Illinois FHA Mortgage Broker
FHA Loans in Illinois
Buy a home with 3.5% down and a 580 credit score, or 500 with 10% down. We shop 120+ lenders and offer manual underwriting when the banks say no.
- 3.5% down
- Pre-approved in 24 hours
- Close in 21 days
or call (847) 899-6882
30-second survey. No credit check. Your info is never sold.
5.0 
Key takeaways
- FHA loans in Illinois require 3.5% down with a credit score of 580 or higher, or 10% down with a score between 500 and 579.
- The 2026 FHA loan limit for a single-family home is $541,287 in every Illinois county, rising to $1,041,125 for a four-unit property.
- With an automated approval, FHA allows debt-to-income ratios up to 46.9% for housing and 56.9% for total debt. Manual underwriting is available when automated systems decline a file.
- Illinois property taxes run roughly double the national average, which adds several hundred dollars a month to FHA payments that national calculators routinely miss.
- MacLagan Home Loans is an Illinois mortgage broker (NMLS #1912744) that shops FHA loans across 120+ lenders, with pre-approvals in 24 business hours.
What is an FHA loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development (HUD). It lets you buy a primary residence with as little as 3.5% down and qualify with lower credit scores and higher debt-to-income ratios than a conventional loan allows.
The FHA doesn’t lend money itself. Private lenders make the loan, and the FHA insures it, which protects the lender if a borrower defaults. That insurance is why lenders can approve buyers they would turn down for conventional financing.
Here’s the part most buyers never hear: FHA guidelines are the same nationwide, but every lender is allowed to add its own stricter rules on top, called overlays. A bank might require a 620 credit score even though FHA allows 500. That’s why one lender says no and another says yes on the exact same file. As a mortgage broker, we shop your loan across 120+ lenders to find one that follows FHA guidelines as written.
An FHA loan is often the right fit if you
- Are buying your first home and have limited savings for a down payment
- Have a credit score under 620, or are rebuilding after past credit issues
- Carry student loans, a car payment, or other debt that pushes your debt-to-income ratio up
- Want to buy a 2- to 4-unit building in Chicago or the suburbs, live in one unit, and rent the others
FHA loan requirements in Illinois for 2026
FHA requirements are set federally by HUD and apply the same way in Illinois as in every other state. The difference between getting approved and getting denied usually comes down to which lender reviews your file and whether they add overlays. Here’s what FHA actually requires, and how we apply it.
| Requirement | FHA guideline | How we apply it |
|---|---|---|
| Credit score | 580 or higher for 3.5% down. 500 to 579 with 10% down. | We lend down to a 500 score. Many banks and retail lenders won’t go below 620. See FHA loans with a 500 to 579 score. |
| Down payment | 3.5% of the purchase price with a 580+ score. 10% with a 500 to 579 score. | Your entire down payment can be a documented gift from a family member. Sellers can contribute up to 6% toward closing costs. |
| Debt-to-income ratio | Up to 46.9% for housing and 56.9% for total debt with an automated approval. | When the automated system declines a file, we can manually underwrite it. Manual approvals allow 31% / 43%, rising to 40% / 50% with strong compensating factors like cash reserves. |
| Employment and income | Two years of employment history and income that’s likely to continue for at least three years. | Job changes and gaps can be explained. Self-employed borrowers typically need two years of tax returns. |
| Occupancy | Must be your primary residence. Move in within 60 days of closing and live there at least one year. | FHA can’t be used for investment properties or second homes. Investors should look at our DSCR loans. |
| Property type | Single-family homes, townhomes, FHA-approved condos, and 2- to 4-unit properties. | 3- and 4-unit buildings must pass the FHA self-sufficiency test, meaning projected rent has to cover the full mortgage payment. |
| Appraisal | An FHA appraisal confirms the home’s value and that it meets HUD’s minimum safety and structural standards. | Common issues include peeling paint on pre-1978 homes, missing handrails, and roofs near the end of their life. We flag risks before you make an offer. |
| Mortgage insurance | 1.75% upfront premium, usually financed into the loan, plus an annual premium of about 0.50% to 0.55% on most 30-year loans. | With less than 10% down, the annual premium lasts for the life of the loan. With 10% or more down, it drops off after 11 years. |
| Loan limit | $541,287 for a single-family home in every Illinois county for 2026. | Limits rise for multi-unit properties, up to $1,041,125 for a four-unit building. |
| Past credit events | Chapter 7 bankruptcy: 2 years from discharge. Chapter 13: 12 months of on-time plan payments with court approval. Foreclosure: 3 years. | You also can’t be delinquent on federal debt, such as unpaid federal taxes or defaulted federal student loans. |
Not sure where you land?
