Images by Getty Images; Illustration by Austin Courregé/Bankrate
Key takeaways
- FHA loans require a minimum 3.5 percent down payment for borrowers with a credit score of 580 or more. Borrowers with a credit score of 500 to 579 need to put 10 percent down to get an FHA loan.
- Conventional conforming mortgages only require 3 percent down, and VA and USDA loans require no down payment.
- Besides a down payment, borrowers need to budget for mortgage insurance premiums (MIPs) and closing costs.
FHA loans are insured by the Federal Housing Administration (FHA). They come with more flexible eligibility guidelines, including a low down payment requirement. If you’re considering an FHA loan, here’s what you need to know about the down payment requirement and other costs.
What is the minimum FHA loan down payment?
The minimum FHA loan down payment is either 3.5 percent or 10 percent of the home’s purchase price, depending on your credit score:
| Credit score | FHA down payment requirement |
|---|---|
| 580+ | 3.5% |
| 500-579 | 10% |
For a $300,000 home purchase, that’s $10,500 down at the low end and $30,000 at the top.
Note you can only borrow so much with an FHA loan: $498,257 for a single-family home in most housing markets for 2024.
How to save for an FHA loan down payment
To save up for a down payment on an FHA loan, begin by setting a goal. Consider:
- What is your homebuying budget? How much house can you afford?
- When do you plan to purchase?
- What is your savings strategy?
- Do you already have some savings to work with?
- Will family members or friends contribute to your down payment?
You can boost your savings by cutting some expenses or using a money-saving app, but you don’t have to save the entire 3.5 percent (or 10 percent) on your own. With an FHA loan, you’re allowed to put gifted funds toward the down payment. Here’s how:
FHA loan down payment gifts and rules
Down payment gifts most commonly come from friends and family members. They can also come from labor unions, employers and nonprofit organizations. However, you can’t use gifted funds from:
- The home builder
- The home’s seller
- Your real estate agent or broker
- Anyone else with a vested interest in selling the home
FHA gift funds can help people become homeowners that may otherwise be unable to purchase a home. Note that if you decide to use gift funds, your mortgage lender may require you to submit a gift letter.
FHA loan down payment assistance
Along with gifted funds, you can also apply down payment assistance to your FHA loan. There are many assistance programs out there, including through nonprofits, lenders and the government. For instance, state housing finance agencies (HFAs) package assistance with first-time homebuyer loans.
Additional cost considerations for FHA loans
Along with the down payment, you’ll also need to budget for:
- FHA mortgage insurance premiums (MIPs): MIPs come in two forms: upfront and monthly. Your lender will charge you an upfront fee when you close on your loan that you can finance into the mortgage. You’ll have to pay additional premiums each month as part of your mortgage payment. How much and how long you pay the monthly premiums varies depending on your down payment and other factors.
- FHA loan closing costs: Typically, FHA closing costs are between 3 percent and 6 percent of the home’s purchase price.
Other low-down payment mortgages
There are other types of mortgages that have either a low or no down payment requirement. These include:
- 3 percent conventional loans
- No-money down VA loans for eligible members of the military and veterans
- No-money down USDA loans for borrowers in eligible rural areas
FHA down payment FAQ
FHA loans, which are backed by the federal government, are designed to make homeownership more accessible to first-time homebuyers and other borrowers who may otherwise struggle when applying for conventional mortgages. For this reason, the loan program requires a down payment of just 3.5 percent and features more relaxed credit guidelines than traditional home loans.
You cannot get an FHA loan with zero down. However, the money for your down payment doesn’t have to come from your account. You may be able to fund your down payment with FHA gift funds and down payment assistance.
If you take out an FHA loan, the seller is allowed to contribute up to 6 percent of the home’s sales price in concessions. For example, if you buy a home for $300,000, the seller can offer up to $18,000 in concessions. You will not receive cash directly as the concessions are applied directly to the closing costs and prepaid expenses.
How much you need to make to get an FHA loan depends largely on the loan size, the interest rate and your other monthly debts.
For example, say you want to buy a $300,000 home with 10 percent down (or $30,000) with a 30-year FHA loan at 7.85 percent interest. For this example, we’ll exclude other monthly debts. You would need to have a gross household income of just under $100,000 to comfortably afford this home at a 28 percent debt-to-income (DTI) ratio. However, with that income, you may be approved for a much higher loan, up to 43 percent DTI or more.
To run your own calculations, check out our home affordability calculator.
Generally, mortgage lenders won’t allow you to use a personal loan for an FHA down payment. You’ll need to use your own funds, gift money or down payment assistance.
Yes, down payment grants are a type of down payment assistance that applies to FHA loans.
