FHA loans require a down payment, but it can be as low as 3.5 percent of the home's purchase price
You do need money down for an FHA loan, but the amount is smaller than what conventional loans typically demand. The Federal Housing Administration sets a minimum down payment of 3.5 percent. That means on a $200,000 home, you would put down $7,000. On a $300,000 home, $10,500. The rest of the purchase price becomes your mortgage.
This 3.5 percent floor is fixed by federal rule and does not change based on your credit score, income, or the lender you choose. Some lenders may ask for more, but none can legally require less. If you have savings beyond 3.5 percent, you can put down more—5 percent, 10 percent, 20 percent—and reduce the amount you borrow.
The down payment itself is separate from closing costs, which typically run 2 to 5 percent of the purchase price and cover appraisals, title work, inspections, and lender fees. You need to budget for both.
Key Takeaways
- FHA loans require a minimum down payment of 3.5 percent of the home price, set by federal rule and the same across all lenders.
- Closing costs are separate from your down payment and usually total 2 to 5 percent of the purchase price.
- Your down payment can come from your own savings, a gift from a family member, or a grant program, but you must document the source.
- The lower down payment means a higher loan amount and a higher monthly mortgage payment, plus mortgage insurance premiums added to your bill.
- Some down payment assistance programs exist through nonprofits and state housing agencies, though availability and terms vary by location.
Where the down payment money can come from
Your 3.5 percent down payment must come from a legitimate source, and your lender will ask you to prove it. The most straightforward source is your own bank account or savings. Lenders typically want to see bank statements from the last two months to confirm the money has been there and is truly yours.
A family member can also gift you the down payment. The gift must be a true gift—not a loan you will repay—and the family member must sign a gift letter stating that no repayment is expected. The lender will verify this letter and may contact the gift-giver to confirm. The money must still move through a bank account you control before you hand it to the seller or title company.
Some employers, nonprofits, and state housing agencies run down payment assistance programs that provide grants or forgivable loans specifically for this purpose. These are not common everywhere, and terms vary widely. Your lender can tell you whether any programs operate in your area, or you can contact your state housing finance agency directly.
How a smaller down payment affects your monthly payment and insurance
Putting down only 3.5 percent means borrowing 96.5 percent of the home price. That larger loan amount raises your monthly mortgage payment compared to a conventional loan with 20 percent down. On a $200,000 home, the difference between a 3.5 percent down payment and a 20 percent down payment can be $100 to $200 per month or more, depending on interest rates.
FHA loans also require mortgage insurance premiums, which protect the lender if you stop paying. There are two parts: an upfront premium paid at closing (usually 1.75 percent of the loan amount, often rolled into your mortgage) and an annual premium added to your monthly payment. The annual premium ranges from roughly 0.55 percent to 0.80 percent of the loan amount per year, depending on your down payment size and credit score. On a $193,000 loan, that could add $100 to $150 to your monthly bill.
You cannot remove mortgage insurance from an FHA loan the way you can with a conventional loan once you reach 20 percent equity. It stays for the life of the loan unless you refinance into a conventional mortgage later.
Down payment requirements if your credit score is lower
The 3.5 percent minimum does not change based on credit score. An FHA lender cannot legally require a larger down payment from you because your score is 580 instead of 680. However, a lower score may affect your interest rate—you might pay a higher rate, which increases your monthly payment—and it may limit which lenders will work with you.
Some lenders set their own minimum credit score requirements, typically around 580 to 640, and will not lend below that threshold regardless of down payment size. If your score is very low, you may need to wait and build credit before applying, or shop among lenders that specialize in lower-score borrowers.
What happens if you cannot save 3.5 percent
If you do not have 3.5 percent saved, you have a few paths. The first is to wait and save. Saving $7,000 for a $200,000 home takes time, but it is achievable if you have steady income. Some people redirect tax refunds or bonuses toward this goal.
The second is to look for down payment assistance in your area. Nonprofits like NeighborWorks, local community development organizations, and some state housing finance agencies offer grants or forgivable loans. These are not universal—availability depends on where you live and your income level—but they exist in many regions. Start by contacting your state housing finance agency or searching "down payment assistance [your state]."
The third is to ask a family member for a gift. This is common and legal under FHA rules, as long as the gift is documented with a signed letter and the money moves through a bank account.
If none of these work, you may not be ready for homeownership yet. Buying without savings creates financial strain and leaves you vulnerable if repairs or job loss occur. Renting while you build a down payment fund is a reasonable choice.
How down payment size affects your loan approval odds
Putting down 3.5 percent is the minimum, but it does not hurt your approval chances compared to putting down more. Lenders approve FHA loans at the 3.5 percent level routinely. What matters more to approval is your debt-to-income ratio (how much you owe each month compared to your gross income), your credit history, and your employment stability.
A larger down payment—say, 10 or 15 percent—can help in a competitive market or if your income is borderline for the loan amount. It shows the lender you have more skin in the game and reduces their risk. But it is not required for approval, and many borrowers are approved with exactly 3.5 percent down.
Frequently Asked Questions
Can I borrow the down payment from someone instead of getting a gift?
No. The lender will ask you to document the source of your down payment, and a loan from a family member must be disclosed. If you disclose it, it counts as debt on your application and reduces how much you can borrow overall. Most lenders will not allow a borrowed down payment at all. A gift is the only way to use someone else's money without it affecting your loan amount.
What if I have less than 3.5 percent saved but I have a co-signer?
A co-signer does not change the down payment requirement. You still need 3.5 percent of the purchase price in cash. A co-signer only helps if your income or credit is weak; they do not reduce the down payment floor.
Do I have to pay the mortgage insurance upfront, or can I roll it into the loan?
The upfront mortgage insurance premium (usually 1.75 percent of the loan amount) is almost always rolled into your mortgage rather than paid at closing. This means you borrow the insurance cost along with the home price. You pay it back over the life of the loan with interest.
If I put down more than 3.5 percent, does my mortgage insurance go down?
Yes, slightly. The upfront premium is calculated on the loan amount, so a larger down payment means a smaller loan and a smaller upfront premium. The annual premium also depends partly on your down payment percentage. However, mortgage insurance on an FHA loan does not disappear once you reach 20 percent equity the way it does on conventional loans.
Can I use a 401(k) withdrawal or loan for my down payment?
Yes, you can use a 401(k) loan or withdrawal as your down payment source. You will need to document it with statements from your plan administrator showing the withdrawal or loan was made. Be aware that a 401(k) withdrawal triggers taxes and penalties if you are under 59½, which reduces the amount you actually receive. A 401(k) loan avoids taxes but must be repaid, and if you leave your job, the loan may become due immediately.