See If I QualifyFHA loans with a 500 to 579 credit score
Been told your credit score is too low for an FHA loan? It may not be. FHA guidelines allow credit scores as low as 500 with 10% down, and we lend all the way down to that floor.
The reason so many buyers hear “no” is that banks and retail mortgage companies often set their own minimum at 580 or 620, well above what FHA requires. Those extra rules are called overlays, and they’re a lender’s choice, not an FHA rule. As a broker, we shop your file across 120+ lenders to find one that follows the FHA guideline as written.
| Credit score | What FHA allows | Many banks and retail lenders | MacLagan Home Loans |
|---|---|---|---|
| 500 to 579 | Eligible with 10% down | Often declined | Eligible with 10% down |
| 580 to 619 | Eligible with 3.5% down | Often declined under a 620 overlay | Eligible with 3.5% down |
| 620 and above | Eligible with 3.5% down | Generally eligible | Eligible, shopped across 120+ lenders for the best rate |
What you’ll need with a score between 500 and 579
- 10% down payment. It can come from your savings or a documented gift from a family member.
- A likely manual underwrite. Automated approval systems often won’t approve scores in this range, so a human underwriter reviews your file against HUD guidelines instead.
- Tighter debt-to-income limits. Manually underwritten loans in this score range are typically capped around 31% for housing and 43% for total debt.
- Recent on-time payments. Underwriters focus on the last 12 months, especially rent. Twelve months of on-time rent carries real weight.
- Cash reserves help. Savings left over after closing count as a compensating factor and strengthen a manual approval.
- Explanations for past issues. A short letter explaining a collection, late payment, or medical debt is standard and often makes the difference.
Why getting to 580 can save you thousands
Crossing 580 drops your minimum down payment from 10% to 3.5%. On a typical Illinois purchase, that’s a five-figure difference in the cash you need to bring to closing.
| Home price | 10% down (500 to 579) | 3.5% down (580+) | Cash you keep |
|---|---|---|---|
| $200,000 | $20,000 | $7,000 | $13,000 |
| $250,000 | $25,000 | $8,750 | $16,250 |
| $300,000 | $30,000 | $10,500 | $19,500 |
If you’re a few points short, we’ll review your credit report with you and show you exactly what’s holding the score down. Sometimes paying down one credit card balance is enough to cross the line. Then you can decide whether to buy now with 10% down or wait a few weeks and buy with 3.5%.
Want to see how this plays out on a real file? Read how we closed an FHA loan three lenders had already denied.
Denied somewhere else? Find out what we can do with your file.
30-second survey. No credit check. Your info is never sold.
All loans are subject to credit approval, underwriting guidelines, and property eligibility. A 500 credit score does not guarantee approval. Manual underwriting requirements vary by lender. Illustrative figures only; not a commitment to lend.
2026 FHA loan limits in Illinois
The 2026 FHA loan limit in Illinois is $541,287 for a single-family home. It’s the same in all 102 Illinois counties, including Cook, DuPage, and Lake, because no Illinois county is designated high-cost by HUD.
