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Listen, I've been helping people buy homes in 37 states for years, and one of the biggest myths I hear is that you need 20% down to buy a home. That's not true, especially when it comes to FHA loans.
Compared to some of the more complicated loan programs out there, the FHA down payment requirement is nice and simple. You only need 3.5% of the purchase price if your credit score is 580 or higher. That's all. There are no hidden fees or tricks.
But this is where it gets a little more complicated, and to be honest, this is where a lot of people get stuck. Your credit score isn't just a random number that your lender uses to make you feel bad about yourself. It really decides how much money you need to bring to the table.
Between 500 and 579? You should be ready to pay 10% upfront. 580 and higher? That's the least you can get, 3.5%. And just so you know, there is no such thing as a zero-down FHA loan, even though you might see ads for them online. The Federal Housing Administration says that the loan-to-value ratio can't be more than 96.5%. This means that you have to put in at least 3.5% of your own money or money that was given to you.
Percentages don't mean much until you see real dollar amounts, so let me show you some examples from the real world.
Price of the house, credit score, down payment percentage, down payment amount, and loan amount
$200,000 585 3.5% $7,000 $193,000
$335,000, 620, 3.5%, $11,725, $323,275
$450,000,520,10%,$45,000,405,000
SmartAsset looked at HMDA data and found that the median home value for FHA borrowers in 2023 was $335,000. So, if your credit score is 620, you would need $11,725 for a down payment.
Let me make something clear about that third example. If your credit score is between 500 and 579, that 10% requirement can feel like a kick in the gut. I won't make it sound better than it is. But here's what I tell people who are in that situation: take this time to improve your credit. Even a jump from 575 to 580 can save you tens of thousands of dollars on your down payment.
We help people with all kinds of credit find the best way to move forward at AmeriSave. That might mean waiting six months to raise your score before you apply. Sometimes it means looking into programs that help with down payments to fill the gap.
Because the mortgage industry likes to make things sound harder than they are, I spend a lot of time explaining this to borrowers.
Most of the time, you need to put down 5% to 20% for a conventional loan. However, programs like HomeReady and Home Possible let you put down 3% if you meet certain requirements. The problem? For the best rates, you usually need a credit score of at least 620, but 680 or higher is better. Fannie Mae's 2023 data shows that the median down payment for conventional loans is much higher than for FHA loans.
If you're a qualified veteran or active-duty service member, VA loans let you borrow money with no down payment. There is also no mortgage insurance. If you can get a VA loan, it's usually the best choice. Just because this is an FHA article doesn't mean I'm going to pretend otherwise.
USDA loans also let you buy rural and suburban properties with no money down. There are limits on income, and your property has to be in an area that qualifies.
Most first-time buyers find FHA loans to be the best option because they only require a 3.5% down payment and have more flexible credit requirements. You'll have to pay mortgage insurance, which we'll talk about in a minute, but you can get in with less money and a lower credit score than with other options.
This is where people get mad at me, and I understand. You came here to find out about down payments, but now I'm telling you about all these other costs. But listen: people who show up to closing without knowing the whole financial picture often end up shocked, stressed, and even unable to finish their purchase.
This one is required. There are no exceptions, no waivers, and no special circumstances that let you skip it.
The MIP you pay up front is 1.75% of the amount of your loan. You can either pay $5,657 at closing on the $323,275 loan we looked at earlier, or you can roll it into your loan balance and pay it off over 30 years.
The HUD guidelines for 2025 say that the calculation is easy. A loan of $200,000 costs $3,500 UFMIP. A loan of $300,000 means a UFMIP of $5,250. A loan of $400,000 means a UFMIP of $7,000.
Most borrowers choose to finance this amount because getting an extra $5,000 to $7,000 at closing defeats the purpose of the low down payment. But keep this in mind: if you finance the UFMIP, you'll have to pay interest on it for the entire time you have the loan.
This is the amount that is added to your payment each month. Most FHA borrowers pay an annual rate of 0.55% of the loan balance, which is split into 12 monthly payments.
Here is the math for that $323,275 loan:
The MIP for the year is $323,275 × 0.55% = $1,778.
Monthly MIP: $1,778 divided by 12 equals $148.
Every month, that $148 goes toward your mortgage payment. And here's the part that really makes people mad: if you put down less than 10%, you'll be paying this for the whole life of the loan. You can only get rid of it by refinancing into a different type of loan after you have 20% equity, or by selling the house.
