualify

One detail that trips people up: at 500–579, you can still get an FHA loan, but you need 10% down and your debt-to-income ratio is capped at 43%. At 580+, the down payment drops to 3.5% and the DTI cap rises to 50% with reserves. That 580 line matters — it’s the difference between needing $70,000 and needing $24,500 on a $700,000 house.

What it actually costs per month

Assumptions, stated plainly so you can check me: FHA 30-year fixed at 6.94% (national average, November 6, 2026). Property tax 1.25% of price per year. Homeowners insurance ~0.5% of value per year. Upfront MIP 1.75% financed into the loan. Annual MIP 0.55% of the loan, paid monthly. No HOA, no other debts. Closing costs are on top of the down payment and are not in these numbers.

$600,000 house

Income needed at 43% debt-to-income, no other debts: about $140,700/year. At 25% of pre-tax income (the budgeting rule I recommend): about $242,000/year.

$700,000 house

Income needed at 43% debt-to-income, no other debts: about $164,100/year. At 25% of pre-tax income: about $282,300/year.

$800,000 house

Income needed at 43% debt-to-income, no other debts: about $187,600/year. At 25% of pre-tax income: about $322,600/year.

Notice the pattern: the MIP is $270–$360 a month, every month, for as long as you have the loan. That’s the cost of the low down payment. It adds up to $3,240–$4,320 a year that a conventional borrower at 20% down doesn’t pay at all.

What you’ll actually need to close

The down payment isn’t the whole cash picture. Here’s the full cash to close on a $700,000 house with 3.5% down:

• Down payment: $24,500
• Closing costs: $14,000–$35,000 (2–5% of price — lender fees, title, escrow, prepaid tax and insurance)
• Total cash to close: $38,500–$59,500

That’s before moving costs, furniture, and the first month’s reserves your lender wants to see. Budget for all of it, not just the down payment.

The mortgage insurance problem — and the fix

Here’s the part most FHA explanations skip. On a conventional loan, PMI drops off when you hit 20% equity. On an FHA loan at 3.5% down, the annual MIP stays for the life of the loan. It doesn’t drop off at 80%. It doesn’t drop off at 78%. The only way to get rid of it is to refinance into a conventional loan once you have 20% equity.

There is one exception: if you put 10% or more down on an FHA loan, the MIP drops off after 11 years. But almost nobody puts 10% down on FHA — at that point, conventional is usually the better loan.

So the honest way to think about FHA: it’s a starter loan. You use it to get in the door, you build equity, and when you have 20% equity you refinance into conventional and the $315 a month disappears. Budget for that refinance from the start — it’s part of the plan, not a surprise.

Can down payment assistance cover the 3.5%?

Yes — and this is where FHA gets powerful for first-time buyers. The 3.5% down payment can come from down payment assistance programs:

• CalHFA MyHome covers up to 3.5% as a deferred-payment junior loan.
• CalHFA ZIP adds another 3% for closing costs.
• GSFA Platinum covers up to 5% as a grant (forgiven after 3 years) or as a deferred loan.
• Empowered 3.5% covers the full 3.5% and is forgiven after just 6 months.
• Dream For All is closed. The 2026 window ran February 24–March 16, 2026, and no new applications are being accepted. Don’t plan around it.

So yes — it’s possible to buy with FHA and have the entire down payment covered by assistance. What you still need is your own cash for closing costs, reserves, and the earnest money deposit. See Down Payment Assistance in California: Every Program Worth Knowing in 2026 for the full breakdown.

Who FHA is for — and who it isn’t

FHA is for you if: your credit is 580–679, your cash is tight and you need the lowest down payment, or you need down payment assistance to cover the 3.5%.

FHA is probably not for you if: your credit is 680+ and you have 10–20% saved (conventional is cheaper), you’re a veteran (VA beats FHA on every number), or you’re buying a condo in a building that isn’t FHA-approved.

Dat’s take

FHA is the first-time buyer loan for a reason — imperfect credit still buys houses. Just know the insurance stays until you refinance, and plan for it.

What to do with this

1. Check your county’s FHA limit and your credit score against the table above.
2. Run your payment at your price in the Mortgage Payment Calculator.
3. Check whether down payment assistance can cover your 3.5% — and confirm the program is actually funded before you count on it.
4. Then start your pre-approval and I’ll run your numbers on FHA and conventional side by side, so you can see exactly what the low down payment costs you.

I explain FHA start to finish on the podcast in Episode 6: listen at podcast.fthbpros.com.

Rates and limits verified November 8, 2026: FHA rate 6.94% (national average, November 6, 2026); loan limits $541,287–$1,249,125 (HUD Mortgagee Letter 2025-23); upfront MIP 1.75% and annual MIP 0.55% (FHA published schedule). Property tax 1.25% and insurance ~0.5%/yr are the site’s standard assumptions — your county and your quote will differ. No HOA or closing costs included. This is education, not a rate quote or a loan approval. Dat Nguyen, Certified Mortgage Advisor, NMLS 1379110, Everyday Lending Group.