That’s up from $524,225 in 2025. Limits rise with the number of units, which makes FHA one of the most affordable ways to buy a two-flat or three-flat and live in one unit while renting out the others.
| Property type | 2026 FHA loan limit | Max purchase price with 3.5% down |
|---|---|---|
| Single-family (1 unit) | $541,287 | About $560,900 |
| Two-flat (2 units) | $693,050 | About $718,200 |
| Three-flat (3 units) | $837,700 | About $868,100 |
| Four-unit (4 units) | $1,041,125 | About $1,078,900 |
FHA loan limits in Chicago and the suburbs
Chicagoland counties use the same 2026 limits as the rest of the state. Here’s how that applies to the communities we serve most often.
| County | 1-unit limit | 4-unit limit | Communities we serve |
|---|---|---|---|
| Cook County | $541,287 | $1,041,125 | Chicago, Evanston, Skokie, Schaumburg, Arlington Heights, Palatine, Des Plaines, Park Ridge, Niles, Glenview, Northbrook |
| Lake County | $541,287 | $1,041,125 | Highland Park, Buffalo Grove, Deerfield |
| DuPage County | $541,287 | $1,041,125 | Naperville |
| Will County | $541,287 | $1,041,125 | Joliet, Bolingbrook, Plainfield |
| Kane County | $541,287 | $1,041,125 | Aurora, Elgin, St. Charles |
| McHenry County | $541,287 | $1,041,125 | Crystal Lake, McHenry, Algonquin |
Buying a two-flat or three-flat with FHA
Chicago’s classic two-flats and three-flats are one of the best uses of an FHA loan. You can buy a 2- to 4-unit building with the same 3.5% down payment as a single-family home, as long as you live in one of the units. Rent from the other units can help you qualify.
For 3- and 4-unit buildings, FHA adds a self-sufficiency test: 75% of the projected rent from all units has to cover the full monthly mortgage payment, including taxes and insurance. Two-unit buildings don’t have to meet this test.
Buying above the FHA limit? You have three options. Put more down so the loan amount fits under $541,287. Use a conventional loan, which allows up to $832,750 in Illinois for 2026 with as little as 3% down. Or, above that, look at a jumbo loan.
We’ll run all three side by side so you can compare the payment and cash to close.
Want to know your real price range?
See How Much I Qualify ForHow to cover your FHA down payment in Illinois
Worried you don’t have enough saved? With FHA, the money for your down payment doesn’t all have to come from your own bank account. Family gifts, retirement funds, and seller credits can cover most or all of what you need to close.
The minimum down payment is 3.5% of the purchase price with a credit score of 580 or higher, or 10% with a score between 500 and 579. Here’s where that money can come from.
Where your down payment can come from
- Your savings and checking accounts. Lenders will review two months of statements. Large deposits that aren’t from your paycheck need a paper trail.
- A gift from family. FHA allows your entire down payment to be a gift, with no minimum contribution from your own funds.
- A gift of equity. If you’re buying from a family member, they can gift you equity in the home instead of cash, and that equity can count as your down payment.
- Your 401(k) or retirement account. A 401(k) loan or withdrawal can be used. A loan from your own 401(k) usually doesn’t count against your debt-to-income ratio.
- Selling something of value. Proceeds from selling a car, equipment, or other assets count, as long as you can document ownership and the sale.
FHA gift fund rules
Gift funds are the most common way first-time buyers cover an FHA down payment. The rules are straightforward, but the paperwork has to be right.
Who can give you money
- Family members, including parents, grandparents, siblings, and in-laws
- Your employer or labor union
- A close friend with a clearly documented relationship
- A charitable organization or government homebuyer program
The seller, real estate agent, builder, or anyone else who profits from the sale can’t give you down payment money.
What you’ll need to document
- A signed gift letter stating the amount and that no repayment is expected
- Proof the donor had the funds, usually a bank statement
- Proof of the transfer, like a wire confirmation or deposit record
- The donor’s name, address, phone, and relationship to you
We’ll send you a gift letter template and walk your donor through it.
