The FHA requires a minimum down payment of 3.5 percent of the purchase price

The Federal Housing Administration sets 3.5 percent as the lowest down payment allowed on an FHA loan. That means on a $200,000 home, your down payment would be $7,000. On a $300,000 home, it would be $10,500. The remaining balance becomes your mortgage, which you'll repay over 15, 20, or 30 years depending on your loan terms.

This 3.5 percent figure has been the FHA standard since 2009 and applies to most borrowers. However, there are two exceptions: if you have a lower credit score (below 580), some lenders require 10 percent down instead, and if you're a first-time homebuyer with certain income limits, some state programs may offer different terms. The 3.5 percent rule is what you'll encounter at most lenders.

The down payment itself is only one cost you'll need to bring to closing. You'll also pay an upfront mortgage insurance premium (typically 1.75 percent of the loan amount) and ongoing monthly mortgage insurance. These insurance costs exist because the FHA accepts borrowers with lower credit scores and smaller down payments than conventional loans do.

Key Takeaways

  • FHA loans require a minimum 3.5 percent down payment on the home's purchase price, which is lower than the 5 to 20 percent conventional lenders typically require.
  • You must pay an upfront mortgage insurance premium of about 1.75 percent of your loan amount at closing, in addition to your down payment.
  • Monthly mortgage insurance premiums will be added to your mortgage payment and vary based on your loan amount, down payment size, and credit score.
  • Borrowers with credit scores below 580 may be required to put down 10 percent instead of 3.5 percent, though this varies by lender.
  • Your down payment money must come from your own savings, a gift from a family member, or a grant program—not from a loan.

Where the down payment money can come from

The FHA allows your down payment to come from your own savings or checking account. You'll need to show bank statements covering the last two months to prove the money has been there and is genuinely yours. If you received a gift from a family member, that's allowed too—the lender will ask for a signed gift letter stating the money is a gift, not a loan you have to repay.

You cannot borrow the down payment from another lender, use a credit card cash advance, or take out a personal loan. The FHA treats borrowed money as additional debt that affects your ability to repay the mortgage. Some state and local programs offer down payment grants specifically for first-time homebuyers, and those funds count as acceptable sources. Your real estate agent or mortgage lender can tell you whether your area has active grant programs.

How down payment size affects your monthly costs

A larger down payment lowers your monthly mortgage insurance premium. If you put down 3.5 percent, your mortgage insurance will cost more each month than if you put down 10 percent. The difference isn't huge—typically $50 to $150 per month depending on your loan size—but it adds up over time.

Putting down more than 3.5 percent also means you borrow less money overall. On a $200,000 home, a 3.5 percent down payment means a $193,000 loan. A 10 percent down payment means a $180,000 loan. The smaller loan means lower monthly payments and less total interest paid over the life of the loan. However, you don't need to put down more than 3.5 percent to get an FHA loan—it's purely a financial choice based on what you can afford.

The mortgage insurance you'll pay beyond the down payment

FHA loans require two forms of mortgage insurance. The first is the upfront mortgage insurance premium (UFMIP), which is typically 1.75 percent of your loan amount. On a $193,000 loan, that's about $3,378. You can pay this at closing out of pocket, or you can roll it into your loan amount and pay it back over time with interest. Most borrowers roll it in because they don't have extra cash at closing.

The second is annual mortgage insurance, which gets divided into monthly payments added to your mortgage bill. The rate depends on your loan amount, how much you put down, and your credit score. For a borrower with a 3.5 percent down payment and a credit score in the 620 to 639 range, annual mortgage insurance might run 0.80 percent of the loan amount per year—roughly $1,544 per year on a $193,000 loan, or about $129 per month.

Unlike conventional loans, FHA mortgage insurance doesn't automatically drop off after you reach 20 percent equity in the home. If you put down less than 10 percent, you'll pay mortgage insurance for the entire loan term (15, 20, or 30 years). If you put down 10 percent or more, mortgage insurance stops after 11 years. This is an important cost difference to understand before you commit to a 3.5 percent down payment.

Credit score requirements tied to down payment

The FHA itself doesn't set a minimum credit score—that's up to individual lenders. However, most lenders require a score of at least 580 to offer the 3.5 percent down payment option. If your score is between 500 and 579, some lenders will work with you but typically require 10 percent down instead. Below 500, most lenders won't offer FHA loans at all.

Your credit score also affects the interest rate you're offered and the mortgage insurance premium you pay. A score of 620 to 639 will result in higher insurance costs than a score of 680 or above. If your score is currently low, waiting six months to a year while you pay down debt and make on-time payments can meaningfully lower your insurance costs and interest rate, even if you still may have access to now.

Debt-to-income limits and how down payment fits in

The FHA limits how much of your monthly income can go toward housing costs and total debt. Most lenders use a 43 percent debt-to-income ratio as the maximum—meaning your mortgage payment, property taxes, insurance, and all other debts combined can't exceed 43 percent of your gross monthly income. Some lenders will go to 50 percent for borrowers with strong credit and savings.

Your down payment size affects this calculation because a larger down payment means a smaller loan and a smaller monthly payment. If you're close to the debt-to-income limit, putting down 10 percent instead of 3.5 percent might be the difference between approval and denial. A mortgage lender can run the numbers for your specific situation and tell you whether a larger down payment would help you may have access to.

Frequently Asked Questions

Can I use a gift from someone who isn't family for my down payment?

Most lenders require the gift to come from a family member—typically a parent, sibling, grandparent, or spouse. Some lenders have stricter rules and require proof of the family relationship. A gift from a friend or employer is usually not accepted. Ask your lender about their specific gift policy before you ask someone outside your family.

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

You won't be able to get an FHA loan until you do. Some state and local down payment grant programs can cover part or all of the 3.5 percent for first-time homebuyers, but these programs have income limits and aren't available everywhere. Contact your local housing authority or search your state's housing finance agency website to see what programs exist in your area.

Does the down payment have to be paid all at once before closing?

No. You bring the down payment to the closing table on the day you sign the mortgage documents. Before that, you'll show your lender bank statements proving you have the money, but you don't transfer it until closing day itself. The title company or escrow agent will coordinate the transfer of all funds at once.

If I put down 10 percent instead of 3.5 percent, do I still pay mortgage insurance?

Yes, but for a shorter time. With 10 percent down, you'll pay mortgage insurance for 11 years instead of the full loan term. After 11 years of on-time payments, the insurance drops off automatically. With 3.5 percent down, you pay for the entire 15, 20, or 30 years unless you refinance into a conventional loan later.

Can I borrow the down payment from my 401(k) or retirement account?

You can withdraw from a 401(k) or take a loan against it, but the lender will count that withdrawal or loan as income or debt on your process. A 401(k) withdrawal is taxable income and will increase your reported income for the year, which affects your debt-to-income ratio. A 401(k) loan shows up as a monthly debt payment. Talk to your lender about how either option would affect your approval before you proceed.