Buying a home is an exciting milestone in life But saving up for the down payment can feel daunting for many first-time homebuyers. If you’re wondering how much money you need to put down for an FHA loan, you’ve come to the right place!
In this comprehensive guide, we’ll cover everything you need to know about FHA loan down payments:
What is an FHA Loan?
FHA loans are government-backed mortgages insured by the Federal Housing Administration (FHA). They make homeownership more accessible by requiring lower down payments and credit scores compared to conventional loans.
Key features of FHA loans include:
- Down payments as low as 3.5%
- Lenient credit score requirements – 580+ FICO for 3.5% down
- Low mortgage insurance premiums
- Gift funds and down payment assistance allowed
FHA Down Payment Requirements
The FHA down payment requirement depends on your credit score:
- Credit Score 580+: 3.5% down payment
- Credit Score 500-579: 10% down payment
For example, if you buy a $300,000 home with a 580+ credit score, your minimum FHA down payment would be 3.5% or $10,500.
With a score of 500-579, you’d need 10% down or $30,000.
How Much to Save for an FHA Down Payment
When budgeting for your FHA loan, keep these costs in mind:
1. Down Payment
Aim to save at least 3.5% of the purchase price if your credit score is 580+. closing costs and other expenses.
2. Closing Costs
FHA closing costs range from 3-6% of the loan amount. For a $300,000 home, that’s $9,000-$18,000.
3. Upfront Mortgage Insurance
You’ll pay an upfront mortgage insurance premium (MIP) of 1.75% of the loan amount, which can be rolled into your mortgage.
4. Prepaid Costs
Prepaid expenses like homeowners insurance property taxes and interest.
Bottom Line For a $300000 home you’ll want around $15,000-$20,000 saved to cover the down payment, closing costs, and prepaid items.
FHA Down Payment Assistance Programs
The good news is you don’t have to fund the down payment all on your own. FHA loans allow gifted funds and down payment assistance programs to help with the required down payment.
Here are some options to look into:
- Down Payment Gift Funds – From relatives, employers, unions etc. Requires a gift letter.
- Down Payment Assistance Programs – Check state and local programs.
- Seller Credits – Up to 6% of the sale price.
Tips for Saving for an FHA Down Payment
- Cut expenses – Downsize housing, transportation, utilities, subscriptions.
- Use a budgeting app – Apps like Mint help you save money automatically.
- Choose the right home – Opt for a less expensive starter home.
- Build your credit – Aim for a score of 580+ for the 3.5% down option.
- Contribute regularly – Even small amounts add up over time.
- Choose the right bank account – Find one with high yields to grow your savings faster.
Alternatives to FHA Loans
If you want other low or no down payment options, look into:
- Conventional 97 – 3% down for first-time buyers.
- VA Loans – Zero down payment for veterans.
- USDA Loans – Zero down loans in rural areas.
FHA Down Payment FAQs
Can I get an FHA loan with no down payment?
No, FHA requires at least 3.5% down if your credit score is 580+ or 10% down with 500-579 credit.
What FICO score is needed for a 3.5% down FHA loan?
You need a minimum credit score of 580 to qualify for a 3.5% down FHA loan. Those with 500-579 credit need 10% down.
Can I use a personal loan or credit card for the down payment?
No, FHA doesn’t allow borrowed funds for the down payment, only your own savings, gifts, or down payment assistance.
How much income do I need for an FHA loan?
Income requirements vary based on factors like your debt, loan amount, and interest rate. Generally, your total monthly debt should be less than 43% of your gross monthly income.
Wrap Up
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An FHA loan is a government-backed conforming loan insured by the Federal Housing Administration. FHA loans have lower credit and down payment requirements for qualified homebuyers. For instance, the minimum required down payment for an FHA loan is only 3.5% of the purchase price. The FHA mortgage calculator includes additional costs in the estimated monthly payment. Such as, a one-time, upfront mortgage insurance premium (MIP) and annual premiums paid monthly.
See how much you might be able to borrow.
This FHA loan calculator provides customized information based on the information you provide. But, it assumes a few things about you. For example, that you’re buying a single-family home as your primary residence. This calculator also makes assumptions about closing costs, lender’s fees and other costs, which can be significant.
Estimated monthly payment and APR example: A $265,375 base loan amount with a 30-year term at an interest rate of 6.250% with a down payment of 3.5% and no discount points purchased would result in an estimated principal and interest monthly payment of $1,663 over the full term of the loan with an Annual Percentage Rate (APR) of 7.478%.1