The Mortgage Research Center says that this is a big drop from rates before 2023, when most borrowers paid 0.85% a year. That saves the average FHA borrower about $60 to $80 a month compared to two years ago.
Plan on closing costs that are 3–6% of the purchase price. You're going to have to pay $10,000 to $20,000 more on top of your down payment and upfront MIP for that $335,000 home.
What do closing costs cover? Everything that no one tells you about. Fees for appraisals range from $400 to $700. A title search and insurance can cost between $1,000 and $3,000. Origination fees range from 0.5% to 1.5% of the loan amount. It costs $30 to $50 to get a credit report. Fees for recording range from $100 to $300. Then you have to pay for property taxes and insurance in advance, and if you need a survey, that costs $300 to $500.
The good news? FHA lets sellers pay up to 6% of the purchase price toward your closing costs. That's more generous than regular loans, which usually only allow sellers to give up to 3% of the price.
This is probably the best thing about FHA loans, and I wish more borrowers knew about it earlier in the process.
You can save money in your checking account, savings account, certificates of deposit, or money market account. Lenders will want to see 2–3 months of bank statements to make sure the money has been there and wasn't just deposited from an unapproved source.
This is where FHA really shines when it comes to gift money. The program lets you get gifts from family members, including domestic partners, employers or labor unions, close friends who have a clear interest in you, charitable organizations, and government agencies that help first-time or moderate-income buyers. HUD Handbook 4000.1 says that your lender will need a gift letter that says the money is a real gift and that you don't expect to pay it back. I've seen families work together to help people buy homes, and it's honestly one of the best parts of this job.
You can use money from your 401(k) or IRA to make your down payment. Before you do this, make sure you know what the tax effects are and what the penalties are for taking money out early. It makes sense sometimes and not other times. Get in touch with a tax expert.
Did you sell your car, boat, or collection of old things? You can use the money from selling personal property to pay for your down payment. You'll need to keep records of the sale, like bills of sale and deposit slips.
HUD's state-by-state database shows that there are hundreds of programs that give out grants, loans that don't have to be paid back, and matched savings plans. Usually, these are aimed at first-time buyers or people who make less than 80% of the area's median income.
Let me help you avoid some trouble. If you get a payday loan, a cash advance, a credit card cash advance, a personal loan from someone who has a financial interest in the sale, money from the seller even if they call it something else, gifts from real estate agents, brokers, or builders involved in your transaction, or unexplained cash deposits, your loan will be denied faster than you can say "denied."
People have tried to be creative with this stuff, and it never works out. Lenders have seen it all, and mortgage fraud is a federal crime that will follow you for the rest of your life.
I have to admit that this topic makes me a little angry because too many borrowers don't know these programs are out there.
The National Council of State Housing Agencies says that there are more than 2,500 programs across the country that help with down payments. State housing finance agencies, local governments, and nonprofit organizations run most of them.
Grants give you money that you don't have to pay back. These usually cost between $5,000 and $15,000, but in some expensive areas, they can cost up to $60,000. Eligibility usually depends on how much money you make, where your property is, and whether or not you're a first-time buyer.
With a second mortgage or deferred payment loan, you can get a second mortgage to pay for your down payment. You don't have to make monthly payments. You can pay back the loan when you sell the house, refinance it, or pay off your first mortgage. Some of them can even be forgiven after you live in the house for a certain number of years, usually between 5 and 10.
With matched savings programs, you can save a certain amount of money, and the program will match your savings dollar for dollar or at some other ratio. These programs reward discipline and help you learn how to manage your money well.
Low-interest second mortgages are like deferred payment loans, but you also have to make monthly payments on your FHA mortgage. Usually, interest rates are between 0% and 3%, which makes them cheaper than other types of financing.
You can search for available programs by state on HUD's website, www.hud.gov/states. Another great place to get information is your state's housing finance agency.
Our loan officers at AmeriSave know about the main help programs in your area and can help you with the application process. Timing is important for these programs because they often have strict deadlines and limited funds.
Let me explain what those credit score requirements mean for your mortgage application in more detail, because there is a difference between what the FHA says and what lenders actually do.
Minimum Standards for FHA:
3.5% down payment if your credit score is 580 or higher
10% down payment if your credit score is between 500 and 579
Not eligible for FHA financing if your score is below 500
Check the facts: Most lenders set their own minimums higher than FHA's. Most lenders, including AmeriSave, will only approve you if you have a score of at least 580, even if you put down 10%. Some lenders won't go lower than 600–620.
