FHA loans require a minimum down payment of 3.5 percent of the home's purchase price, and that figure does not change based on your credit score or income.
The Federal Housing Administration does not lend money itself — instead, it insures loans made by banks and mortgage companies. That insurance protects the lender if you stop paying, which is why FHA loans exist: they let people with lower down payments and weaker credit histories borrow money to buy a home. The 3.5 percent minimum applies to most borrowers, though a smaller group with very low credit scores may face a 10 percent requirement.
The down payment is the cash you bring to closing. On a $300,000 home, 3.5 percent equals $10,500. The remaining $289,500 comes from the loan itself. That lower down payment is the main reason people choose FHA over conventional mortgages, which typically require 5 to 20 percent down.
Key Takeaways
- FHA loans require a minimum 3.5 percent down payment on the purchase price, with no exceptions based on credit score or income level.
- You must also pay mortgage insurance premiums — an upfront fee at closing and a monthly fee added to your mortgage payment — which FHA requires for the life of the loan.
- The down payment can come from your own savings, a gift from a family member, or a grant program, but not from a loan.
- If your credit score is below 580, you may be required to put down 10 percent instead of 3.5 percent.
- The total cash you need at closing includes the down payment plus closing costs, which typically run 2 to 5 percent of the purchase price.
Where the down payment money can come from
Your down payment must come from a source that does not create new debt. Your own savings account is the most straightforward source. Money from a family member as a gift is also allowed — the lender will ask you to sign a letter stating it is a gift and not a loan you must repay.
Some down payment assistance programs exist through nonprofits, local housing authorities, and state housing finance agencies. These programs vary widely by location and may have their own income limits or first-time homebuyer requirements. Your mortgage lender or a local housing counselor can tell you what programs operate in your area.
You cannot borrow the down payment from another lender, use a credit card cash advance, or take out a personal loan. The FHA views new debt as a sign you cannot afford the home, and it will show up on your credit report during the underwriting process.
Mortgage insurance premiums add to your total cost
FHA loans come with two mortgage insurance charges that conventional loans do not. The first is an upfront mortgage insurance premium (UFMIP), typically 1.75 percent of the loan amount. On a $289,500 loan, that is roughly $5,066. You can pay this at closing or roll it into your loan balance.
The second is an annual mortgage insurance premium (MIP), paid monthly as part of your mortgage payment. The rate depends on your down payment size and the length of your loan. With a 3.5 percent down payment on a 30-year loan, MIP typically runs between 0.55 and 0.80 percent of the loan balance per year, divided into 12 monthly payments. This fee stays in place for the entire life of the loan, even after you build equity.
Conventional loans also have mortgage insurance if you put down less than 20 percent, but it can be removed once you reach 20 percent equity in the home. FHA mortgage insurance is permanent, which is an important cost difference to understand before you choose an FHA loan.
Credit score and the 10 percent down payment rule
Most borrowers with an FHA loan have a credit score of 580 or higher and pay the standard 3.5 percent down. If your credit score falls below 580, some lenders will require you to put down 10 percent instead. This is a lender policy, not an FHA rule — the FHA itself does not set a minimum credit score — but most major lenders follow this practice.
A score below 580 also makes the loan harder to get approved for overall. You may face a longer underwriting process, requests for additional documentation, or denial. Working with a mortgage broker who specializes in lower-credit borrowers can help you understand which lenders will work with your score and what terms they will offer.
Closing costs are separate from the down payment
The down payment is only one part of the cash you need at closing. Closing costs cover the lender's fees, title insurance, appraisal, inspection, and other services required to complete the purchase. These typically range from 2 to 5 percent of the purchase price, though the exact amount depends on your location and the lender.
On a $300,000 home, closing costs might run $6,000 to $15,000. Combined with your $10,500 down payment, you would need roughly $16,500 to $25,500 in cash at closing. Some of these costs can be negotiated or covered by the seller, but you should plan for the full amount and confirm the exact figure with your lender before you make an offer.
FHA loans allow sellers to cover up to 6 percent of closing costs on your behalf, which can reduce the cash you bring to the table. This is a negotiating point when you make an offer on a home.
How to calculate what you actually need to save
Start with the home price and multiply by 0.035 to find your minimum down payment. Then add 3 percent of the home price as a rough estimate for closing costs (use 5 percent if you want a safer cushion). Add the upfront mortgage insurance premium, which is 1.75 percent of the loan amount — that is the home price minus your down payment.
Example: On a $250,000 home, the down payment is $8,750. Closing costs at 3 percent are $7,500. The loan amount is $241,250, so the upfront mortgage insurance premium is $4,222. Your total cash needed is roughly $20,472. Your lender will give you a detailed estimate called a Loan Estimate within three business days of your application, which will show the exact figures for your situation.
Down payment assistance and first-time homebuyer programs
Many states and cities offer down payment assistance programs specifically for first-time homebuyers or low-income households. These programs may provide grants (money you do not repay), forgivable loans (loans that disappear if you stay in the home for a set period), or second mortgages at favorable terms. Requirements vary — some programs limit the home price, others require you to complete a homebuyer education course, and many have income caps.
Your mortgage lender can point you toward programs in your state, or you can contact your local housing authority or a HUD-approved housing counselor. These counselors offer free guidance on down payment options and can often identify programs you would not find on your own. The National Foundation for Credit Counseling and HUD's website both have searchable directories of counselors by zip code.
Frequently Asked Questions
Can I use a 401(k) withdrawal or loan for my down payment?
Yes, you can withdraw from a 401(k) or take a loan against it, though both have tax and financial consequences. A withdrawal triggers income tax and possibly a 10 percent penalty if you are under 59½. A 401(k) loan does not create a tax event but reduces your retirement savings and requires repayment. The lender will count a 401(k) loan as a monthly debt obligation, which may lower the amount you can borrow. Discuss the impact with a tax professional or financial advisor before you proceed.
What if I do not have the full down payment saved yet?
You have several options: save longer before applying, look for down payment assistance programs in your area, ask a family member for a gift, or negotiate with the seller to cover closing costs. Some first-time homebuyer programs can cover part or all of the down payment if you meet their requirements. A mortgage lender or housing counselor can help you explore what is available where you live.
Does the down payment have to be 3.5 percent, or can I put down more?
You can put down more than 3.5 percent if you want to. Putting down 5 or 10 percent lowers your monthly mortgage insurance premium and reduces the amount you borrow, which saves money over time. The trade-off is that you need more cash upfront. There is no penalty for a larger down payment on an FHA loan.
Can the seller pay my down payment for me?
No, the seller cannot pay your down payment directly. However, the seller can cover up to 6 percent of your closing costs, which frees up your cash to use toward the down payment. This is a common negotiation point in real estate offers and can meaningfully reduce the total cash you need to bring.
Do I need to show proof that my down payment gift is really a gift?
Yes. If a family member gives you money for the down payment, the lender will ask for a signed gift letter stating the amount, the giver's relationship to you, and that the money does not need to be repaid. The lender may also ask for bank statements showing the money moved from the giver's account to yours. This protects the lender by confirming you are not taking on hidden debt.