FHA Loan First Time Home Buyer Guide: Requirements and the Appraisal Trap

FHA Loans Are Built for First-Time Buyers

An FHA loan is a mortgage insured by the Federal Housing Administration. The FHA does not lend you the money. It insures the lender against loss, which is why lenders can accept a lower credit score and a smaller down payment than they would on a conventional loan.

That trade is the entire appeal for a first-time buyer. You get in with less cash. You pay for it with mortgage insurance.

The Requirements in Plain Terms

Down payment. 3.5% of the purchase price if your credit score is 580 or higher. If your score falls between 500 and 579, the requirement jumps to 10% down. On a $350,000 home that is the difference between $12,250 and $35,000.

Credit score. The FHA floor is 500. Most lenders set their own overlay well above that, often 620 or higher, so shop more than one lender if your score is in the 500s.

Debt-to-income ratio. Generally up to 43% of gross monthly income. Automated underwriting approves higher ratios when you have compensating factors like cash reserves or a long employment history.

Occupancy. The home has to be your primary residence. FHA is not for an investment property or a second home.

Mortgage insurance. This is what the low down payment costs you. There is an upfront premium of 1.75% of the loan amount, usually rolled into the loan, plus an annual premium collected monthly. If you put down less than 10%, that annual premium stays for the life of the loan and only a refinance removes it. Put down 10% or more and it drops off after 11 years.

Loan limits. FHA caps how much you can borrow. The cap varies by county and changes every year, so confirm the current limit for Pinellas or Hillsborough County before you settle on a price range.

The Part Nobody Warns First-Time Buyers About

Here is where FHA deals die, and it is almost never the borrower's fault.

FHA does not just underwrite you. It underwrites the house.

Every FHA loan requires an appraisal that checks the property against Minimum Property Requirements. The appraiser is looking for three things: safety, security, and soundness. If the house fails, the loan does not close until somebody fixes the problem. Usually that somebody is the seller, and sellers walk.

The common failures:

A roof at the end of its life. The appraiser wants a roof that keeps water out and has meaningful remaining useful life. An aging roof with no documented replacement is one of the most frequent reasons an FHA appraisal comes back with conditions attached.

Unpermitted work. An addition, a converted garage, or an enclosed porch that never had a permit can be excluded from the square footage. That lowers the appraised value and can break your financing outright.

Peeling paint on a pre-1978 home. Lead paint rules apply. Chipping or peeling paint has to be corrected before closing.

Structural and safety hazards. Missing handrails, exposed wiring, an inoperable furnace, and standing water under the house all trigger conditions.

You find out about all of it after you are under contract, after you have paid for the appraisal, and often after your inspection period has already closed.

In Pinellas County, This Is a Numbers Problem

We pulled the county records. As of July 2026, 201,760 properties in Pinellas County were built in 2005 or earlier and have no roof permit on record.

That does not prove those roofs are original. Permits get filed under prior owners, records get miscoded, and some work predates digital filing. What it does mean is that for a large share of the housing stock here, there is no documented roof replacement for an FHA appraiser to point to. If you are financing with FHA, that is worth knowing before you write the offer.

The same logic applies to additions. Pinellas and Hillsborough counties have 1.24 million permit records between them. The useful signal is not only what is on file. It is what is missing on a house that has obviously had work done.

How to Protect Your FHA Offer

Pull the permit history before you offer. If the listing advertises a renovated kitchen, a converted garage, or an addition, the permit record either backs that up or it does not. A few minutes of research costs less than a dead contract.

Ask about roof age in writing. Florida sellers know this question is coming, for FHA and for insurance both. If there is no permit and no receipt, treat the roof as a negotiation item from the start.

Get insurance quotes early. Florida insurance is its own hurdle and an older roof can make a policy expensive or hard to place. Your lender will require coverage before closing.

Do not skip the inspection. An FHA appraisal is not a home inspection. It checks minimum standards, not condition. They are different jobs and you want both.

Is FHA the Right Loan for You

FHA makes sense when your credit score or your savings are the binding constraint. It is the most forgiving common loan program on both counts.

It makes less sense when you have strong credit and 5% or more to put down. A conventional loan at 5% down with private mortgage insurance can cost less over the life of the loan, because conventional PMI comes off once you reach 20% equity. FHA mortgage insurance does not, unless you refinance.

Run both. Ask your lender for a side by side on total cost over the number of years you actually expect to stay in the house, not just the monthly payment.

Check the House Before the Appraiser Does

A HouseFax report is $12.99 and pulls the county records for any address in Pinellas or Hillsborough County: full permit history, the recorded sales chain, lien and title status, evacuation and flood zone, tax history, and the gap between assessed value and asking price.

For an FHA buyer the permit section is the one that matters most. It shows what the county has on file and what it does not, before you commit to a property that may not survive the appraisal.

Check the address first. Then write the offer.