FHA loans require a down payment, but it can be as low as 3.5 percent of the home's purchase price
The Federal Housing Administration (FHA) does not allow you to buy a home with zero down. You must put money down upfront. The minimum is 3.5 percent of what the home costs. If you are buying a $200,000 home, your down payment would be $7,000. That $7,000 comes from your own funds—savings, a gift from a family member, or money you have set aside for this purpose.
The 3.5 percent minimum applies when your credit score is 580 or higher. If your score is between 500 and 579, some lenders will work with you, but they may require 10 percent down instead. The exact requirement depends on the lender you choose, not on the FHA itself. The FHA sets the floor; individual lenders can ask for more.
The down payment is separate from closing costs, which are additional fees you pay at the time of purchase. Closing costs typically run 2 to 5 percent of the loan amount and cover things like the appraisal, title search, and lender fees. You may be able to roll some closing costs into your loan, but the down payment itself must come from your pocket.
Key Takeaways
- FHA loans require a minimum down payment of 3.5 percent of the home price when your credit score is 580 or higher.
- The down payment must come from your own funds, a family gift, or a grant—not from a loan or credit card.
- Your lender may require more than 3.5 percent down depending on your credit score, debt level, and the property type.
- Down payment assistance programs run by nonprofits and local governments can help cover part or all of the 3.5 percent.
- Closing costs are separate from the down payment and typically add 2 to 5 percent more to your out-of-pocket expenses.
Where the down payment money can come from
Your down payment must be "seasoned," meaning it has been in your bank account for at least two months before you apply. The lender will ask to see bank statements proving the money is yours and has been there. If you received a gift from a family member, the lender will require a signed gift letter stating the money is a gift, not a loan you have to repay.
You cannot borrow the down payment from a credit card, personal loan, or another lender. The FHA prohibits this because it would increase your total debt load and make you a riskier borrower. Some lenders allow you to use funds from a retirement account (like a 401k) or a savings account you have had for years, but rules vary by lender.
Down payment assistance programs exist in many states and cities. These are usually run by nonprofits or local housing agencies and can cover part or all of your 3.5 percent down payment. Some programs are grants (money you do not repay), and others are forgivable loans (you repay them only if you sell the home within a certain period). Your mortgage lender or a local housing counselor can point you toward programs in your area.
How much your lender might actually require
While 3.5 percent is the FHA minimum, your specific lender may ask for more based on your financial profile. If your credit score is lower, your debt-to-income ratio is high (meaning you already owe a lot relative to your income), or you have had recent late payments, the lender may require 5, 7, or even 10 percent down. This is the lender's way of reducing their risk.
The property itself also matters. If you are buying a condo, the lender may require a larger down payment than for a single-family home. If the home needs repairs or is in a declining neighborhood, the lender may ask for more money down. Ask your lender upfront what they will require based on your situation, not just what the FHA minimum is.
What happens if you do not have 3.5 percent saved
If you cannot save 3.5 percent on your own, your first step is to search for down payment assistance in your state or city. The National Council of State Housing Agencies maintains a database of programs by state. Many cities also run their own programs through the housing authority or community development office. Some programs have income limits or require you to take a homebuying course first, but many have no strings attached.
If assistance programs are not available or you do not meet their requirements, you have a few other options. You can delay your purchase and save more money. You can ask a family member for a gift (remember: it must be a gift, not a loan). Or you can look into an FHA loan with a co-borrower—someone with stronger finances who will be on the loan with you and may help you meet the lender's requirements.
Some people consider putting down less than 3.5 percent by using a co-signer or by misrepresenting their funds, but this violates FHA rules and can result in loan denial or fraud charges. The honest path is slower but safer.
Down payment versus mortgage insurance
FHA loans come with mortgage insurance, which protects the lender if you stop paying. This insurance costs money—an upfront premium and a monthly payment added to your mortgage bill. The upfront premium is typically 1.75 percent of the loan amount and is usually rolled into your loan (you do not pay it separately). The monthly insurance payment varies but often runs 0.5 to 1 percent of the loan amount per year.
The smaller your down payment, the higher your mortgage insurance costs will be. If you put down 3.5 percent, you will pay mortgage insurance for the entire life of the loan (or until you refinance into a conventional loan). If you put down 10 percent or more, you can drop the mortgage insurance after 11 years. This is one reason some people try to save more than the minimum: the insurance savings over time can be substantial.
Frequently Asked Questions
Can a family member give me money for the down payment?
Yes. The money must be a gift, not a loan. Your lender will require a signed gift letter from the family member stating they are giving you the money with no expectation of repayment. You will also need to show bank statements proving the gift was deposited into your account.
What if I have bad credit—do I need more down payment?
Possibly. The FHA minimum is 3.5 percent for scores of 580 and above. Below 580, some lenders require 10 percent down. Others will not work with you at all. Shop around with multiple lenders, as requirements vary. A credit counselor can also help you understand what lenders are looking for.
Can I borrow the down payment from my 401k?
Some lenders allow it, but rules vary. You may be able to take a loan against your 401k or make a hardship withdrawal. However, this has tax and retirement planning consequences. Talk to your plan administrator and a tax professional before doing this, and ask your lender whether they will accept funds from a retirement account.
Do I have to pay the down payment all at once?
Yes. The down payment is due at closing, the day you sign the final paperwork and receive the keys. You cannot pay it in installments. However, some down payment assistance programs will send their funds directly to the closing agent on your behalf, so you may not have to write a check yourself.
What if I put down more than 3.5 percent—does it help?
Yes. A larger down payment lowers your monthly mortgage insurance cost and may help you may have access to for a better interest rate. It also means you owe less money overall. If you can save more than 3.5 percent, it is usually worth doing so, though the difference in monthly payments may be small.