Private Money Hawaii
Who Qualifies for FHA Loan? Requirements Explained
Who Qualifies for FHA Loan?
Who qualifies for an FHA loan depends on five core qualification areas: residency status, credit score, down payment, income/DTI, and property + occupancy rules. FHA loans are flexible compared to conventional mortgages, but they are not universal—and understanding where they don’t work is just as important as knowing where they do. Who qualifies for an FHA loan? Borrowers must meet FHA residency eligibility, have a minimum 500 credit score, provide the required down payment, show stable income with acceptable DTI, and purchase a primary residence that meets FHA property standards. FHA loans are designed for owner-occupants with moderate credit and limited down payments. However, FHA rules around property condition, timelines, and occupancy can disqualify otherwise qualified buyers—especially in Hawaii’s competitive market. In those cases, short-term private or hard money financing is sometimes used as a bridge until FHA becomes viable.Key Takeaways
- FHA minimum credit score: 500
- 580+ scores unlock 3.5% down
- FHA is a primary residence only
- Property condition matters as much as borrower credit
- Hawaii FHA loan limits are a frequent constraint
- Private or hard money may serve as a short-term bridge when FHA isn’t immediately viable
1. Residency Eligibility
As of Mortgagee Letter 2025-09, FHA eligibility rules were updated:
- U.S. citizens may qualify
- Lawful permanent residents (green card holders) may qualify
- Non-permanent residents are no longer eligible for FHA-insured loans (effective for FHA case numbers assigned on or after May 25, 2025)
Borrowers must be able to document lawful residency status and meet the same underwriting standards as U.S. citizens.
2. Credit Score Requirements
FHA uses a Minimum Decision Credit Score (MDCS):
- Below 500 → Not eligible
- 500–579 → Eligible with minimum 10% down
- 580+ → Eligible with ma inimum 3.5% down
Important note:
Many lenders apply overlays, meaning they may require higher scores than FHA’s published minimums.
3. Income and Debt-to-Income (DTI) Guidelines
FHA does not set a single hard DTI cap, but lenders evaluate:
- Stable, verifiable income
- Monthly debts vs. gross income
- Full housing payment (principal, interest, taxes, insurance, and FHA mortgage insurance)
While ~43% DTI is often referenced, higher ratios may be approved with strong compensating factors—or denied if risk layering exists.
4. Occupancy Rules: FHA Is for Primary Residences
FHA loans are not investment loans.
You must:
- Intend to occupy the property as your primary residence
- Move in within the required timeframe
- Continue occupying the home according to FHA rules
Allowed scenarios include:
- Single-family primary residences
- 2–4 unit properties if you live in one unit (house hacking)
- FHA-approved condos (project approval required)
5. Property Condition Requirements
Even if you qualify, the property must also qualify.
FHA appraisals require the home to be:
- Safe
- Sound
- Sanitary
- Habitable at closing
Common FHA deal killers:
- Health and safety repairs
- Roof, electrical, or plumbing issues
- Deferred maintenance
- Appraisal “subject-to” conditions that sellers refuse to fix
6. Mortgage Insurance Costs
FHA loans include mortgage insurance:
- Upfront Mortgage Insurance Premium (UFMIP): 1.75% of the base loan amount
- Ongoing monthly mortgage insurance (varies by LTV and term)
These costs directly affect the payment used in DTI qualification.
7. FHA Loan Limits (Critical in Hawaii)
FHA loans are capped by county loan limits.
In Hawaii, these limits often become the first disqualifier, especially for single-family homes on Oʻahu, Maui, Kauaʻi, and Hawaiʻi Island.
Borrowers must:
- Qualify personally and
- Stay within HUD’s county-specific FHA limits
When FHA Doesn’t Work: Where Private & Hard Money Come In
While FHA loans work well for many buyers, they are not designed for every situation—especially in Hawaii’s fast-moving, inventory-constrained market.
Common FHA Roadblocks
- Property does not meet FHA condition standards
- Seller refuses required repairs
- Timeline is too slow to compete
- Complex income documentation
- Temporary credit or DTI issues
- Property intended for renovation before occupancy
How Hard Money Is Used (Strategically)
In these situations, some buyers use short-term hard money financing as a temporary bridge, not a permanent solution.
Typical use cases:
- Buying a property as-is
- Closing quickly to secure the deal
- Renovating to meet FHA standards
- Refinancing into an FHA after occupancy and repairs
Private money doesn’t replace FHA—it fills the gap when FHA isn’t usable yet.
This approach is common among informed buyers who understand that financing strategy matters as much as qualification.
FAQs
Can I qualify for FHA with bad credit?
If your MDCS is below 500, FHA is not an option. Scores between 500–579 require higher down payment and lender approval.Can I use FHA for an investment property?
No. FHA loans require owner occupancy.What if the house doesn’t pass FHA appraisal?
The loan may be delayed or denied. Some buyers use short-term financing to purchase and renovate, then refinance into FHA.Is FHA always the cheapest option?
Not always. Mortgage insurance, loan limits, and property rules can make other strategies more efficient depending on the situation.Not Sure If FHA Actually Works for This Home?
If you’re trying to figure out who qualifies for an FHA loan, and whether FHA works for your credit, income, and the specific Hawaii property you’re targeting, a quick review can save you from choosing the wrong financing path.
You can request a free, no-obligation financing review that looks at:
- FHA eligibility and down payment requirements
- Real DTI math using Hawaii taxes and insurance
- FHA loan limits by county
- Whether a short-term private loan makes sense before the FHA
There’s no pressure and no hard credit pull just to get clarity.
Request your free personalized financing review and make the smart move before you commit.
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Private Money Hawaii
Address: 411 Hobron Ln #3912, Honolulu, HI 96815
Call: +1(808) 753-1204
Email: funding@privatemoneyhawaii.com
Looking for a reliable private money lender in Hawaii for your next real estate investment loan?
PRIVATE MONEY HAWAII
Private Money Hawaii
411 Hobron Ln #3912, Honolulu, HI 96815
Phone: (808) 753-1204
Email: funding@privatemoneyhawaii.com
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