Why? How much risk you're willing to take. Each lender has a different idea of how much risk they are willing to take on.
Your payment history makes up 35% of your score. Your score can drop by 60 to 100 points if you miss a payment by 30 days. Did you miss a mortgage payment? That's even worse.
Another 30% is credit utilization. Your credit card balances should be less than 30% of your limits, and less than 10% for the best scores.
The other 35% is made up of the length of your credit history, new credit, and the mix of your credit. It's a bad idea to open a lot of new accounts right before you apply for a mortgage. Three weeks before closing, I saw deals fall through because borrowers bought furniture on credit.
Here's what you need to do if you want to go from 565 to 580.
Pay off your credit card balances as quickly as you can. This is the quickest way to raise your score in 30 to 60 days. Get those balances down to less than 30% of your limits, even if it means using up some of your savings for a short time. You can fill it up again before you close.
Do not close old credit cards. They're helping your score by giving you more credit and lengthening your credit history, even if you don't use them.
If you see any mistakes on your credit report, you should dispute them. A 2012 FTC study found that about 20% of people have mistakes on their credit reports. You can get your free reports at AnnualCreditReport.com and contest any mistakes.
Make payments automatically. One missed payment can set you back months. Make everything automatic so you never miss a due date again.
Think about becoming an authorized user on someone else's account if they have a perfect payment history. This can sometimes help your score go up quickly.
Let's put all of this together with a realistic example based on how things are in the market in 2025.
Details of the purchase:
Price of the house: $350,000
Score: 650
A down payment of 3.5%
Example: 6.75% interest rate
Length of loan: 30 years
Cost Category Amount Notes
$12,250 down payment (3.5%) due at closing
Upfront MIP (1.75%) is $5,911 and is usually added to the loan amount.
Closing costs (about 4%) are $14,000, but this varies by lender and location.
Cash to close (without UFMIP financing): $26,250
Cash to close (with UFMIP financing) $20,339, which is the most common choice.
Breakdown of Monthly Payments:
Principal and interest: $2,230
MIP per year (0.55%): $157 a month
Taxes on property (for example): $350
Insurance for homeowners: $150
Total monthly payment: $2,887
People don't always think about this: that's $34,644 a year for housing. HUD says that your housing payment should usually be less than 31% of your gross monthly income. However, if you have other debts, you can go up to 43% of your total debt-to-income ratio. You would need to make about $112,000 a year to easily afford this payment within the 31% limit.
The FHA loan limit in your area sets the highest loan amount. This directly affects the price of the home you can buy with FHA financing.
In 2025, single-family homes in low-cost areas can't cost more than $524,225. Areas with high costs can reach $1,209,750. There are even higher limits for Alaska, Hawaii, Guam, and the US Virgin Islands.
HUD's website has information about the limit for your county. This is important because if you want to buy a home that costs more than the FHA limit in your area, you'll need a jumbo loan or another way to pay for it.
Since I work in the Dallas-Fort Worth area, I'll use Texas as an example. The FHA limit for a single-family home in Dallas County is $524,225 in 2025. That means that if you buy a house for $550,000, you are $25,775 over the FHA limit. You can either make up the difference with a bigger down payment, look for properties that are within the FHA limit, or think about getting a conventional loan instead.
The limit is $1,209,750 in places where things cost a lot, like San Francisco County. Same program, but the buying power is very different depending on where you live.
People don't pay enough attention to the FHA Energy Efficient Mortgage. You can add the cost of energy-saving upgrades to your FHA loan without having to put more money down. We're talking about solar panels, new windows, better HVAC, better insulation, and other changes that will lower your utility bills. The most you can add is either 5% of the property's value or $8,000, but if an energy consultant says the improvements are good enough, you can sometimes add more.
You can buy a fixer-upper and pay for the repairs with just one mortgage thanks to the FHA 203(k) Rehabilitation Loan. The down payment stays between 3.5% and 10% of the purchase price plus the estimated cost of renovations, depending on your credit score. This can be a good plan in places where homes that are ready to move into are too expensive. By buying a house that needs work and using a 203(k) loan to fix it up, I've seen borrowers save $50,000 to $100,000.
Another choice is FHA assumptions. You might be able to take over someone's FHA loan if you're buying a home from them and they already have one that started before 2013. This could be useful if their interest rate is a lot lower than the current market rates. The down payment would be the amount left on the loan after the sale price.
I've seen these mistakes happen over and over again after making loans in 37 states.