Seller concessions: up to 6% toward closing costs
Your down payment is only part of the cash you need. Closing costs typically add another 2% to 5% of the purchase price. FHA lets the seller pay up to 6% of the sale price toward your closing costs, prepaid taxes and insurance, and discount points. Seller credits can’t be used for the 3.5% down payment itself, but they can cut your total cash to close nearly in half.
| Down payment (3.5%) | $10,500 |
|---|---|
| Estimated closing costs and prepaids (3%) | $9,000 |
| Upfront mortgage insurance | $0 (financed) |
| Cash to close with no seller credit | $19,500 |
| Seller credit (3%) | −$9,000 |
| Cash to close with seller credit | $10,500 |
Illustrative example only. Actual closing costs depend on the property, county, title fees, and escrow requirements. Seller concessions are negotiated as part of your purchase contract.
Find out exactly how much cash you’ll need.
See If I QualifyFHA mortgage insurance (MIP) explained
Every FHA loan includes mortgage insurance, called MIP. It’s the trade-off for the low down payment and flexible credit rules, and it comes in two parts.
Upfront premium
1.75%
Charged once, based on your loan amount. Almost every buyer rolls it into the loan, so it doesn’t add to your cash at closing. On a $300,000 home with 3.5% down, that’s about $5,066 added to the loan balance.
Annual premium
0.50% to 0.55%
Charged yearly on most 30-year loans and split into your monthly payment. On that same $300,000 home, it works out to about $135 a month.
Annual MIP rates and how long you’ll pay
| Loan term and down payment | Annual MIP | How long it lasts |
|---|---|---|
| 30-year, less than 5% down | 0.55% | Life of the loan |
| 30-year, 5% to 9.99% down | 0.50% | Life of the loan |
| 30-year, 10% or more down | 0.50% | 11 years |
| 15-year, less than 10% down | 0.40% | Life of the loan |
| 15-year, 10% or more down | 0.15% | 11 years |
How to get rid of FHA mortgage insurance
If you put less than 10% down, MIP stays for the life of the loan. The way out is to refinance into a conventional loan once you have at least 20% equity, which removes mortgage insurance entirely. Between your payments and home value appreciation, many Illinois buyers reach that point within a few years. We track that for our clients and reach out when refinancing makes sense.
FHA payment examples for Illinois buyers
What will an FHA loan actually cost you each month in Illinois? More than most online calculators show you.
Illinois has some of the highest property taxes in the country, roughly double the national average. Most national mortgage calculators plug in a 1.1% tax rate, which understates a typical Illinois payment by $200 to $400 a month. The examples below use a 2.1% Illinois estimate so you see a realistic number.
| Home price | $250,000 | $300,000 | $400,000 | $500,000 |
|---|---|---|---|---|
| Down payment (3.5%) | $8,750 | $10,500 | $14,000 | $17,500 |
| Loan amount with upfront MIP | $245,472 | $294,566 | $392,755 | $490,944 |
| Principal and interest | $1,552 | $1,862 | $2,482 | $3,103 |
| Monthly MIP | $113 | $135 | $180 | $225 |
| Property taxes (Illinois, 2.1%) | $438 | $525 | $700 | $875 |
| Homeowners insurance | $83 | $100 | $133 | $167 |
| Total monthly payment | $2,185 | $2,622 | $3,496 | $4,370 |
| Missed by a 1.1% national tax estimate | $208/mo | $250/mo | $333/mo | $417/mo |
| Minimum income (46.9% housing ratio) | $55,900 | $67,100 | $89,400 | $111,800 |
| Income for a manual approval (31% housing ratio) | $84,600 | $101,500 | $135,300 | $169,200 |
How much do you need to make to buy a $300,000 house with an FHA loan in Illinois?
To buy a $300,000 home in Illinois with an FHA loan, you’ll typically need a household income of about $67,000 a year or more, assuming a 6.5% rate and little other monthly debt. Your full payment would be about $2,622 a month, including roughly $525 in property taxes.
That $67,000 figure assumes an automated approval at FHA’s maximum 46.9% housing ratio. If your file needs a manual underwrite, or you carry car payments, student loans, or credit card balances, plan on needing more.
