How Much Is An FHA Loan Down Payment?

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FHA loans are insured by the Federal Housing Administration (FHA). They come with more flexible eligibility guidelines, including a low down payment requirement. If you’re considering this option, here’s what you need to know about the FHA loan down payment requirement and other costs.

What is the minimum FHA loan down payment?

The minimum FHA loan down payment is either 3.5 percent or 10 percent of the home’s purchase price, depending on your credit score. You cannot get an FHA loan with zero down.

Say, for example, you are buying a $400,000 house and using an FHA loan to fund the purchase. If you have a credit score of 620, you can put just 3.5 percent down, which amounts to $14,000. However, if your credit score is 560, you’ll need to put at least 10 percent down, which equals $40,000.

How to save for an FHA loan down payment

To save up for a down payment for an FHA loan, begin by setting a goal. Consider:

• What is your homebuying budget? How much house can you afford?
• When do you plan to purchase a home?
• What is your savings strategy for a down payment?
• Do you already have some savings to work with?
• Will family members or friends contribute to your down payment?

You can boost your savings by cutting some expenses or using a money-saving app, but you don’t have to save the entire 3.5 percent (or 10 percent) on your own. You’re allowed to put gifted funds toward the FHA down payment requirement. Here’s how:

FHA loan down payment gifts and rules

Down payment gifts most commonly come from friends and family members. They can also come from labor unions, employers and nonprofit organizations. However, you can’t use gifted funds from:

• The home builder
• The home’s seller
• Your real estate agent or broker
• Anyone else with a vested interest in selling the home

FHA gift funds can help people become homeowners who may otherwise be unable to purchase a home. Note that if you decide to use gift funds, your mortgage lender will likely require you to submit a gift letter.

FHA loan down payment assistance

Along with gifted funds, you can also apply down payment assistance to your FHA loan. There are many assistance programs out there, including through nonprofits, lenders and the government. For instance, some state housing finance agencies (HFAs) package assistance with first-time homebuyer loans.

Other programs, including ones run by lenders, offer grant money that you can use toward your FHA down payment. Explore online or ask lenders what kind of FHA down payment assistance you might be eligible for based on your location and income level.

FHA loan down payment requirements

While some requirements might vary by lender, there are several you must meet to qualify for an FHA loan. These include:

• The loan must be for your primary residence.
• You must have a credit score of at least 580 (500 if putting 10 percent down).
• You must make a minimum down payment of 3.5 percent (with at least a 580 credit score).
• Your back-end debt-to-income ratio must be no more than 43 percent (50 percent in some cases).
• You must pay an upfront MIP of 1.75 percent of the loan principal.

 Additional cost considerations for FHA loans

Along with the down payment, you’ll also need to budget for:

• FHA mortgage insurance premiums (MIPs): MIPs come in two forms: upfront and annual. Your lender will charge you an upfront fee when you close on your loan that you can finance into the mortgage. You’ll have to pay additional premiums each month as part of your mortgage payment to cover your annual MIP. How much and how long you pay the monthly premiums varies depending on your down payment and other factors.
• FHA loan closing costs: Typically, FHA closing costs are between 2 percent and 6 percent of the home’s purchase price.

Other low-down payment mortgages

There are other types of mortgages that have either a low or no down payment requirement. These include:

FHA down payment FAQ

• Why is the FHA loan down payment requirement more flexible than other loans?
  

  FHA loans, which are backed by the federal government, are designed to make homeownership more accessible to first-time homebuyers and other borrowers who may otherwise struggle when applying for conventional mortgages. For this reason, the loan program requires a down payment of just 3.5 percent and features more relaxed credit guidelines than traditional home loans.

• Can I get seller concessions with an FHA loan?
  

  If you take out an FHA loan, the seller is allowed to contribute up to 6 percent of the home’s sales price in concessions. For example, if you buy a home for $300,000, the seller can offer up to $18,000 in concessions. You will not receive cash directly, as the concessions are applied directly to the closing costs and prepaid expenses.

• Can I use personal loans for the FHA down payment?
  

  Generally, mortgage lenders won’t allow you to use a personal loan for an FHA down payment. You’ll need to use your own funds, gift money or down payment assistance.