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What Are The FHA Loan Down Payment Requirements?

December 11, 2023 5-minute read

Author: Victoria Araj

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One of the initial costs of buying a house is a down payment, which is a percentage of the home’s purchase price. Your down payment requirement will depend on factors like the type of mortgage, your credit score, debt-to-income ratio (DTI) and other personal factors.

If you take out an FHA loan, you’ll have to make a down payment that meets the guidelines set by the Federal Housing Administration (FHA).

Let’s take a look at how much money you’ll need for a down payment on a home purchased with an FHA loan. Then, we’ll review some down payment assistance programs and other resources that can help home buyers make a down payment on an FHA loan.

What Is The Down Payment Requirement For An FHA Loan?

You can qualify for an FHA loan with a FICO® Score as low as 500, but your score will affect your minimum down payment. If your credit score is between 500 and 579, you’re required to put 10% down. FHA home loans require a down payment of 3.5% of the purchase price for home buyers with a credit score of 580 or above.

Let’s consider an example. If you’re planning to buy a home for $250,000 and your score is at least 580, you’ll need a $8,750 down payment. Your minimum down payment will be $25,000 if your credit score is between 500 and 579.

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Additional Costs To Close On An FHA Loan

In addition to your down payment, you can expect to pay between 3% and 6% of the home’s purchase price in FHA closing costs. Looking at our example of the $250,000 home purchase, you’ll pay between about $7,500 – $15,000 in closing costs on an FHA mortgage loan.

FHA home loans also require home buyers to pay an FHA mortgage insurance premium (MIP). When you close on the home sale, you’ll pay an upfront FHA MIP of 1.75% of the total loan amount. For a $250,000 home, that would mean paying an upfront MIP of $4,375. You can either pay this total amount at the closing table or roll it into your loan balance and monthly payments.

FHA loan borrowers will also have to pay an annual mortgage insurance premium. The annual MIP amount your lender requires will depend on factors like the length of your loan term, your loan-to-value ratio (LTV) and your down payment. Mortgage lenders typically include your annual MIP in your monthly mortgage payments.

Why Is The FHA Loan Down Payment Requirement More Flexible Than Other Loans?

The FHA has provisions that can help make it easier to meet the down payment requirement of an FHA loan. Let’s consider three of these provisions.

FHA Gift Rules

The FHA has generous rules surrounding FHA gift funds, or cash that’s gifted to help home buyers make an FHA loan down payment. These rules make it easier for a community to contribute to the home buyer in ways that regulations on conforming loans don’t allow.

The approved list of donors includes:

  • A borrower’s family member
  • A borrower’s employer or labor union
  • A close friend with a clearly defined interest in the borrower
  • A charitable organization
  • A governmental agency assisting low/moderate-income families or first-time home buyers

You can’t receive the gift from anyone with a financial interest in the home-buying transaction, including:

  • The seller of the property
  • Real estate agents
  • The lender
  • The home builder

Lower Credit Score Requirement

If you’re comparing FHA and conventional loans, FHA loans have more lenient credit requirements. Let’s review the credit score requirement for each down payment amount on an FHA loan.

  • If you have a credit score of 580 or higher, the minimum down payment requirement is 3.5%.
  • If you have a score between 500 and 579, the minimum down payment requirement is 10%.

By comparison, you’ll need a credit score of 620 or higher to be approved by Rocket Mortgage® for a conventional mortgage with only 3% down.

If your score is below 620, lenders likely won’t be able to approve your conventional loan, or they’ll charge you a higher interest rate or require a larger down payment.

Find out if an FHA loan is right for you.

See rates, requirements and benefits.

Is Down Payment Assistance Available For FHA Loans?

Down payment assistance is available, particularly for first-time home buyers. Home buyers can explore a variety of FHA down payment assistance options, particularly at the state and local level. These assistance programs typically come in the form of loans, grants and matched savings programs.

The U.S. Department of Housing and Urban Development (HUD) also maintains a database of local home buying assistance programs. The HUD database includes information on down payment assistance programs as well as other home buying resources.

FHA Loan Down Payment FAQs

Below, we answer some additional questions you may have about FHA loans and the down payment requirement.

What is the minimum down payment for an FHA loan?

The minimum down payment required for an FHA loan is 3.5%. Keep in mind that you’ll need a credit score of 580 or higher to be eligible for the 3.5% down payment. You’ll have to put 10% down if you have a credit score of 500 – 579. It’s important to note that Rocket Mortgage requires a minimum credit score of 580 for all FHA loans.

What else do I need to qualify for an FHA loan?

In addition to the down payment requirement, you’ll need to meet other standards in order to qualify for an FHA loan. Here are some of the FHA loan requirements:

  • A debt-to-income ratio (DTI) of less than 45%
  • Verification of your income through documents like pay stubs, federal tax returns and bank statements
  • The loan amount you borrow must be within the FHA loan limits for your area
  • Your home must be considered a primary residence and can’t be used as an investment property
  • The house must be appraised by an FHA-approved appraiser

Can I get seller concessions with an FHA loan?

FHA home buyers can ask for seller concessions to help reduce how much cash they’ll need to bring to the closing table. With an FHA loan, the seller can agree to contribute up to 6% of the home sale price toward closing costs.

What are other low-down payment mortgage options?

An FHA loan is just one example of a loan option that has a low down payment requirement. VA and USDA loans, for instance, offer eligible borrowers a down payment as low as 0%. Keep in mind that Rocket Mortgage no longer accepts USDA loan applications.

Qualifying borrowers can also apply for Freddie Mac’s Home Possible® or Fannie Mae’s HomeReady® loan program and make a down payment as low as 3%. Check out these loan programs to see how you qualify.

The Bottom Line: FHA Loans Offer Low- And Moderate-Income Wage Earners An Affordable Option

FHA loans can be a great option for low- and moderate-income wage earners and those who might not meet traditional credit requirements for a home loan. With a 3.5% down payment and a little patience when searching for your next home, you can let an FHA home loan help you become a homeowner.

Ready to start your FHA mortgage loan journey? Apply online today and see which option is best for you.

Find out if an FHA loan is right for you.

See rates, requirements and benefits.

Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.