Run the numbers on your own price range
Plug in your price, down payment, and your town’s actual tax rate to see your real monthly payment.
Today’s FHA rates in Illinois
Wondering if an FHA loan means paying a higher rate? Often it’s the opposite. Because the FHA insures the loan, lenders take on less risk, and FHA rates frequently come in below conventional rates for the same borrower, especially if your credit score is under 740.
The catch is mortgage insurance. A lower rate plus MIP can still cost more per month than a conventional loan with a slightly higher rate, which is why we compare the full payment, not just the rate.
Get your personalized FHA rate
See today’s FHA pricing based on your credit, down payment, and price range, shopped across 120+ lenders.
No credit check. Your info is never sold.
What affects your FHA rate
| Factor | How it affects your rate |
|---|---|
| Credit score | Higher scores get better pricing, but FHA rates move far less with credit score than conventional rates do. Lenders typically price FHA in broad tiers, with the biggest jumps below 620 and below 580. |
| Discount points | You can pay points at closing to buy your rate down. One point equals 1% of the loan amount. Seller concessions can be used to pay for points. |
| Loan amount | Very small loans can carry slightly higher rates, since lender costs are similar regardless of loan size. |
| Property type | Condos and 2- to 4-unit buildings can price a little differently than single-family homes. |
| Rate lock length | Longer locks, such as 45 or 60 days, usually cost a bit more than a 30-day lock. |
| Which lender you use | The same borrower can get noticeably different FHA quotes from different lenders on the same day. This is the one factor you control completely, and it’s why we shop every file across 120+ lenders. |
What FHA rate can you get with a 700 credit score?
A 700 credit score generally qualifies for pricing very close to the best FHA rates available. FHA rates vary much less by credit score than conventional rates do, so the difference between a 700 and a 760 score is usually small on an FHA loan.
That’s also why FHA often beats conventional financing for buyers in the 620 to 700 range, where conventional pricing and private mortgage insurance get noticeably more expensive. For your exact rate today, get a personalized quote.
Rate vs. APR
Your interest rate sets your monthly principal and interest payment. Your APR adds in lender fees, points, and mortgage insurance, so it shows the true yearly cost of the loan. On FHA loans, APR usually runs noticeably higher than the rate because of MIP. When comparing offers, compare APRs on the same loan amount and the same day.
Rates change daily and are not guaranteed until locked. Your rate depends on your credit, loan amount, down payment, property type, and market conditions. All loans subject to credit approval and underwriting guidelines.
FHA vs. conventional: which is better?
Should you go FHA or conventional? For most buyers, it comes down to two numbers: your credit score and your down payment. FHA is usually the better fit if your score is below about 680 or your debt-to-income ratio is high. Conventional usually wins if your score is 720 or higher and you can put at least 5% down.
Between those ranges, the answer depends on your full payment, including mortgage insurance, which is why we price both options for every buyer who could qualify for either.
| Feature | FHA loan | Conventional loan |
|---|---|---|
| Minimum credit score | 500 with 10% down, 580 with 3.5% down | 620 |
| Minimum down payment | 3.5% | 3% for first-time buyers and some programs, otherwise 5% |
| Maximum debt-to-income | Up to 46.9% housing and 56.9% total with automated approval | Up to 50% total |
| Mortgage insurance cost | 1.75% upfront plus 0.50% to 0.55% a year. Same price regardless of credit score. | No upfront charge. Monthly PMI priced on credit score and down payment, so it rises sharply at lower scores. |
| Removing mortgage insurance | Lasts for the life of the loan with less than 10% down. Removed after 11 years with 10% or more down. | Can be canceled at 20% equity and drops off automatically at 22%. |
| 2026 Illinois loan limit | $541,287 (1 unit) | $832,750 (1 unit) |
| Seller concessions | Up to 6% | 3% with less than 10% down, up to 6% or 9% with more down |
| Waiting period after bankruptcy | 2 years after Chapter 7 discharge | 4 years after Chapter 7 discharge |
| Waiting period after foreclosure | 3 years | 7 years |
| Property types | Primary residence only | Primary residence, second home, or investment property |
| Appraisal | Stricter. The home must meet HUD’s minimum safety and condition standards. | Standard appraisal focused mainly on value |
| Assumable when you sell | Yes. A qualified buyer can take over your loan and rate. | Generally no |
Which one fits you?
