Images by Getty Images; Illustration by Austin Courregé/Bankrate
Key takeaways
- FHA loans require a minimum 3.5 percent down payment for borrowers with a credit score of 580 or more. Borrowers with a credit score of 500 to 579 need to put 10 percent down to get an FHA loan.
- Conventional conforming mortgages only require 3 percent down, and VA and USDA loans require no down payment.
- Besides a down payment, borrowers need to budget for mortgage insurance premiums (MIPs) and closing costs.
FHA loans are insured by the Federal Housing Administration (FHA). They come with more flexible eligibility guidelines, including a low down payment requirement. If you’re considering an FHA loan, here’s what you need to know about the down payment requirement and other costs.
What is the minimum FHA loan down payment?
The minimum FHA loan down payment is either 3.5 percent or 10 percent of the home’s purchase price, depending on your credit score:
| Credit score | FHA down payment requirement |
|---|
| 580+ | 3.5% |
| 500-579 | 10% |
For a $300,000 home purchase, that’s $10,500 down at the low end and $30,000 at the top.
Note you can only borrow so much with an FHA loan: $498,257 for a single-family home in most housing markets for 2024.
How to save for an FHA loan down payment
To save up for a down payment on an FHA loan, begin by setting a goal. Consider:
- What is your homebuying budget? How much house can you afford?
- When do you plan to purchase?
- What is your savings strategy?
- Do you already have some savings to work with?
- Will family members or friends contribute to your down payment?
You can boost your savings by cutting some expenses or using a money-saving app, but you don’t have to save the entire 3.5 percent (or 10 percent) on your own. With an FHA loan, you’re allowed to put gifted funds toward the down payment. Here’s how:
FHA loan down payment gifts and rules
Down payment gifts most commonly come from friends and family members. They can also come from labor unions, employers and nonprofit organizations. However, you can’t use gifted funds from:
- The home builder
- The home’s seller
- Your real estate agent or broker
- Anyone else with a vested interest in selling the home
FHA gift funds can help people become homeowners that may otherwise be unable to purchase a home. Note that if you decide to use gift funds, your mortgage lender may require you to submit a gift letter.
FHA loan down payment assistance
Along with gifted funds, you can also apply down payment assistance to your FHA loan. There are many assistance programs out there, including through nonprofits, lenders and the government. For instance, state housing finance agencies (HFAs) package assistance with first-time homebuyer loans.
Additional cost considerations for FHA loans
Along with the down payment, you’ll also need to budget for:
- FHA mortgage insurance premiums (MIPs): MIPs come in two forms: upfront and monthly. Your lender will charge you an upfront fee when you close on your loan that you can finance into the mortgage. You’ll have to pay additional premiums each month as part of your mortgage payment. How much and how long you pay the monthly premiums varies depending on your down payment and other factors.
- FHA loan closing costs: Typically, FHA closing costs are between 3 percent and 6 percent of the home’s purchase price.
Other low-down payment mortgages
There are other types of mortgages that have either a low or no down payment requirement. These include:
- 3 percent conventional loans
- No-money down VA loans for eligible members of the military and veterans
- No-money down USDA loans for borrowers in eligible rural areas
FHA down payment FAQ
FHA loans, which are backed by the federal government, are designed to make homeownership more accessible to first-time homebuyers and other borrowers who may otherwise struggle when applying for conventional mortgages. For this reason, the loan program requires a down payment of just 3.5 percent and features more relaxed credit guidelines than traditional home loans.
You cannot get an FHA loan with zero down. However, the money for your down payment doesn’t have to come from your account. You may be able to fund your down payment with FHA gift funds and down payment assistance.
If you take out an FHA loan, the seller is allowed to contribute up to 6 percent of the home’s sales price in concessions. For example, if you buy a home for $300,000, the seller can offer up to $18,000 in concessions. You will not receive cash directly as the concessions are applied directly to the closing costs and prepaid expenses.
How much you need to make to get an FHA loan depends largely on the loan size, the interest rate and your other monthly debts.
For example, say you want to buy a $300,000 home with 10 percent down (or $30,000) with a 30-year FHA loan at 7.85 percent interest. For this example, we’ll exclude other monthly debts. You would need to have a gross household income of just under $100,000 to comfortably afford this home at a 28 percent debt-to-income (DTI) ratio. However, with that income, you may be approved for a much higher loan, up to 43 percent DTI or more.
To run your own calculations, check out our home affordability calculator.
Generally, mortgage lenders won’t allow you to use a personal loan for an FHA down payment. You’ll need to use your own funds, gift money or down payment assistance.
Yes, down payment grants are a type of down payment assistance that applies to FHA loans.
FAQs
FHA loans require a minimum 3.5 percent down payment for borrowers with a credit score of 580 or more. Borrowers with a credit score of 500 to 579 need to put 10 percent down to get an FHA loan.
