The FHA requires a minimum down payment of 3.5 percent of the home's purchase price

The Federal Housing Administration sets 3.5 percent as the lowest down payment allowed on an FHA loan. This means on a $200,000 home, you would put down $7,000. The remaining amount—$193,000—becomes your mortgage, plus FHA mortgage insurance premiums that protect the lender if you stop paying.

This 3.5 percent floor applies to most borrowers. Some exceptions exist: if your credit score is below 580, some lenders require 10 percent down instead, though this is less common. If you are buying a property that needs repairs, the FHA 203(k) program has its own rules and may require different down payment amounts depending on the scope of work.

The down payment itself comes from your own funds—savings, a gift from a family member, or proceeds from selling another property. You cannot borrow the down payment from another lender. The FHA does allow gift funds from relatives, employers, nonprofits, or government agencies, but the gift must be documented in writing and the giver cannot expect repayment.

Key Takeaways

  • FHA loans require a minimum 3.5 percent down payment on the purchase price, which is lower than conventional loans typically demand.
  • Borrowers with credit scores below 580 may face a 10 percent down payment requirement from some lenders, though this varies by institution.
  • Down payment funds must come from your own resources or documented gifts; you cannot borrow them from another lender.
  • FHA mortgage insurance premiums are added to your loan and paid monthly, making the total monthly cost higher than the base mortgage payment alone.
  • The down payment amount does not change based on the property type, but FHA 203(k) renovation loans may have different structures.

How FHA mortgage insurance affects your actual cost

When you put down only 3.5 percent, the FHA requires you to pay mortgage insurance. This insurance protects the lender, not you. It comes in two parts: an upfront premium and a monthly premium.

The upfront mortgage insurance premium (UFMIP) is typically 1.75 percent of the loan amount. On that $200,000 home with a $7,000 down payment, your loan is $193,000, so the UFMIP would be roughly $3,378. Most lenders roll this into your mortgage, so you do not pay it out of pocket at closing—you pay it over the life of the loan.

The monthly mortgage insurance premium (MIP) is added to your regular mortgage payment. The rate depends on your loan amount, the length of your loan, and how much you put down. For a 30-year loan with 3.5 percent down, monthly MIP typically ranges from 0.55 to 0.80 percent of the loan amount annually, paid in monthly installments. On a $193,000 loan, that could be $88 to $128 per month, though your lender will give you the exact figure.

You can remove the monthly MIP only after you have paid down the loan to 80 percent of the original home value and have owned it for at least 11 years. If you put down 10 percent instead of 3.5 percent, the MIP requirement drops to 11 years regardless of the loan balance.

What counts toward your down payment

Your down payment must be real money in your account or a documented gift. The FHA does not count sweat equity, seller concessions, or promises of future funds.

Acceptable sources include personal savings, checking or savings accounts, money market accounts, certificates of deposit, stocks or bonds, retirement account withdrawals (subject to tax consequences), and documented gifts from family members. If you receive a gift, the giver must sign a gift letter stating the amount, the relationship, and that no repayment is expected. The lender will verify the gift funds actually moved into your account.

Seller concessions—money the seller gives you toward closing costs—cannot reduce your down payment. If a seller offers to cover some of your closing costs, that money goes toward those costs, not toward your 3.5 percent down. Some lenders allow seller concessions up to 6 percent of the purchase price, but they do not lower the down payment requirement.

Down payment assistance programs and grants

Several programs exist to help borrowers cover the down payment. These are separate from the FHA loan itself and come from state housing agencies, nonprofits, and local governments.

State housing finance agencies often run down payment assistance programs. You can find yours through the National Council of State Housing Agencies website. These programs may offer grants (money you do not repay) or second mortgages (loans you do repay). Requirements vary by state: some have income limits, some require homebuyer education courses, and some target first-time buyers only.

Nonprofit organizations like NeighborWorks America and local community development corporations also offer down payment help. These are typically free to explore, though some require a homebuyer education class before you receive funds.

Employer programs are less common but worth asking about. Some large employers offer down payment grants or matching programs for employees buying homes. Your HR department can tell you if your employer has one.

If you receive down payment assistance, disclose it to your lender. Some assistance programs are structured as grants and do not affect your loan; others are second mortgages that the lender must account for when calculating your debt-to-income ratio.

Credit score and down payment requirements

Your credit score can change your down payment requirement. Most lenders allow 3.5 percent down if your credit score is 580 or higher. Below 580, some lenders require 10 percent down, though not all lenders work with borrowers in this range.

Credit score also affects your interest rate. A lower score typically means a higher rate, which increases your monthly payment. The difference between a 620 score and a 740 score can be 0.5 to 1 percent in interest rate, which adds hundreds of dollars per year to your payment.

If your score is below 580, you have options: wait and build your score before applying, work with a lender that accepts lower scores, or put down 10 percent to meet the higher requirement. Building your score takes time—typically three to six months of on-time payments and lower credit card balances.

Timing and closing costs separate from down payment

Your down payment is only one part of what you need at closing. Closing costs—appraisal, title insurance, attorney fees, inspections, and other charges—typically run 2 to 5 percent of the purchase price. On a $200,000 home, that could be $4,000 to $10,000.

You must have both the down payment and closing costs ready. Some lenders allow seller concessions to cover closing costs, which can reduce the cash you bring to closing. FHA rules allow sellers to contribute up to 6 percent of the purchase price toward your closing costs, though individual lenders may set lower limits.

If you do not have enough for both, explore whether a down payment assistance program in your state covers closing costs as well. Some do; others cover only the down payment.

Frequently Asked Questions

Can I get an FHA loan with less than 3.5 percent down?

No. The FHA sets 3.5 percent as the minimum for most borrowers. Some lenders may require 10 percent if your credit score is below 580, but you cannot go lower than 3.5 percent with an FHA loan. If you cannot save 3.5 percent, explore down payment assistance programs in your state or consider a conventional loan with a different structure.

Does the down payment amount affect my interest rate?

Not directly. Your interest rate is set by the lender based on credit score, loan type, market conditions, and the loan term. However, putting down more than 3.5 percent can lower your monthly mortgage insurance premium, which reduces your total monthly payment. A larger down payment also improves your debt-to-income ratio, making you a stronger borrower.

What happens if I cannot save the full 3.5 percent before I find a home?

You have time after you make an offer. Most purchase agreements give you 30 to 45 days to close. If you are close to 3.5 percent, you may be able to save the remaining amount during that period. You can also ask family members for a gift or look into down payment assistance programs while your offer is pending.

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

Yes, but be aware of tax consequences. Withdrawing from a 401(k) before age 59½ typically triggers a 10 percent early withdrawal penalty plus income taxes on the amount withdrawn. Some plans allow loans instead of withdrawals, which may be a better option. Consult a tax professional before withdrawing to understand the full cost.

If I put down 10 percent instead of 3.5 percent, when can I remove mortgage insurance?

With 10 percent down, you must carry mortgage insurance for 11 years, regardless of how much you have paid down. With 3.5 percent down, you carry it for the life of the loan unless you refinance or reach 80 percent equity after 11 years. Putting down more upfront can save you money on insurance over time.