FHA down payment requirements start at 3.5 percent of the home's purchase price

The Federal Housing Administration (FHA) allows you to put down as little as 3.5 percent of what you're paying for the house. If you're buying a $200,000 home, that's $7,000. If you're buying a $300,000 home, that's $10,500. The remaining amount becomes your loan, which you'll repay over 15, 20, or 30 years depending on your term.

You can put down more than 3.5 percent if you have the money — many people put down 5, 10, or even 20 percent. A larger down payment lowers your monthly payment and reduces how much interest you pay over the life of the loan. It also means you'll owe less in mortgage insurance, which is a required cost on FHA loans.

The 3.5 percent minimum applies to owner-occupied homes — houses, condos, and townhouses where you'll actually live. FHA loans do not cover investment properties or vacation homes.

Key Takeaways

  • FHA loans require a minimum down payment of 3.5 percent of the purchase price, calculated on the home's appraised value, not the sale price.
  • Your down payment comes from your own savings, a gift from a family member, or a combination of both — you cannot borrow it.
  • Mortgage insurance is required on all FHA loans and costs between 0.55 and 1.80 percent of the loan amount annually, depending on your down payment and loan term.
  • If you put down less than 10 percent, you'll pay mortgage insurance for the entire life of the loan; at 10 percent or more, it stops after 11 years.

Where the down payment money can come from

Your down payment must come from funds you already own. The FHA allows money from savings accounts, checking accounts, retirement accounts (with some restrictions), stocks, bonds, or a gift from a family member. A family member can give you the full down payment if they choose — there's no limit on gift amounts for FHA loans.

You cannot borrow the down payment from another lender, use a credit card cash advance, or take out a personal loan. The FHA requires proof that the money has been in your account for at least two months before you close on the house. If you received a gift, the family member must sign a gift letter stating the money is a gift, not a loan you'll repay.

Some employers, nonprofits, and government agencies offer down payment assistance programs that work alongside FHA loans. These are separate from the FHA itself but can help you cover part or all of that 3.5 percent. Your lender can tell you whether programs exist in your area.

How mortgage insurance changes your total cost

Mortgage insurance is mandatory on every FHA loan. It protects the lender if you stop paying, and it's a real cost you pay every month. The amount depends on two things: how much you're putting down and how long your loan is.

If you put down 3.5 percent on a $200,000 home with a 30-year loan, your mortgage insurance will cost roughly $140 to $180 per month. That's added to your regular mortgage payment. If you put down 10 percent instead, the monthly cost drops to around $80 to $120, and it stops after 11 years. At 3.5 percent, it never stops — you pay it for the full 30 years.

The insurance is calculated as a percentage of your loan amount, not your down payment. A smaller down payment means a larger loan, which means higher insurance costs. This is why putting down more than 3.5 percent can save you thousands over time, even though it requires more money upfront.

Down payment compared to credit score and debt

The FHA is more flexible on down payment than conventional loans, but it's stricter on other things. You can get an FHA loan with a credit score as low as 580 (some lenders go to 500), whereas conventional loans usually require 620 or higher. That lower credit score threshold is what makes FHA loans attractive to first-time buyers.

However, the FHA also looks at your debt-to-income ratio — how much you owe compared to how much you earn. Most lenders cap this at 43 percent, meaning your total monthly debt payments (including the new mortgage) cannot exceed 43 percent of your gross monthly income. If you earn $4,000 a month, your total debt payments can't exceed $1,720.

A smaller down payment means a larger loan and a higher monthly payment, which can push you over that debt limit. In that case, you'd need to put down more money, pay off other debts first, or find a less expensive home. The down payment alone doesn't determine whether you're approved — your full financial picture does.

What happens if you don't have 3.5 percent saved

If you can't save 3.5 percent on your own, several paths exist. Down payment assistance programs run by cities, counties, and nonprofits can cover part or all of it. Some programs are grants (you don't repay them), and some are forgivable loans (you repay them only if you sell the house within a certain time). Your lender or a local housing counselor can point you toward programs in your area.

Family gifts are another route. The FHA allows a family member to give you the full down payment with no strings attached — you just need the gift letter. Some employers and credit unions also offer down payment help as an employee benefit.

If none of those options work, you might consider waiting and saving more, or exploring whether a conventional loan with a co-signer could work for your situation. A co-signer is someone who agrees to repay the loan if you can't — it's a bigger commitment than a gift, but it can help you get approved.

Down payment and appraisal: what you actually owe

Your down payment is calculated on the home's appraised value, not the sale price. An appraiser — hired by the lender — inspects the house and determines what it's actually worth. If you agree to pay $200,000 but the appraisal comes in at $190,000, your down payment is 3.5 percent of $190,000, not $200,000.

This protects you from overpaying. If the appraisal is lower than the sale price, you have options: renegotiate the price with the seller, put down more money to make up the difference, or walk away. You don't have to proceed if the house isn't worth what you agreed to pay.

The appraisal also affects your loan amount. A lower appraisal means a smaller loan, which means lower monthly payments and lower mortgage insurance costs. It's one reason the appraisal process, though it takes time, works in your favor.

Frequently Asked Questions

Can I use my 401(k) or IRA for the down payment?

You can withdraw from an IRA without penalty if you're a first-time homebuyer (defined as not owning a home in the past two years), up to $10,000 lifetime. A 401(k) is harder — you'd typically need to take a loan against it, not a withdrawal. Talk to your plan administrator and a tax professional before touching retirement savings, because withdrawals count as income and can affect your loan approval.

What if the seller pays part of my down payment?

The FHA allows seller concessions — the seller can pay closing costs, property taxes, or other fees on your behalf. However, they cannot directly pay your down payment. The down payment must come from your own funds or a family gift. Seller concessions can free up your money for the down payment, but they can't replace it.

Do I need to put down more than 3.5 percent to get approved?

Not necessarily. If your credit score, income, and debt levels are solid, 3.5 percent is enough. However, if your credit is lower or your debt is higher, some lenders may ask for 5 or 10 percent to reduce their risk. Ask your lender upfront what they require based on your situation.

What if I'm buying a condo — is the down payment different?

The down payment percentage is the same — 3.5 percent minimum. However, the condo building itself must be FHA-approved, meaning it meets certain standards for owner occupancy and financial health. Not all condos are approved. Your lender will check this before you move forward, so you won't waste time on a property that doesn't may have access to.

Can I borrow money from a friend who isn't family?

No. The FHA requires that gifts come from family members — parents, grandparents, siblings, or in-laws. A friend's gift won't be accepted. If you need to borrow from someone outside your family, it counts as a debt and affects your debt-to-income ratio, which can lower how much you can borrow.