FHA is usually the better choice if you
- Have a credit score below about 680
- Have a debt-to-income ratio above 45%
- Had a bankruptcy or foreclosure in the last few years
- Want to buy a 2- to 4-unit building with 3.5% down
- Need the seller to cover more of your closing costs
Conventional is usually the better choice if you
- Have a credit score of 720 or higher
- Can put 5% or more down
- Want mortgage insurance that goes away on its own
- Are buying above $541,287
- Are buying a second home or investment property. See our conventional loans page.
The best of both: start with FHA, refinance later
Many of our clients use FHA to get into a home now, then refinance into a conventional loan once their credit improves and they reach 20% equity. That removes FHA mortgage insurance for good. It’s often a faster path to homeownership than waiting years to qualify for conventional financing on day one.
Not sure which is cheaper for you?
Compare FHA and ConventionalThe FHA loan process: 6 steps to closing
How long does an FHA loan take? With us, most buyers go from first conversation to pre-approval in a day or two, and from accepted offer to closing in 21 days or less. Here’s exactly what happens at each step.
-
Take the 30-second survey
30 secondsAnswer a few questions about your goals, price range, and credit. There’s no credit check and your information is never sold.
-
Talk through your options
Same or next business dayWe’ll call to talk through your situation and confirm whether FHA, conventional, or another loan fits you best. If your credit or debt-to-income needs work, you’ll hear that now, along with a plan to fix it.
-
Upload your documents
1 to 2 days, at your paceSend your pay stubs, W-2s, bank statements, and ID through our secure portal. The checklist on this page shows everything you’ll need.
-
Get pre-approved
Within 24 business hoursOnce your documents are in, we shop your file across 120+ lenders and issue a pre-approval letter with your price range. Sellers and agents take a fully documented pre-approval more seriously than a quick online estimate.
-
Find your home and make an offer
Your timelineShop with confidence knowing your budget. We’ll update your pre-approval letter for each offer so it matches the exact price, and we’re available to talk with your agent or the listing agent to strengthen your offer.
-
Close on your home
21 days or less from accepted offerOnce your offer is accepted, we lock your rate and move your file to closing:
- We order the FHA appraisal right away
- Underwriting reviews your file and we clear any conditions
- You receive your Closing Disclosure at least 3 business days before closing
- You sign, get your keys, and move in
Ready for step one?
Start My 30-Second SurveyTimelines depend on appraisal scheduling, condo approval status, title, and how quickly documents are provided. Pre-approval is not a commitment to lend. All loans subject to credit approval and underwriting guidelines.
Why Illinois buyers choose MacLagan Home Loans for FHA loans
Why work with a mortgage broker instead of a bank? A bank can only offer you its own FHA loan, with its own overlays and its own rate. We compare your file across more than 120 lenders to find the one that approves you at the best price.
-
120+ lenders, one application
FHA rules are the same everywhere, but lender overlays and pricing aren’t. We shop your loan across our wholesale lender network so you’re not stuck with one bank’s answer. Here’s more on how a mortgage broker compares to national lenders.
-
FHA approvals down to a 500 credit score
We lend to the FHA guideline, not to a bank’s overlay. That includes scores from 500 with 10% down and manual underwriting when the automated system says no.
-
We read the guidelines, not just the automated result
When a file gets declined, we look for what the guidelines actually allow. That’s how we closed a loan other lenders had already denied.
-
Pre-approved in 24 hours, closed in 21 days
Fast, fully documented pre-approvals help your offer compete, and a 21-day target close from accepted offer keeps your purchase on schedule.
