FHA loans are the most popular low-down-payment mortgage for a reason: you can get into a home with 3.5% down and a 580 credit score. But how much house can you actually afford with an FHA loan? The answer depends on four things most calculators skip: your DTI limit, the FHA MIP cost, the 2026 loan limits, and your total cash available.
This guide walks through the FHA-specific affordability calculation — different from a conventional mortgage because of the MIP cost and higher DTI allowances.
How FHA affordability differs from conventional
Two things change the math when you use an FHA loan:
- FHA MIP adds to your monthly payment. Annual MIP of 0.55% on the loan amount is divided into 12 monthly payments. On a $300,000 loan that's $138/month — reducing how much you can put toward principal and interest within your DTI limit.
- FHA allows higher DTI ratios. FHA approves up to 43% back-end DTI (sometimes 50% with compensating factors) vs. conventional's typical 36%. This can give you more purchasing power if you have existing debt.
The FHA affordability calculation — step by step
Step 1 — Find your gross monthly income
Take your annual salary and divide by 12. Include all documented income — salary, bonuses, rental income, self-employment (requires 2 years of tax returns).
Step 2 — Apply the FHA front-end DTI limit (31%)
Your total housing payment — principal, interest, property tax, insurance, and MIP — cannot exceed 31% of gross monthly income. At $6,000/month gross, your maximum housing payment is $1,860.
Step 3 — Subtract taxes, insurance, and MIP
These are part of your payment but don't pay down your loan:
- Property tax: roughly $200–$600/month depending on state and home price
- Homeowner's insurance: roughly $100–$200/month
- FHA annual MIP: 0.55% ÷ 12 = ~$138/month on a $300,000 loan
Subtract these from your max payment to find what's left for principal and interest (P&I).
Step 4 — Convert P&I to a loan amount
At a 7% interest rate on a 30-year term, every $100,000 of loan costs roughly $665/month in P&I. At 6.5%, it's $632/month. Divide your available P&I by the per-$100k payment to estimate your loan amount.
Step 5 — Add your down payment (minus upfront MIP)
FHA requires 3.5% down on the purchase price. The upfront MIP (1.75%) is added to your loan, not paid in cash. So your cash requirement is just the 3.5% down payment plus closing costs (2–5% of the loan).
How much house can you afford with an FHA loan by salary?
These estimates assume: 7% interest rate, 30-year term, 3.5% down, $150/month insurance, and average property tax. FHA MIP is included in the monthly payment.
| Annual salary | Max FHA payment (31%) | After taxes + MIP | Estimated home price |
|---|---|---|---|
| $40,000 | $1,033/mo | ~$600 P&I | ~$85,000 |
| $55,000 | $1,421/mo | ~$1,000 P&I | ~$145,000 |
| $70,000 | $1,808/mo | ~$1,350 P&I | ~$195,000 |
| $85,000 | $2,196/mo | ~$1,700 P&I | ~$245,000 |
| $100,000 | $2,583/mo | ~$2,050 P&I | ~$300,000 |
| $130,000 | $3,358/mo | ~$2,750 P&I | ~$400,000 |
| $160,000 | $4,133/mo | ~$3,500 P&I | ~$510,000 |
FHA loan limits for 2026 — the ceiling on your purchase
No matter how much you can afford by income, you can't borrow more than the FHA loan limit for your county.
| Area type | 2026 limit | Examples |
|---|---|---|
| Low-cost areas (floor) | $524,225 | Most of the Midwest, South, rural areas |
| High-cost areas (ceiling) | $1,209,750 | San Francisco, NYC, Los Angeles, Seattle |
| Alaska / Hawaii / Guam / USVI | $1,814,625 | Special high-cost designation |
If you're buying in an expensive market where the loan limit is lower than your purchase price, you'll need a jumbo loan — which FHA doesn't offer. In that case, a conventional loan may be your only option.
The real cost of FHA MIP on your budget
FHA MIP is the biggest FHA-specific factor that reduces purchasing power. Here's exactly what it costs at different loan sizes:
| Loan amount | Upfront MIP (1.75%) | Monthly MIP (0.55%/yr) | Total MIP — year 1 |
|---|---|---|---|
| $150,000 | $2,625 | $69/mo | $3,453 |
| $250,000 | $4,375 | $115/mo | $5,755 |
| $350,000 | $6,125 | $160/mo | $8,045 |
| $450,000 | $7,875 | $206/mo | $10,347 |
| $524,225 (limit) | $9,174 | $240/mo | $12,054 |
FHA vs conventional — which lets you afford more?
The answer depends entirely on your credit score and down payment size:
- Credit score below 660: FHA wins. Conventional PMI rates are extremely high for lower-credit borrowers — sometimes 1.5–2% annually. FHA's flat 0.55% MIP is cheaper.
- Credit score 700+ with 5–10% down: It's close. Run the numbers both ways — conventional PMI at this credit tier is competitive with FHA MIP, and conventional PMI cancels at 20% equity while FHA MIP doesn't.
- Credit score 740+ with 20% down: Conventional wins decisively. No PMI, no MIP, better rate, more house for your money.
See our full FHA vs conventional comparison with side-by-side dollar costs.
How much cash do you actually need upfront?
FHA's low down payment is the headline, but closing costs catch many buyers off guard:
- Down payment (3.5%): On a $300,000 home, that's $10,500
- Closing costs (2–5%): Typically $6,000–$15,000 on a $300,000 loan
- Emergency reserves: Most lenders want 2–3 months of payments in savings after closing
Total cash needed to buy a $300,000 home with FHA: roughly $22,000–$32,000. The good news: FHA allows the entire down payment to come from gift funds, and most down payment assistance programs are compatible with FHA loans.
A worked example — $80,000 salary, $350/month in existing debt
- Gross monthly income: $6,667
- FHA front-end limit (31%): $2,067/month max housing payment
- FHA back-end limit (43%): $2,867 total debts — minus $350 existing = $2,517 max housing
- Binding constraint: front-end at $2,067/month
- Subtract $300 tax + $130 insurance + $138 MIP = $1,499 for P&I
- At 7% / 30yr, $1,499 P&I supports a loan of approximately $225,000
- Upfront MIP (1.75% of $225k) adds $3,938 to loan → total financed: $228,938
- With 3.5% down: home price around $233,000
Use our FHA loan calculator to model your own scenario with your actual state's tax rate, current interest rates, and exact down payment amount.