FHA down payments start at 3.5% of the home price, and that is the minimum the Federal Housing Administration allows

An FHA loan is a mortgage insured by the Federal Housing Administration, which means the government backs the loan if you stop paying. Because the government takes on that risk, FHA lets you put down less money upfront than conventional loans require. The minimum down payment is 3.5% of the purchase price. If you are buying a $200,000 home, 3.5% is $7,000. That $7,000 comes from your own money — it does not get borrowed.

You can put down more than 3.5% if you have it. Some buyers put down 5%, 10%, or 20%. The higher your down payment, the lower your monthly mortgage insurance cost will be. But you are never required to put down more than 3.5% for an FHA loan.

The down payment is separate from closing costs. Closing costs are the fees for the appraisal, title search, loan processing, and other services — they typically run 2% to 5% of the loan amount. You pay those on top of the down payment, though some sellers will cover part of your closing costs as part of the sale agreement.

Key Takeaways

  • FHA loans require a minimum down payment of 3.5% of the home's purchase price, which is lower than most conventional mortgages.
  • You must have the down payment in your own funds or from an approved source like a gift from a family member or nonprofit grant.
  • Closing costs are separate from the down payment and typically add another 2% to 5% to what you owe at signing.
  • Putting down more than 3.5% reduces your monthly mortgage insurance premium, so the total cost of the loan goes down over time.
  • The down payment amount does not change based on your credit score or income, only on the home price.

Where the down payment money can come from

Your down payment must come from your own savings, a gift from a family member, or certain approved sources. You cannot borrow the down payment from another lender — if you do, the FHA will count that borrowed money as additional debt when calculating whether you can afford the mortgage.

A family member can give you the down payment as a gift with no strings attached. The lender will ask for a signed letter from the person giving the gift stating that it does not need to be repaid. The gift can come from a spouse, parent, child, sibling, or other relative. Some lenders also allow gifts from employers, labor unions, or nonprofit organizations that help homebuyers.

If you are a first-time homebuyer, you may find down payment assistance programs run by your state, county, or local housing authority. These programs sometimes provide grants (money you do not repay) or second mortgages (loans with favorable terms). The availability and amount vary by location. Your lender can point you toward programs in your area, or you can contact your local housing authority directly.

How mortgage insurance changes your actual monthly cost

When you put down less than 20%, you pay mortgage insurance — a monthly fee added to your mortgage payment. On an FHA loan, this fee is called the mortgage insurance premium, or MIP. It protects the lender if you default, but you are the one who pays for it.

FHA charges two types of mortgage insurance. The first is an upfront premium, called the upfront mortgage insurance premium (UFMIP), which is 1.75% of the loan amount. This gets rolled into your loan, meaning you borrow it as part of your mortgage rather than paying it in cash at closing. On a $200,000 home with a $7,000 down payment, the loan amount is $193,000, and the UFMIP would be about $3,378.

The second is an annual premium paid monthly. The rate depends on your down payment and the length of your loan. If you put down 3.5%, the annual MIP is typically around 0.55% of the loan balance per year, paid in monthly installments. On a $193,000 loan, that is roughly $106 per month. If you put down 10%, the annual rate drops to around 0.30%, or about $48 per month on the same loan amount. The exact rates change based on FHA guidelines and your specific loan terms.

You pay mortgage insurance for the life of the loan if your down payment was 3.5%. If you put down 10% or more, you can stop paying MIP after 11 years. This is why a larger down payment saves money over time — the monthly insurance cost is lower, and you stop paying it sooner.

Down payment requirements by loan type within FHA

FHA offers different loan products, and the down payment minimum is the same across all of them: 3.5%. The main FHA loan types are the 203(b) (standard home purchase), 203(k) (for homes needing repairs), and 203(h) (for people rebuilding after a disaster). Regardless of which type you use, you need 3.5% down.

The difference between loan types is not the down payment — it is what the loan can be used for and what inspections or repairs are required. A 203(k) loan, for example, includes money for home repairs in the total loan amount, but you still put down 3.5% of the purchase price of the home itself.

What disqualifies you from using your down payment

The lender will verify where your down payment came from. If the money came from a loan you took out specifically to cover the down payment, the FHA will not allow it. The lender will ask for bank statements showing the money has been in your account for at least two months. This is called the "seasoning" requirement — it proves the money is yours and not borrowed.

If you received a gift, the lender needs a signed letter from the person who gave it stating the money is a gift and does not need to be repaid. Some lenders also require proof that the gift-giver has the funds to give (like a bank statement), though this varies by lender.

You cannot use credit cards, personal loans, or lines of credit to fund the down payment. You also cannot borrow against retirement accounts like a 401(k) or IRA and use that as down payment money — the lender will see the withdrawal and count it as new debt.

How your down payment affects your interest rate and total loan cost

Your down payment does not directly change your interest rate on an FHA loan. The rate is based on market conditions, your credit score, and the loan term (15 years, 30 years, etc.). A larger down payment does not get you a lower interest rate.

However, a larger down payment reduces your total cost because it lowers the loan amount and the mortgage insurance premium. If you put down $7,000 on a $200,000 home, you borrow $193,000. If you put down $20,000, you borrow $180,000. The smaller loan means smaller monthly payments and less total interest paid over the life of the loan. It also means lower monthly mortgage insurance, which saves thousands of dollars over 30 years.

The break-even point varies, but generally, putting down 10% instead of 3.5% saves enough on mortgage insurance to offset the extra cash you spent upfront, usually within 5 to 7 years of payments.

Frequently Asked Questions

Can I use a 401(k) loan for my FHA down payment?

No. If you borrow from your 401(k), the lender will see the withdrawal as new debt and count it against your debt-to-income ratio. This can disqualify you or lower the loan amount you are approved for. Gifts from family members or down payment assistance programs are better options.

What if I do not have 3.5% saved right now?

Look into down payment assistance programs in your state or county — many offer grants or favorable second mortgages for first-time homebuyers. You can also ask a family member for a gift. If neither option works, you may need to wait and save, or explore whether a conventional loan with a co-signer might work for your situation.

Does the seller ever pay my down payment?

No, the seller cannot pay your down payment directly. However, the seller can agree to cover some or all of your closing costs as part of the purchase agreement. This frees up your cash to use toward the down payment. The amount the seller can contribute is limited by FHA rules, typically up to 6% of the purchase price.

If I put down 3.5%, how much will mortgage insurance cost per month?

Mortgage insurance on an FHA loan with a 3.5% down payment typically runs 0.50% to 0.55% of the loan balance per year, paid monthly. On a $193,000 loan, that is roughly $80 to $90 per month. The exact amount depends on your credit score, the loan term, and current FHA rates, so ask your lender for a specific quote.

Can I remove mortgage insurance later if I pay down the loan?

If you put down 3.5%, you cannot remove mortgage insurance no matter how much you pay down — you pay it for the entire loan term. If you put down 10% or more, you can stop paying MIP after 11 years of on-time payments. This is another reason a larger down payment saves money over time.