What Down Payment Do I Need for an FHA Loan?

What Down Payment Do I Need for an FHA Loan?

FHA loans generally have more flexible down payment and credit score requirements than conventional loans.

The down payment you’ll need for an FHA loan depends on your credit score. Borrowers with a credit score of 580 or higher typically need at least 3.5% down. Those with scores between 500 and 579 must put at least 10% down.

You can use savings, eligible gift funds, or down payment assistance to cover your minimum down payment. Your total cash to close will also include closing costs and FHA mortgage insurance premiums.

Understanding FHA Loan Down Payment Requirements

An FHA loan is a mortgage insured by the Federal Housing Administration, which operates under the U.S. Department of Housing and Urban Development (HUD). That insurance allows lenders to approve borrowers with lower down payments and more flexible credit criteria than most conventional loans.

The FHA minimum down payment is 3.5% for borrowers with credit scores of 580 or higher. Borrowers with credit scores between 500 and 579 are required to make a 10% down payment.

The program allows you to use a mix of sources, including personal savings, eligible gift funds, and qualified down payment assistance programs, to meet the required down payment percentage.

FHA loans require mortgage insurance, including an upfront mortgage insurance premium of 1.75% of the base loan amount, which is often rolled into the loan, plus annual mortgage insurance premiums paid monthly. These premiums increase the total cost of financing.

How Your Credit Score Affects Your FHA Down Payment

Your credit score is a three-digit measure of your creditworthiness. For FHA loans, it directly determines your minimum down payment requirement: 3.5% with a 580 or higher score, or 10% if your score is between 500 and 579.

Because the percentage applies to the home’s purchase price, even small improvements in your credit score can reduce your required down payment by thousands of dollars.

Keep in mind that individual lenders can apply stricter internal requirements, known as lender overlays. For example, a lender may require a minimum credit score of 600 or 620 even though FHA guidelines allow 580 for a 3.5% down payment.

Credit score and down payment aren't the only requirements for an FHA loan. Other factors, like your debt-to-income ratio, also play a role in whether you qualify.

FHA Loan Calculator

You can use our FHA loan down payment calculator to explore how different credit scores and down payment amounts affect your required cash and monthly mortgage insurance costs. Calculator results are illustrative and not a loan offer.

What You Can Use for an FHA Down Payment

FHA guidelines allow several borrower-friendly funding sources:

• Your own funds: Savings or checking accounts, permitted retirement withdrawals, and proceeds from the sale of assets with proper documentation
  
  
• Gift funds: Money given with no expectation of repayment, typically from family members, close friends, employers, or charitable organizations, documented with a gift letter
  
  
• Down payment assistance programs: Grants or forgivable or deferred loans from state housing finance agencies, local governments, nonprofits, or employers

Seller contributions cannot be used for the FHA down payment, but they can cover closing costs and prepaid expenses, often up to 6% of the purchase price. That can help preserve your cash.

Always confirm source eligibility and documentation requirements with your lender early in the process.

The Bottom Line

If your credit score is 580 or higher, you’ll need a down payment of 3.5% for an FHA loan. If you credit score is between 500 and 580, you’ll be required to put down 10%.

Frequently Asked Questions About FHA Loan Down Payments

What is the minimum down payment required for an FHA loan?

The minimum down payment is 3.5% with a credit score of 580 or higher, or 10% with a score between 500 and 579.

Can I use gift funds or assistance programs for my FHA down payment?

Yes. Eligible gift funds and down payment assistance programs can be used when properly documented.

How does mortgage insurance affect FHA loan costs?

FHA loans require both an upfront and annual mortgage insurance premium, which increases the total cost of borrowing.

What credit score qualifies for the lowest FHA down payment?

You need a minimum credit score of 580 to qualify for the 3.5% down payment option.

Can sellers pay my FHA down payment?

No. Sellers may contribute to closing costs and prepaids up to 6%, but they cannot fund the down payment.