How much do I need to make to buy a $300K house with an FHA loan? ›
How much do I need to make to buy a $300K house? You'll likely need to make about $75,000 a year to buy a $300K house. This is an estimate, but, as a rule of thumb, with a 3 percent down payment on a conventional 30-year mortgage at 7 percent, your monthly mortgage payment will be around $2,250.
What is the downside to an FHA loan? ›
FHA Loan: Cons
Here are some FHA home loan disadvantages: An extra cost – an upfront mortgage insurance premium (MIP) of 2.25% of the loan's value. The MIP must either be paid in cash when you get the loan or rolled into the life of the loan. Home price qualifying maximums are set by FHA.
Why are FHA closing costs so high? ›
Because FHA closing costs include the upfront MIP, an FHA loan can have average closing costs on the higher end of the typical 3% – 6% range. That doesn't diminish in any way the value of getting an FHA mortgage, with its low down payment, lower interest rates and flexible underwriting.
How much money do you need for an FHA loan? ›
An FHA loan requires a minimum 3.5% down payment for credit scores of 580 and higher. If you can make a 10% down payment, your credit score can be in the 500 – 579 range. Rocket Mortgage® requires a minimum credit score of 580 for FHA loans.
How much house can I afford if I make $36,000 a year? ›
On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.
Can I afford a 300k house on a 70K salary? ›
If you make $70K a year, you can likely afford a new home between $290,000 and $310,000*. That translates to a monthly house payment between $2,000 and $2,500, which includes your monthly mortgage payment, taxes, and home insurance.
Why do sellers avoid FHA loans? ›
Some reasons a seller might refuse an FHA loan include misconceptions about longer closing times, stricter property requirements, or the belief that FHA borrowers are riskier.
Why is it so hard to buy a house with an FHA loan? ›
Why Do Some Sellers Not Accept FHA Loans? Some home sellers see an FHA loan as a “riskier” loan compared to a conventional loan because of the FHA loan's stricter appraisal requirements. Also, the loan's lenient financial requirements for borrowers may leave the seller with a negative perception.
Why is it so hard to get a FHA loan? ›
While FHA loans can be much more forgiving compared to other types of loans one of the reasons an FHA application is declined is due to high debt-to-income ratios. Most lenders ask the total amount of monthly credit obligations, including the mortgage, should be no higher than 43 percent of gross monthly income.
Both the buyer and seller are responsible for covering different closings costs associated with the transaction. Some fees may be negotiated between the parties, while other fees (particularly lender fees and government fees) are not negotiable.
Can I roll my closing costs into my FHA loan? ›
Yes. As with other types of mortgages, you can roll FHA closing costs into your mortgage. This means you'll pay less at the closing, but higher monthly payments, as well as more interest. This move is really about determining what's more important to you: avoiding a payment now, or paying more for it in the future.
Can buyer pay all closing costs on an FHA loan? ›
Every FHA loan includes closing costs, but they can be reduced. While closing costs are generally considered to be the responsibility of the homebuyer, you may not have to pay for everything yourself. One of the biggest advantages of an FHA loan is the ability to avoid large upfront costs.
How much income do I need for a 400k FHA loan? ›
How Much Income Do I Need for a 400k Mortgage?
| Loan Type | Down Payment % | Income Needed |
|---|
| Conventional | 20% | $77,000 |
| FHA | 3.5% | $67,000 |
| VA | 0% | $69,000 |
| USDA | 0% | $78,000 |
Dec 24, 2023
If you have a conventional loan, $800 in monthly debt obligations and a $10,000 down payment, you can afford a home that's around $250,000 in today's interest rate environment.
How much is a 3.5 down payment on a 300 000 house? ›
FHA loans are recognized for their flexibility regarding credit, income, and down payment guidelines. They require a minimum down payment of just 3.5%, which is $10,500 for a $300,000 home. Please also note that mortgage insurance premiums are a requirement for all FHA loans.
How much house can I afford FHA based on income? ›
-- The sum of the monthly mortgage and monthly tax payments must be less than 31% of your gross (pre-taxes) monthly salary. -- The sum of the monthly mortgage, monthly tax and other monthly debt payments must be less than 43% of your gross (pre-taxes) monthly salary.
How much income is too much for an FHA loan? ›
There's also no maximum income requirement for an FHA loan, so you don't have to worry about earning too much to qualify. These loans are ideal for those who want a lower down payment, and for those with lower credit scores.
How much should I make to afford a $300 K house? ›
Lenders like to see a front-end DTI of no more than 28%. For a $300,000 home with a house payment of $2,178, you'd need about $7,778 per month, or $93,336 per year, in income to stay within 28%.
How much house can I afford if I make $300 K? ›
Even if you're paying a student loan or car loan, a $300,000 annual income means you can likely afford a home priced around $925,000. An income of $300,000 a year is more than four times the U.S. median household income of $74,580, so it gives you a good head start.
