FHA Down Payment Requirements: What You Need to Know

FHA loans are the most popular low-down-payment option in America. They're insured by the Federal Housing Administration and offered through FHA-approved lenders. Here's how the down payment actually works.

The 3.5% Down Payment

FHA loans require just 3.5% down if your credit score is 580 or higher. That's $12,250 on a $350,000 home. Compare that to 20% down at $70,000, and you see why FHA is so popular with first-time buyers.

Credit Score Requirements

• 580 or higher: 3.5% down payment
• 500 to 579: 10% down payment

Most lenders set their own overlay requirements above the FHA minimum. Many require a 620 or 640 minimum even though the FHA allows 580. Shop around if you're in the 580 to 619 range.

Where the Down Payment Can Come From

FHA is flexible with fund sources:

• Personal savings (verified by bank statements)
• Gift funds from family (with a signed gift letter)
• Down payment assistance programs (grants, forgivable loans)
• 401(k) loans or withdrawals
• Sale of personal property (with documentation)

Cash-on-hand or borrowed funds from an unsecured source won't work. The money needs a verifiable paper trail.

Upfront MIP (UFMIP)

Remember: FHA charges an upfront mortgage insurance premium of 1.75% of the loan amount. On a $338,000 loan (purchase price minus 3.5% down), that's $5,915. You can pay this at closing or finance it into the loan. Financing it adds to your loan balance but saves upfront cash.

Is FHA Right for You?

FHA is ideal if you have a lower credit score, limited down payment funds, or higher debt-to-income ratios. It's less ideal if you have great credit (conventional loans have lower PMI for high-credit borrowers) or if you're buying in a competitive market where sellers prefer conventional buyers.

Talk to a lender who offers both FHA and conventional and ask for a side-by-side comparison with your actual numbers.