FHA Loan Down Payment Requirements: Guide for Homebuyers
Key Takeaways
- FHA loans require a down payment, but the minimum is often lower than that of many conventional loans.
- Eligible borrowers may qualify for a 3.5% down payment, depending on their credit score.
- FHA down payments can come from personal funds, gift funds, or eligible down payment assistance programs.
- FHA loans offer flexible qualification requirements that can help make homeownership more accessible.
Buying a home usually involves making a down payment, which can stretch your finances, especially if you have limited savings. Thankfully, some loan options offer more affordable, lower minimum down payments than others.
FHA loans are backed by the Federal Housing Administration (FHA) and can often help homebuyers afford a mortgage with more relaxed credit requirements and a lower minimum down payment than conventional loans. We’ll help you understand these requirements so you can decide if an FHA loan might be the right type of mortgage for you.
Are Down Payments Required for FHA Loans?
You’ll have to make a down payment when you buy a home with an FHA loan, but it’s often less than the down payment required for a conventional loan. This lower upfront cost is one reason FHA loans are popular with first-time homebuyers as well as those with lower incomes or credit scores or without large savings.
While a down payment is always required with an FHA loan, the exact amount depends on several factors.
What Is the Minimum Down Payment for an FHA Loan?
The minimum down payment for an FHA loan is usually 3.5% of the purchase price, but it can vary based on your credit score. For example, you may need to provide a down payment of 10% for an FHA loan if your credit score is between 500 and 579.
You can choose to make a larger down payment than the FHA requires, which can help you save on interest because you’ll be borrowing less money to buy your home. Keep in mind that the amount of your FHA down payment can also affect how much you pay in FHA mortgage insurance premiums (MIP) and how long you’ll need to pay them.
To learn more about how much your monthly payment might be, check out our FHA loan calculator. If you’re a Freedom Mortgage customer, primary borrowers can check their credit score on our mobile app.
The Right Loans for Homebuyers
FHA loans make buying a new home more affordable with low minimum credit scores and down payments as low as 3.5%.
Get Started
Affording FHA Down Payments
While you'll need to meet FHA and lender requirements, your down payment doesn't always have to come entirely from your own savings. Depending on your situation, you may be able to use gift funds, or a down payment assistance program.
Personal Funds
Most borrowers use their own money to cover the down payment on an FHA loan. These funds can come from savings, checking accounts, or other eligible personal assets that can be documented during the mortgage process.
FHA loans don't allow you to finance the down payment or use funds from unsecured loans or credit card cash advances to meet the down payment requirement. Your lender will verify that your down payment comes from an acceptable source as part of the loan approval process.
Gift Funds
FHA guidelines allow you to use gift funds for some or all of your down payment. Gift funds are commonly provided by eligible family members or other approved donors, as long as they meet FHA requirements.
To document the gift, your lender will typically require a gift letter confirming that the money is a gift, not a loan that must be repaid. You may also need to provide documentation showing the source and transfer of the funds.
Down Payment Assistance (DPA) Programs
Some borrowers may qualify for down payment assistance (DPA) programs that help cover part or all of the required amount. This is why you may have heard the phrase “no down payment FHA loans.” Generally, this means it’s possible to get help finding the money for your down payment.
Many states offer down payment assistance programs for eligible homebuyers. The U.S. Department of Housing and Urban Development (HUD) provides resources to help you find programs in your area, including housing counseling agencies and other homeownership assistance.
Depending on where you live, you may also find assistance through state housing finance agencies, local governments, nonprofit organizations, employer-sponsored programs, or other homeownership initiatives for eligible buyers.
Are Down Payments Needed to Refinance an FHA Loan?
You won’t need to make a down payment to refinance an FHA loan. But lenders often have home equity requirements they’ll measure using a loan-to-value ratio (LTV). In this case, you’ll need to keep your LTV below a certain maximum percentage—often 80% or 97.75%—to get your refinance approved.
Keep in mind that refinancing an FHA loan often comes with closing costs you’ll need to pay upfront or add to your loan amount. By refinancing, the total finance charges you pay for your home may be higher over the life of the loan. If you qualify for an FHA Streamline Refinance with Freedom Mortgage, we can often offer you lower costs, less paperwork, easy credit qualification, and faster closing than traditional refinance options.
Other Requirements for FHA Loans
Aside from your down payment, here are other FHA loan requirements to consider:
- Debt-to-income ratio (DTI): Reviewing your debt-to-income ratio helps lenders better understand your overall financial health. Most lenders typically want to see a DTI of 43% or less to qualify for an FHA loan, but other factors may allow for flexibility.
- Mortgage insurance premium (MIP): FHA loans require a MIP regardless of the down payment amount. If your down payment is 10% or more, you’ll pay annual MIP for 11 years. If your down payment is less than 10%—including the standard 3.5% minimum—you’ll pay annual MIP for the full loan term.
- Primary residence: FHA loan borrowers are typically required to use the home purchased as their primary residence and move in within 60 days of closing.
- Proof of income: Lenders usually require proof of steady income, such as pay stubs or tax documents, to ensure you can comfortably afford the monthly mortgage payments on a loan.
Final Thoughts: Low FHA Down Payments Can Help You Become a Homeowner Sooner
With down payments starting at just 3.5%, flexible credit guidelines, and available support programs, FHA loans can provide a more affordable and accessible route to homeownership. Even if you have limited savings or a lower credit score, an FHA loan might be the opportunity you’ve been looking for to make your dream of homeownership come to life.
Whether you’re purchasing your first home or considering a refinance with an FHA loan, get prequalified today with Freedom Mortgage to start the process. We’ll be with you every step of the way.
Victoria Araj is the Senior Director, Managing Editor at Freedom Mortgage. In her 20 years of working for top mortgage lenders, she’s held roles in mortgage banking, public relations, editorial content, and more. She has 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. She has spoken at several industry conferences, where she’s discussed the importance of editorial content for brands.
You Might Be Interested In
FHA vs. Conventional Loans: How They Compare
See if an FHA or Conventional Loan Is Best For You
FHA Closing Costs: What’s Included and How Much You’ll Pay
What Fees Can FHA Homebuyers Expect at Closing?
FHA Loans for Bad Credit Scores
Get an FHA Loan to Buy or Refinance a Home
FHA vs. Conventional Loans: How They Compare
See if an FHA or Conventional Loan Is Best For You
FHA Closing Costs: What’s Included and How Much You’ll Pay
What Fees Can FHA Homebuyers Expect at Closing?
- ${title}${badge}