FHA loans require a minimum down payment of 3.5% of the purchase price, and that percentage is set by federal rule, not by individual lenders.

If you are buying a house for $200,000, your down payment would be $7,000. For a $300,000 house, it would be $10,500. The Federal Housing Administration (FHA) is part of the U.S. Department of Housing and Urban Development and sets this floor for all lenders offering FHA-backed mortgages. You cannot put down less than 3.5% and still use an FHA loan—if you have less saved, you would need to wait, save more, or look at a different loan type.

The 3.5% rule applies whether you are a first-time buyer or have owned before. It does not change based on your credit score, income, or how much you can afford to put down. Some lenders may require slightly more due to their own policies, but 3.5% is the FHA minimum across the board.

Key Takeaways

  • FHA down payments start at 3.5% of the home price, which is lower than the 5% to 20% typical for conventional loans.
  • The down payment amount is calculated on the purchase price, not the appraised value, so know your offer price before calculating.
  • You can use gift money from family members to cover the down payment, but the lender will ask for a signed letter from the giver stating it is a gift with no repayment expected.
  • FHA loans require mortgage insurance premiums in addition to your down payment, which adds to your monthly payment and total cost.
  • Putting down more than 3.5% lowers your mortgage insurance costs but is not required and does not change your loan approval odds.

What counts toward your down payment

Your own savings count. So does a gift from a family member—parent, grandparent, sibling, or spouse. The lender will require a gift letter, which is a signed statement from the person giving you the money saying it is a gift, not a loan, and they expect no repayment. Without that letter, the lender will treat the money as a debt you owe, which changes your debt-to-income ratio and may disqualify you.

Money from your employer, a nonprofit, or a government down payment assistance program also counts. Some states and cities run programs that give or lend money specifically for down payments on FHA loans. Your lender can tell you which programs they accept, because the rules vary by program and by lender.

Retirement account withdrawals can be used, though they may trigger taxes or penalties depending on your age and account type. Borrowing against your 401(k) or taking an early IRA withdrawal is legal for a home purchase, but you should talk to a tax professional or financial advisor before doing it, because the cost is not always obvious upfront.

How down payment size affects your mortgage insurance

FHA loans require mortgage insurance premiums (MIP), which protect the lender if you stop paying. There are two parts: an upfront premium paid at closing, and an annual premium rolled into your monthly payment.

The upfront premium is 1.75% of the loan amount for most borrowers. If you borrow $192,500 (on a $200,000 house with a 3.5% down payment), the upfront premium is about $3,369, and the lender typically rolls it into your loan balance so you do not pay it in cash at closing.

The annual premium varies based on how much you put down and how long you keep the loan. If you put down 3.5%, you will pay annual MIP for the life of the loan—you cannot get it removed even after you build equity. If you put down 10% or more, the annual MIP drops off after 11 years. This is why some buyers choose to save more than 3.5%: the lower insurance cost over time can offset the benefit of borrowing more.

Down payment sources the lender will question

Lenders verify where your down payment money came from because FHA rules prohibit borrowed funds. If you took out a personal loan, a credit card cash advance, or a loan from anyone else to fund your down payment, you cannot use it for an FHA mortgage. The lender will ask for bank statements going back two months to see the money sitting in your account, and they will ask about any large deposits that appear.

If you received a gift, the lender needs the gift letter. If you withdrew from savings, they need to see the account. If you sold something or received an inheritance, you may need a bill of sale or a copy of the will or probate paperwork. This is not the lender being difficult—FHA rules require it, and the lender's loan approval depends on proving the source.

Some lenders are stricter than others about how far back they trace deposits. A few require a full 60-day history; others ask for 30 days plus an explanation of anything unusual. Ask your lender upfront what documents they need so you can gather them before you apply.

Putting down more than 3.5%

You can put down 5%, 10%, 15%, or more if you have the money. Putting down more than 3.5% does not speed up approval or improve your odds of being accepted. It does lower your monthly mortgage insurance cost and, if you put down 10% or more, removes the insurance requirement after 11 years instead of keeping it for life.

The tradeoff is that you use cash now instead of keeping it for closing costs, repairs, or emergencies. For many buyers, especially those with limited savings, the 3.5% minimum is the right choice because it preserves cash for other needs. For others, putting down 5% or 10% makes sense if they have the money and want to lower their long-term costs.

Run the numbers with your lender. They can show you the monthly payment difference between a 3.5% down payment and a 10% down payment on your specific loan amount, so you can decide whether the savings are worth using more of your cash now.

Down payment assistance programs

Many states, cities, and nonprofits offer down payment help for FHA buyers. Some give money outright; others offer low-interest loans you repay over time. may be able to access usually depends on income (often capped at 80% to 120% of the area median income), first-time buyer status, and the location of the home.

Your lender can point you to programs they work with regularly. You can also search your state housing finance agency website or call 211 (a national helpline) to find programs in your area. If you use an assistance program, the lender will need documentation showing the terms and confirming the money is a gift or a loan, depending on the program.

Some programs require you to take a homebuyer education course before they will fund you. This is usually a one-time class, either online or in person, that covers budgeting, maintenance, and what to expect as a homeowner. The course is free or low-cost and counts toward the program's requirements.

Frequently Asked Questions

Can I borrow the down payment from someone other than a family member?

No. FHA rules prohibit borrowed funds for the down payment. A gift from a family member is allowed with a signed gift letter, but a loan from a friend, employer, or financial institution is not. If you borrow the money, you cannot use an FHA loan.

What happens if I do not have 3.5% saved?

You have three options: save more money and wait, look into down payment assistance programs in your area, or explore a different loan type if you may have access to. Some conventional loans allow 3% down, and some state or local programs may have lower minimums, but FHA's floor is 3.5%.

Does putting down more than 3.5% help me get approved?

No. The lender approves or denies you based on income, credit, and debt—not down payment size. Putting down more money does not change your approval odds, but it does lower your monthly mortgage insurance cost and may remove the insurance requirement sooner.

Can I use a 401(k) withdrawal for my down payment?

Yes, but check with a tax professional first. Early withdrawals from a 401(k) before age 59½ usually trigger a 10% penalty plus income tax, though some plans allow loans instead. An IRA withdrawal may have fewer penalties if you are a first-time buyer, but the rules are complex and vary by account type.

What if the appraisal comes in lower than my offer price?

Your down payment is calculated on the purchase price in your contract, not the appraised value. If the appraisal is lower, you will need to either renegotiate the price with the seller, put down more cash to make up the difference, or walk away. Your lender can explain your options once the appraisal is done.