How Much Down Payment Do You Need for an FHA Loan? A Complete Guide

Getting an FHA loan to buy your first home is an exciting milestone. But before you can close on your mortgage, you’ll need to save up enough for a down payment. So how much down payment do you need for an FHA loan?

The FHA down payment requirements depend mainly on your credit score Borrowers with higher scores can qualify for FHA loans with a down payment as low as 3,5% of the purchase price, Those with lower scores may need to put down 10% or more

In this guide, we’ll break down the key factors that determine your FHA loan down payment amount. We’ll also look at other costs that come with an FHA mortgage.

FHA Down Payment Requirements at a Glance

Here’s a quick overview of the down payment requirements for FHA loans

• Minimum FHA down payment: 3.5% of the home’s purchase price
• You need a credit score of at least 580 to qualify for the 3.5% down payment.
• With a score between 500 – 579, you’ll need a 10% down payment.
• FHA also requires you to pay closing costs and upfront mortgage insurance.

Now let’s take a closer look at how your credit score affects the FHA down payment requirements

FHA Down Payment with a Credit Score of 580+

The lowest down payment allowed on an FHA loan is 3.5% of the home’s purchase price. For example:

• Home purchase price: $250,000
• Minimum down payment: 3.5% of $250,000 = $8,750

To qualify for this down payment, you’ll need a minimum FICO score of 580 or higher. This is one reason why FHA loans appeal to buyers with lower credit scores.

Conventional mortgages backed by Fannie Mae or Freddie Mac typically require a down payment of at least 3-5% as well. But you’ll need a minimum score around 620 to qualify.

With an FHA loan, you can get approved with a lower score and still only need 3.5% down. This makes homebuying more accessible for those with less cash saved up or weaker credit histories.

FHA Down Payment with Credit Score 500 – 579

FHA lets home buyers with even lower credit scores qualify for financing. But there’s a catch.

If your credit score is between 500 and 579, your minimum FHA down payment rises to 10% of the purchase price.

On a $250,000 home, 10% down would be $25,000. That’s obviously a lot more cash needed upfront compared to 3.5% down.

Still, some buyers may prefer putting 10% down with an FHA loan vs. being denied for a conventional mortgage altogether.

An FHA loan with 10% down also costs less per month than conventional loans that allow 3-5% down. That’s because FHA mortgages have lower mortgage insurance premiums baked into the payments.

Additional FHA Loan Costs

Besides the down payment, you’ll have a few other upfront costs when getting an FHA mortgage:

Closing costs – These include lender fees, appraisal fee, title insurance fee and more. Closing costs on an FHA loan range from 3-6% of the purchase price. On a $250,000 home, you’d pay $7,500 – $15,000.

Upfront mortgage insurance – FHA loans require you to pay an upfront mortgage insurance premium (MIP) equal to 1.75% of the loan amount. On that $250,000 loan, you’d pay an upfront MIP of $4,375.

You can either pay the full 1.75% MIP at closing. Or you can finance it by rolling it into the loan amount.

Ongoing MIP – In addition to the upfront MIP, you’ll also make monthly mortgage insurance payments. The exact amount depends on your loan term, down payment, and other factors.

Why Does FHA Have Lower Down Payment Requirements?

Compared to conventional loans, FHA mortgage requirements are more flexible in a few key ways:

• Lower credit score requirements – As noted above, you can qualify for an FHA loan with a score as low as 500. Most conventional loans require 620 or higher.

• Gift funds allowed – FHA lets family, employers, charities and government agencies gift you money for the down payment. Most conventional loans don’t allow this.

• Lower mortgage insurance – FHA mortgage insurance premiums are lower than what’s charged on conventional loans with less than 20% down.

These advantages make FHA financing more accessible for first-time and low-to-moderate income home buyers. The trade-off is you have to pay the MIP throughout the life of the FHA loan.

Is Down Payment Assistance Available for FHA Loans?

Down payment assistance programs offer grants, loans, or matched savings plans to help buyers cover their down payments. There are state, local, and national programs available to assist FHA borrowers.

Some options to look into include:

• State housing finance agencies – Many states offer down payment assistance programs for first-time buyers. Learn more here.

• Employer programs – Some companies help employees with home buying through grants, matched savings plans, or low-interest loans.

• Federal Home Loan Banks – Regional FHLBanks fund down payment programs offered through local lenders and nonprofits.

Always confirm eligibility requirements before seeking down payment help. Programs often have income limits, home price limits, and other criteria borrowers must meet.

What Other Costs Do FHA Buyers Pay at Closing?

In addition to your down payment and closing costs, here are some other typical fees FHA borrowers will pay when they close on their mortgage:

• Home inspection fee – Costs $200-$500 on average. Required by FHA unless the property is new construction.

• Appraisal fee – $400-$700 typically, for the appraisal ordered by your lender.

• Credit report fee – $25-$50 per person.

• Flood determination fee – $5-$15 to check if the home is in a flood zone.

• Homeowners insurance premium – Varies based on property value and location. Can range from $500 to $2,000+ per year.

• Property taxes – Prorated amount due at closing based on local tax rates.

• Interest – You pay interest on the loan for the remainder of the month after closing.

Pro tip: Ask your lender for a completeClosing Disclosure at least 3 days before your closing date. This will list all final costs so you can be prepared.

FHA Loan Down Payment FAQs

How much can I borrow with an FHA loan?

The maximum FHA loan amount varies by county. But nationwide in 2022, you can borrow up to $420,680 with a 3.5% down FHA loan. The limits are higher for FHA loans requiring 10% down.

What are today’s FHA interest rates?

Rates on 30-year FHA fixed-rate mortgages currently range from about 5.25% to 6.25%, depending on your credit score. Rates for 15-year FHA loans are lower, ranging from about 4.25% to 5.6%.

Can I pay a bigger down payment on an FHA loan?

Yes, you can pay more than 3.5% if you want to reduce your interest rate or monthly payment. However, FHA loans require mortgage insurance whenever you put less than 20% down. So there’s no advantage to paying extra down payment beyond 20%.

What credit score is needed for an FHA loan?

The minimum FICO score for an FHA loan is 500 with a 10% down payment, or 580 with 3.5% down. But each lender sets their own credit requirements, and many prefer scores of at least 620 or higher.

The Bottom Line

The flexibility of FHA loans allows borrowers to buy a home with as little as 3.5% down and a credit score as low as 580. Just keep in mind you’ll have to pay mortgage insurance over the life of an FHA loan.

Before pulling the trigger, shop around with a few lenders to see if you can qualify for a conventional mortgage with similar low down payment options. This may make better financial sense depending on your situation.

But overall, FHA mortgages give many the opportunity to buy their first home with an affordable down payment. See if you can make it work for you!