-
An investor’s eye on the property
Alex has bought, renovated, and rented more than 100 properties. That experience helps spot FHA appraisal problems before you make an offer, and it’s especially useful if you’re buying a two-flat or three-flat to live in and rent out.
-
Rated 5.0 on Google and A+ with the BBB
More than 56 Google reviews at a 5.0 rating, and BBB accredited with an A+ rating. Read our Google reviews.
FHA loans across Chicago and the suburbs
We help FHA buyers anywhere in Illinois, from our office in Deerfield. Most of our clients are buying in Chicago and the north, northwest, and west suburbs. Choose your community to see local market details and how we can help.
Chicago
FHA works especially well for Chicago two-flats and three-flats, where you can live in one unit and rent the others with 3.5% down. Buying a condo? The building needs FHA approval, or the individual unit needs a single-unit approval, so we check that before you make an offer.
North Shore and near north suburbs
Home prices here often run above what the $541,287 FHA limit covers. FHA buyers in these towns commonly focus on condos, townhomes, and starter homes, or put more down to fit under the limit.
Northwest suburbs
A wide mix of single-family homes, townhomes, and condos at price points that often fit comfortably within FHA limits, which makes these towns popular with first-time FHA buyers.
West suburbs
Property tax rates vary widely across DuPage and Will counties, which can change your FHA payment by hundreds of dollars a month between neighboring towns. We use the actual tax bill for the home you’re buying, not an estimate.
Don’t see your town? We’re licensed statewide and help FHA buyers throughout Illinois, plus Wisconsin, Minnesota, and Arizona. Contact us or call (847) 899-6882.
FHA Loan FAQs
Straight answers to the questions Illinois buyers ask most about FHA loans.
What credit score do you need for an FHA loan in Illinois?
You need a 580 credit score to qualify for the minimum 3.5% down payment on an FHA loan in Illinois. Scores between 500 and 579 can qualify with 10% down. Many banks set their own minimum at 620, but MacLagan Home Loans lends to the FHA guideline, down to a 500 score, and offers manual underwriting when automated approval isn’t available.
What disqualifies you from an FHA loan?
Common FHA disqualifiers include a credit score below 500, delinquent federal debt such as unpaid federal taxes or defaulted federal student loans, a debt-to-income ratio above FHA limits without compensating factors, a bankruptcy or foreclosure still inside its waiting period, a home that fails FHA’s minimum property standards, and buying a property you won’t live in. A denial from one lender doesn’t always mean you’re disqualified; it may be that lender’s overlay.
How much do you need to make to buy a $300,000 house with an FHA loan in Illinois?
You typically need a household income of about $67,000 a year or more to buy a $300,000 home in Illinois with an FHA loan, assuming a 6.5% rate and little other debt. The full monthly payment would be about $2,622, including roughly $525 in Illinois property taxes. See the FHA payment examples above for other price points.
What is the minimum down payment on a $250,000 home with an FHA loan?
The minimum down payment on a $250,000 home with an FHA loan is $8,750, which is 3.5% of the purchase price, if your credit score is 580 or higher. With a score between 500 and 579, the minimum is 10%, or $25,000. The entire down payment can come from a documented gift from a family member.
What is the downside of an FHA loan?
The biggest downside of an FHA loan is mortgage insurance. You pay a 1.75% upfront premium plus an annual premium, and with less than 10% down, the annual premium lasts for the life of the loan unless you refinance. FHA loans also have a $541,287 single-family loan limit in Illinois for 2026, require the home to be your primary residence, and use a stricter appraisal that can require repairs before closing.
Can you put 20% down on an FHA loan?
Yes, you can put 20% down on an FHA loan, but it usually isn’t the best choice. FHA still charges the 1.75% upfront premium and an annual premium for 11 years, while a conventional loan with 20% down has no mortgage insurance at all. If you have 20% down and a credit score of 620 or higher, compare a conventional loan first.
