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The down payment requirements for FHA loans are often lower than the requirements for other loans because FHA loans are backed by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (or "HUD").

The federal government wants to help lower to moderate income people become homeowners by guaranteeing FHA loans that are offered through private lenders. This allows lenders to make mortgages available to homebuyers with more affordable rates and terms, including lower down payment requirements.

What is the minimum down payment for an FHA loan?

The minimum down payment required for an FHA loan is 3.5% of the purchase price of the house when you have a credit score of 580 or better. When your credit score is between 540 and 580, lenders typically require you to make a down payment of 10%. Consider this example for a house that costs $250,000:

Credit score Minimum down payment on $250,000 house (%) Minimum down payment on $250,000 house ($)
580 or better 3.5% $8,750
Between 540 and 579 10% $25,000

As shown above, your credit score can impact the size of the down payment you may be required to make with an FHA loan. The size of your down payment can also affect the amount you pay in interest over the life of a loan. When you make a larger down payment, you borrow less money and pay less interest as a result.

Consider the cost of the Mortgage Insurance Premium (MIP) before you make a down payment on an FHA loan

Everyone who obtains an FHA loan is required to pay an upfront mortgage insurance premium equal to 1.75% of the loan amount. After this, you have to pay an annual mortgage insurance premium too. The cost of this yearly premium is partly based on the size of your down payment. For example, current homebuyers who are getting an FHA loan with a 30 year term can pay a lower insurance premium if they make a down payment of at least 5%.

Would you like to talk to a Freedom Mortgage Loan Advisor to learn more about FHA loans? Please call 877-220-5533 or Get Started online.

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