FHA loans require a down payment, but it can be as low as 3.5 percent of the home's purchase price
An FHA loan (Federal Housing Administration loan) is a mortgage insured by the federal government, which means the lender takes less risk. Because the lender's risk is lower, the FHA allows borrowers to put down less money upfront than conventional loans typically require. The minimum down payment is 3.5 percent of the purchase price. On a $200,000 home, that would be $7,000.
You cannot avoid the down payment entirely with an FHA loan. Some lenders advertise "no down payment" mortgages, but those are not FHA loans—they are either VA loans (for military service members) or USDA loans (for rural properties). If you are looking at an FHA loan specifically, you will need to bring cash to closing.
The down payment is separate from closing costs, which typically run 2 to 5 percent of the loan amount. You may be able to roll some closing costs into the loan itself or ask the seller to cover them, but the down payment itself comes out of your pocket at signing.
Key Takeaways
- FHA loans require a minimum down payment of 3.5 percent of the home's purchase price, with no exceptions.
- The down payment is due at closing and cannot be borrowed or rolled into the loan amount.
- You will also owe mortgage insurance premiums on top of your regular monthly payment, which is mandatory for all FHA loans.
- Some of your closing costs may be paid by the seller or rolled into the loan, but the down payment itself must come from your own funds.
Where the 3.5 percent figure comes from
The FHA sets the minimum down payment at 3.5 percent. This is a federal rule, not something individual lenders can change. If a lender tells you they will accept less, they are not offering an FHA loan. You can put down more than 3.5 percent if you have the cash—many borrowers put down 5, 10, or 20 percent—but 3.5 is the floor.
The reason the FHA allows such a low down payment is that the loan is insured by the government. If you stop paying, the FHA compensates the lender for the loss. This insurance protects the lender, not you, which is why you pay for it.
Mortgage insurance: the cost of a low down payment
When you put down less than 20 percent on any mortgage, lenders require mortgage insurance. With an FHA loan, this insurance is mandatory regardless of your down payment size. You pay for it in two ways: an upfront premium at closing and a monthly premium added to your mortgage payment.
The upfront mortgage insurance premium (UFMIP) is typically 1.75 percent of the loan amount. On a $200,000 loan, that is $3,500. You can pay this in cash at closing or roll it into the loan amount, which means you borrow it and pay interest on it over 30 years.
The annual mortgage insurance premium (MIP) is added to your monthly payment. The rate depends on your down payment size and loan term. With a 3.5 percent down payment on a 30-year loan, the annual MIP is usually around 0.55 percent of the loan amount, paid monthly. On a $200,000 loan, that is roughly $110 per month.
You cannot remove mortgage insurance from an FHA loan the way you can with a conventional loan. Even if you pay down the principal to 80 percent of the home's value, the insurance stays for the life of the loan (or until you refinance into a conventional mortgage).
How to gather the down payment
The down payment must come from your own funds or from an approved source. Lenders will ask where the money came from and may require bank statements to verify it. Common sources include savings, a gift from a family member, or proceeds from selling another property.
If you receive a gift, the person giving it must sign a gift letter stating it is a gift, not a loan. The lender needs to know you will not have to repay it, because that would affect your debt-to-income ratio. The gift can come from a family member, but not from the seller or anyone with a financial interest in the sale.
Some down payment information programs exist through nonprofits, state housing agencies, and local governments. These programs may offer grants or forgivable loans that count toward your down payment. You would need to research what is available in your area and whether you meet their requirements.
Down payment timing and what happens at closing
You do not pay the down payment when you make an offer on a home. You pay it at closing, which typically happens 30 to 45 days after your offer is accepted. Before closing, you will receive a Closing Disclosure form that itemizes exactly how much you owe, including the down payment, the upfront mortgage insurance premium, and all other closing costs.
At closing, you will bring a cashier's check or arrange a wire transfer for the down payment plus any closing costs you are responsible for. The title company or closing attorney will handle the funds and distribute them to the lender, the seller, and other parties owed money.
If you do not have the full down payment saved yet, you cannot move forward with an FHA loan. Some lenders offer "down payment information" programs, but these are typically loans you take out separately, not a way to avoid bringing cash to closing.
Comparing FHA down payments to other loan types
FHA loans sit in the middle of the down payment spectrum. Conventional loans typically require 5 to 20 percent down, though some lenders offer 3 percent conventional loans. VA loans (for military service members and veterans) require zero down payment. USDA loans (for rural properties) also require zero down payment.
The trade-off with FHA is that while the down payment is low, you pay mortgage insurance for the life of the loan. With a conventional loan, you can remove mortgage insurance once you reach 20 percent equity. With a VA or USDA loan, there is no mortgage insurance at all, but you may not be may be able to access for those programs.
| Loan Type | Minimum Down Payment | Mortgage Insurance |
|---|---|---|
| FHA | 3.5% | Mandatory for life of loan |
| Conventional | 3–20% | Required below 20%, removable at 20% equity |
| VA | 0% | None |
| USDA | 0% | None |
Frequently Asked Questions
Can I borrow the down payment from someone?
No. The lender will ask where the down payment came from, and if it is a loan, it counts as debt on your credit report and affects your debt-to-income ratio. A gift from a family member is allowed if they sign a gift letter, but a loan is not.
What if I do not have 3.5 percent saved?
You cannot get an FHA loan without the down payment. Some nonprofits and local housing agencies offer down payment grants or forgivable loans, but you would need to research programs in your area. Alternatively, you could wait and save, or explore whether you may have access to for a VA or USDA loan instead.
Can the seller pay my down payment?
No. The down payment must come from your own funds or from an approved gift. The seller can pay some of your closing costs (up to a certain percentage depending on the lender), but not the down payment itself.
Do I have to pay the upfront mortgage insurance premium in cash?
No. You can roll the upfront mortgage insurance premium (usually 1.75 percent of the loan) into the loan amount, which means you borrow it and pay interest on it over 30 years. This increases your monthly payment but reduces the cash you need at closing.
Will I ever stop paying mortgage insurance on an FHA loan?
Only if you refinance into a conventional loan. FHA mortgage insurance is mandatory for the life of the loan, even after you build equity. Once you have enough equity and your credit is strong, refinancing into a conventional mortgage lets you remove the insurance.