Guide to FHA Loan Down Payments

Low Minimum Down Payments Make FHA Loans More Affordable

Buying a home usually involves making a down payment, which can stretch your finances a bit— 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. FHA loans are popular with first-time homebuyers, as well as those who may have a lower income or credit score.

Minimum Down Payment for an FHA Loan

You'll have to make a down payment when you buy a home with an FHA loan, but it's often less than what you would have to put down for a conventional 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're 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 for your FHA mortgage insurance premiums (MIP), as well as how long you'll need to pay these premiums.

To learn more about how much your monthly payment might be, check out our FHA loan calculator.

FHA Loan Down Payment Requirements

Your minimum FHA loan down payment is determined by your credit score:

• 580 or higher: If your credit score is 580 or higher, the minimum required down payment for an FHA loan is 3.5% of the purchase price of the home. This means that if you wanted to buy a $270,000 home with an FHA loan, you would only need to make a $9,450 down payment.
• 500–579: If your credit score is 500–579, the required down payment amount increases to 10% of the home's purchase price. Using the same example of buying a home that costs $270,000 with an FHA loan, your minimum down payment would be $27,000.

Other Requirements for FHA Loans

Aside from your down payment, here are other FHA loan requirements to consider:

• Debt-to-income ratio (DTI): Reviewing debt-to-income ratio is a way for lenders to better understand a borrower's overall financial health. This calculation compares a borrower's monthly debt payments to their gross monthly income. 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): Regardless of the down payment amount, FHA loans require a mortgage insurance premium for at least 11 years. This insurance protects lenders and allows them to issue loans to customers who might not qualify for a mortgage without the insurance protection.
• 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. A primary residence is one lived in by the homeowner for at least a year.
• Proof of income: Lenders usually require proof of steady income to ensure borrowers can comfortably afford to make monthly mortgage payments on a loan. They may ask for pay stubs, tax documents, or other documentation that shows streams of income.

FHA Loan Down Payment Assistance Programs

You may have seen information about “no down payment” FHA loans. Generally, this means it's possible to get help finding the money for your down payment. For example, many states have FHA loan down payment assistance programs. Visit the U.S. Department of Housing and Urban Development (HUD) website to see what assistance may be available in your state. You'll find links to various programs, such as housing counselor agencies, that can provide advice on topics like home buying, avoiding foreclosures, and credit issues.

In addition, there are state-specific homeownership assistance programs—such as Habitat for Humanity, educational programs to learn about buying and maintaining your home, community resources, and homeownership voucher programs—that all provide down payment assistance if you qualify. If you aren't sure where to look for these programs, we are always just a call away and happy to help.

Finally, the FHA allows you to use gift funds from a family member to make your down payment. Freedom Mortgage will walk you through the process of using gift funds, making sure everything is approved quickly, and your loan has no delays.

Are Down Payments Needed To Refinance an FHA Loan?

No, 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 97.5%—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 FHA streamline refinancing with Freedom Mortgage, we can offer you refinancing with lower costs, less paperwork, easy credit qualification, and faster closing.

Final Thoughts on FHA Loan Down Payments

FHA loans can provide an affordable and accessible route to homeownership, particularly for buyers with limited savings or lower credit scores. With down payments starting at just 3.5%, flexible credit guidelines, and support programs available, these loans can help people achieve the freedom of homeownership. Whether you're purchasing your first home or considering a refinance, understanding the ins and outs of FHA down payments can help you make an informed financial decision.

*Freedom Mortgage is a top FHA lender in the United States, according to Inside Mortgage Finance, 2024.