FHA down payment requirements start at 3.5 percent of the home's purchase price

The Federal Housing Administration sets a minimum down payment of 3.5 percent for most borrowers. 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 loan.

This 3.5 percent figure applies to first-time buyers and repeat buyers alike, as long as your credit score meets the FHA's floor of 580. If your score falls between 500 and 579, the FHA requires 10 percent down instead — double the standard amount.

The down payment itself comes from your own funds. You cannot borrow it from another source. The FHA allows gifts from family members to cover part or all of your down payment, but the money must be a true gift with no repayment expected — the lender will ask for a signed gift letter to confirm this.

Key Takeaways

  • FHA loans require a minimum 3.5 percent down payment for borrowers with a credit score of 580 or higher.
  • Borrowers with credit scores between 500 and 579 must put down 10 percent instead.
  • Your down payment must come from your own savings or from a family gift documented with a signed letter.
  • The down payment amount does not include closing costs, mortgage insurance, or property taxes — those are separate expenses you will owe at closing.

What happens to your down payment at closing

Your down payment reduces the loan amount the FHA insures. If you buy a $250,000 home and put down 3.5 percent ($8,750), the FHA insures a loan of $241,250. That smaller loan amount means lower monthly payments than a conventional mortgage on the same home would require.

At closing, your down payment goes directly to the seller as part of the purchase price. You do not keep it or use it for anything else. The title company or closing attorney handles this transfer — it happens the same day you sign the final paperwork.

Down payment versus mortgage insurance and closing costs

Many borrowers confuse down payment with the other money due at closing. They are separate. Your down payment is what you contribute toward the purchase price. Mortgage insurance is what you pay to protect the lender if you default — the FHA requires this on all loans with less than 20 percent down. Closing costs cover the lender's fees, title search, appraisal, and other transaction expenses.

On that $250,000 home with 3.5 percent down, you might see:

  • Down payment: $8,750
  • Closing costs: $5,000 to $7,500 (typically 2 to 3 percent of the loan amount)
  • Upfront mortgage insurance premium: $4,825 (1.75 percent of the loan amount for most borrowers)

Your lender can roll closing costs and the upfront mortgage insurance into your loan, meaning you do not have to pay them in cash at closing. Your down payment, however, must be paid in cash.

How to save for an FHA down payment

Because 3.5 percent is the floor, not the goal, putting down more than the minimum lowers your monthly payment and reduces the total interest you pay over the life of the loan. Many first-time buyers save for a year or two to reach 5 or 10 percent down, which still qualifies for an FHA loan but costs less in the long run.

If you cannot save the full amount yourself, the FHA allows down payment gifts from family members. The gift must be from a relative — spouse, parent, sibling, grandparent, or in-law. Some lenders also accept gifts from employers or nonprofit organizations, but this varies by lender. The gift giver does not need to be on the loan or own the home.

A few state and local programs offer down payment grants or matching funds for first-time buyers, though these vary by location and income. Your lender or a local housing counselor can tell you whether your area has such a program.

Credit score and down payment: how they connect

Your credit score determines which down payment tier you fall into. The FHA does not publish a single "credit score requirement" — instead, it sets a floor at 580 for the 3.5 percent option and 500 for the 10 percent option. Most lenders, however, set their own minimums higher than the FHA floor. Many require 620 or 640 for the 3.5 percent down option.

If your score is below 580, you have two paths: wait and rebuild your credit, or look for a lender willing to work with lower scores (some do, though they may charge a higher interest rate). Putting down 10 percent does not bypass a low credit score — it only applies if your score is between 500 and 579.

Down payment on investment properties and second homes

The FHA only insures loans on primary residences — homes you will live in as your main address. If you are buying a second home or an investment property, FHA loans are not an option, and you will need a conventional loan instead. Conventional loans typically require 10 to 20 percent down for investment properties.

Frequently Asked Questions

Can I borrow my down payment from a friend or family member?

No. Your down payment must come from your own savings or from a gift. If it is a gift, the lender requires a signed letter from the gift giver stating that no repayment is expected. A loan, even from family, does not count.

What if I do not have 3.5 percent saved?

Some nonprofit organizations and state programs offer down payment grants or matching funds for first-time buyers. Your lender or a HUD-approved housing counselor can point you toward programs in your area. You can also ask family members for a gift, which the FHA allows.

Does putting down more than 3.5 percent change my mortgage insurance?

Yes. Mortgage insurance premiums are based on your loan-to-value ratio — the size of your loan compared to the home's price. A larger down payment means a smaller loan and lower insurance costs. At 10 percent down, your monthly insurance payment drops noticeably compared to 3.5 percent.

Can I use my 401k or retirement account for the down payment?

You can withdraw from a 401k or IRA, but the lender will count the withdrawal as income on your process, which may affect your debt-to-income ratio and your ability to borrow. Some retirement accounts allow loans rather than withdrawals, which may be treated differently. Ask your lender how they handle retirement account funds before you withdraw.

Is the down payment the same as the earnest money I put down when I make an offer?

No. Earnest money is a deposit you make when you offer to buy the home — it shows the seller you are serious. That money is held in escrow and applied toward your down payment at closing. So if you put down $3,000 in earnest money and your down payment is $8,750, you still owe $5,750 at closing.