What is the FHA 90-day rule?
The FHA 90-day rule is an anti-flipping rule. A home can’t be purchased with an FHA loan if the seller has owned it for 90 days or less. If the seller has owned it for 91 to 180 days and the new price is 100% or more above what they paid, FHA requires a second appraisal. The rule mainly affects recently flipped homes.
What are the FHA 210-day and 6-month rules?
The FHA 210-day and 6-month rules apply to an FHA streamline refinance. To streamline refinance an existing FHA loan, at least 210 days must have passed since the original closing, and you must have made at least six monthly payments on that loan. They don’t apply to buying a home.
Why don’t some sellers like FHA loans?
Some sellers worry that an FHA loan’s stricter appraisal will require repairs or delay closing. In practice, a strong FHA offer backed by a fully documented pre-approval can close on the same timeline as a conventional loan. We flag likely appraisal issues before you make an offer and can talk with the listing agent to address the seller’s concerns.
Can I use an FHA loan to buy a two-flat or three-flat in Chicago?
Yes. You can buy a 2- to 4-unit property in Chicago with an FHA loan and as little as 3.5% down, as long as you live in one of the units. Rental income from the other units can help you qualify. For 2026, the Illinois FHA limit is $693,050 for two units and $837,700 for three units, and 3- and 4-unit buildings must pass FHA’s self-sufficiency test.
Are FHA loans only for first-time homebuyers?
No. FHA loans are available to first-time and repeat buyers, as long as the home will be your primary residence. You generally can have only one FHA loan at a time, with exceptions for situations like relocating for work or needing a larger home for a growing family.
Can a family member co-sign on an FHA loan?
Yes. FHA allows a family member to join your loan as a non-occupant co-borrower, meaning they don’t have to live in the home. Their income helps you qualify, but their debts count too, including mortgages on their own properties. Read how we handled a co-signer’s mortgage payment to get a denied buyer approved.
Can you get an FHA loan after bankruptcy or foreclosure?
Yes. FHA generally requires 2 years after a Chapter 7 bankruptcy discharge, 12 months of on-time payments on a Chapter 13 plan with court approval, and 3 years after a foreclosure. In some cases, FHA allows a shorter wait when the event was caused by documented extenuating circumstances beyond your control. These waiting periods are shorter than conventional loans require.
What won’t pass an FHA appraisal?
Common FHA appraisal problems include peeling or chipping paint on homes built before 1978, missing handrails on stairs, a roof with less than two years of remaining life, broken windows, exposed wiring, missing smoke detectors, and utilities that don’t work. Most can be repaired before closing. We help you spot likely issues before you make an offer.
Does MacLagan Home Loans offer FHA 203(k) renovation loans?
No. We don’t offer FHA 203(k) renovation loans. For a home you plan to live in, we focus on standard FHA purchase loans and check FHA condition requirements before you make an offer. If you’re an investor buying a property to renovate, see our fix-and-flip loans.
Still have more questions about FHA loans?
Get approved Quick & Easy!
Loans we offer
Your Home Loan Could Be Fully Funded 21 Days From Now Without Any Hassles!
Conventional Loans
A popular mortgage option for borrower’s with strong credit and stable income. Down payments as low as 3% and with competitive and adjustable rate options.
Read moreBank Statement Loans
The best mortgage option for self-employed borrowers. If you take all of your write offs on your tax returns and can’t qualify for a conventional loan, this is the perfect mortgage option for you.
Read moreVA Loans
The best loan option for eligible military veterans and active duty service members. 100% financing and no mortgage insurance.
Read moreJumbo Loans
A great mortgage option for borrower’s looking to finance a home that exceeds conventional loan limits. Down payments as low as 10%.
Read moreDSCR Loans
Rental property loans that require no income or employment verification. The best loan for real estate investors and landlords
Read moreFix & Flip Loans
The perfect loan option for real estate investors who are looking to finance a property that needs renovation. Finance 100% of the renovation with down payments as low as 10% of the purchase price.
Read more