What Down Payment You Need for an FHA Loan

FHA loans require a minimum down payment of 3.5 percent of the home's purchase price

The Federal Housing Administration (FHA) sets a floor of 3.5 percent down. That means on a $200,000 home, you would put down $7,000. On a $300,000 home, $10,500. The remaining amount becomes your mortgage, and you pay mortgage insurance on top of the loan itself because the down payment is smaller than what conventional lenders typically require.

This 3.5 percent minimum applies to most borrowers. However, if you are a first-time homebuyer, a military service member, or have other circumstances, some lenders offer programs that may lower that floor further—though 3.5 percent remains the FHA's official standard. The down payment must come from your own funds, a gift from a family member, or a grant; it cannot be borrowed.

Key Takeaways

• FHA loans require at least 3.5 percent down on the purchase price, calculated before mortgage insurance is added.
• You must pay mortgage insurance premiums (both upfront and monthly) because your down payment is below 20 percent.
• The down payment can come from your savings, a family gift, or a grant—but not from a loan or credit card.
• Your credit score, debt-to-income ratio, and employment history matter more than the size of your down payment for FHA approval.

How the 3.5 percent down payment is calculated

The down payment is a percentage of the purchase price, not the appraised value or the loan amount. If you and the seller agree on $250,000, your 3.5 percent down payment is $8,750, regardless of what the home appraises for later.

The lender will ask you to document where that money came from. Bank statements showing the funds in your account for at least two months are standard proof. If a family member is giving you the money as a gift, the lender will require a signed gift letter stating the amount, the giver's relationship to you, and that no repayment is expected.

Mortgage insurance costs when you put down less than 20 percent

Because you are borrowing 96.5 percent of the home's price, the FHA requires you to pay mortgage insurance. This protects the lender if you stop paying. Mortgage insurance comes in two forms: an upfront premium and a monthly premium.

The upfront mortgage insurance premium (UFMIP) is typically 1.75 percent of the loan amount and is usually rolled into your mortgage rather than paid at closing. On a $242,000 loan (the 96.5 percent portion of a $250,000 home), the UFMIP would be roughly $4,235, added to what you owe each month.

The annual mortgage insurance premium (MIP) is paid monthly as part of your mortgage payment. The rate depends on your loan amount, down payment size, and loan term. For a 30-year loan with 3.5 percent down, the annual MIP is typically between 0.55 and 0.80 percent of the loan amount, divided by 12 for your monthly payment. On a $242,000 loan, that could be $110 to $160 per month.

Unlike conventional loans, FHA mortgage insurance does not automatically drop off when you reach 20 percent equity. You pay it for the life of the loan if you put down less than 10 percent. If you put down 10 percent or more, you can stop paying MIP after 11 years.

Where down payment money can and cannot come from

The FHA allows down payment funds from savings, checking accounts, money market accounts, and certificates of deposit. Retirement accounts like a 401(k) or IRA can be tapped, though you may face tax penalties. Some lenders allow you to borrow from a 401(k) without penalty if your plan permits loans.

Family gifts are permitted and do not have to be repaid. The giver does not need to be a relative by blood—a close family friend can give a gift if the lender approves. The gift letter must state the relationship, the amount, and that repayment is not expected.

Down payment assistance programs run by nonprofits, state housing agencies, and some employers can provide grants or forgivable loans. These funds count toward your down payment. You will need to document the source and terms of any assistance program.

You cannot borrow the down payment from a credit card, personal loan, or home equity line of credit. The lender will see the new debt on your credit report and may deny the loan or require you to pay it off first. Borrowed funds also raise your debt-to-income ratio, which affects whether you may have access to.

Down payment size and your approval odds

While 3.5 percent is the minimum, putting down more improves your chances of approval and lowers your monthly costs. A larger down payment means a smaller loan, which means lower mortgage insurance premiums and a lower monthly payment overall.

Your credit score, employment history, and debt-to-income ratio matter more than the exact down payment amount. The FHA allows credit scores as low as 580 with 3.5 percent down, though some lenders set their own minimums higher (often 620 or 640). If your score is below 580, you may need to put down 10 percent instead.

Lenders also look at your debt-to-income ratio—the total of all your monthly debt payments divided by your gross monthly income. The FHA allows up to 50 percent in most cases, though some lenders cap it at 43 percent. A larger down payment does not change this ratio, but it does lower your monthly mortgage payment, which can help you stay under the limit.

Closing costs are separate from your down payment

The down payment covers only the equity you own at closing. Closing costs—appraisal, title search, inspection, attorney fees, and lender fees—are separate and typically range from 2 to 5 percent of the purchase price. You must pay these in addition to your down payment, though the seller can agree to pay some of them as part of your negotiation.

Some FHA programs allow the seller to cover up to 6 percent of closing costs, which can ease your burden at closing. Ask your lender whether this is available in your situation.

Frequently Asked Questions

Can I put down less than 3.5 percent on an FHA loan?

No. The FHA's minimum is 3.5 percent of the purchase price. Some lenders offer programs for first-time buyers or military members that may have other benefits, but the down payment floor remains 3.5 percent.

What happens if I don't have 3.5 percent saved?

You can ask a family member for a gift, look into down payment assistance programs through your state housing agency or local nonprofits, or explore employer-sponsored homebuying programs. Some grants do not require repayment. A 211 referral can point you to programs in your area.

Do I have to pay mortgage insurance forever on an FHA loan?

If you put down less than 10 percent, yes—mortgage insurance stays for the life of the loan. If you put down 10 percent or more, you can stop paying the annual mortgage insurance premium after 11 years of on-time payments.

Can the seller pay my down payment for me?

No. The down payment must come from your own funds, a gift, or a grant. The seller can pay closing costs on your behalf, but not the down payment itself.

How do I know if my down payment funds will be accepted?

Your lender will ask for bank statements showing the funds for at least two months before closing, or a gift letter if the money is a family gift. If the funds come from a program, you will need documentation of that program's terms. Ask your lender for a complete list of what they need before you start gathering documents.