Mistake number one is not looking for lender credits. In exchange for a slightly higher interest rate, some lenders will pay for some or all of your closing costs. This could lower the amount of cash you need at closing from $20,000 to $12,000 or less. This might or might not make sense for you, but at least you know it's an option.
Mistake number two is to wait until you have 20% saved. If you rent for $1,800 a month while saving for a bigger down payment, you're wasting $21,600 a year on rent. A lot of people who borrow money would be better off buying now with 3.5% down than waiting three more years to save 20%. Count the numbers. Sometimes it makes sense to wait. It doesn't most of the time.
Mistake number three is not getting seller concessions. FHA lets sellers give up to 6% of the price of the home. That's a lot of money, between $12,000 and $30,000, that you could use to pay for closing costs on a typical home purchase. Sellers are often willing to help out in a buyer's market. Just ask.
Mistake number four is to take all of your savings out. Don't spend all of your money on the down payment and closing costs. You need money set aside for moving costs, repairs that need to be done right away, furniture, and emergencies. After you close, most financial advisors say you should save enough money to cover three to six months of expenses.
Mistake number five is making big purchases before closing. Getting a new credit card, buying a car, co-signing for someone else, or changing jobs can all stop your mortgage from going through even days before closing. Before they give you the money for the loan, your lender will check your credit again.
Let me be clear about when FHA is a good choice and when a regular loan might be better.
If your credit score is below 680, you have less than 5% down payment, your debt-to-income ratio is above 43%, you've had credit problems in the past (like bankruptcy over 2 years ago or foreclosure over 3 years ago), or you're a first-time buyer with little financial history, you should choose FHA.
If your credit score is 740 or higher, you have 5–20% down payment, you want to cancel mortgage insurance when you reach 20% equity, you're buying a condo because FHA condo approval is more strict, or the seller prefers conventional offers (which some do), you should think about conventional.
The Mortgage Bankers Association's 2024 data shows that the average FHA borrower's credit score is about 680, while the average conventional borrower's score is about 750. There is a reason for the 70-point difference. With conventional loans, people with higher credit scores get better rates and terms.
I've been making mortgages for years and am licensed in 37 states. I've seen the FHA program help thousands of families buy homes who wouldn't have been able to get traditional financing.
Is it flawless? No. That mortgage insurance lasts longer than most people want it to, and the upfront costs can still seem like a lot when you're trying to save every penny. FHA is still the easiest way for people with little money saved up, bad credit, or both to buy a home.
A $300,000 home only needs a $10,500 down payment and closing costs because of the 3.5% down payment requirement. With gift funds and programs that help with down payments, that amount can be cut down or even completely removed. According to HUD's data for fiscal year 2024, more than 498,000 first-time home buyers used FHA loans to buy homes. That means 82.64% of all FHA purchase loans, which shows that this program is working exactly as it was meant to.
My honest advice is to not let the desire for perfection get in the way of doing a good job. If you're renting for $2,000 a month and trying to save 20% for a down payment, it might be better to buy now with 3.5% down and start building equity right away. Do the math for your own situation, but keep in mind that every month you wait is another month you don't build equity and another month of rent that you won't get back.
We at AmeriSave are experts at helping borrowers get FHA loans from application to closing. We know what you need to do to get your file approved and how to set it up. We also know about the help programs that are available in your state. We're here to help you make this process as easy as possible, whether you're just starting to look into your options or you're ready to get preapproved.
That's what this is really about: helping families get the stability and chance to build wealth that comes with owning a home. Every year, millions of Americans can do that thanks to the FHA program. It might be just what you need to open your own door.
Are you ready to look into your FHA loan choices? Start with AmeriSave today to find out what you can get and take the first step toward owning a home.
Yes, of course. You don't have to put any of your own money down for the FHA program. You can get the whole 3.5% down payment from a gift source that meets the program's requirements. Your lender will need a letter from the person giving you the money that says it is a real gift and that you don't have to pay it back. You'll also need proof that the donor sent the money to you and that they had the money available to give it to you.
At 580, you meet the requirements for the 3.5% minimum down payment. But keep in mind that you're very close, and any changes to your score between the time you apply and the time you close could drop you below the threshold. If your score drops to 579, which is one point lower, you will need to put down 10% of the purchase price. Because credit scores can change based on when they are reported and other things you can't control, I always suggest having a cushion above the minimum credit score requirements.
Yes, FHA lets you buy properties with up to four units, like a duplex, triplex, or fourplex, as long as you live in one of the units as your main home. The down payment amount is still 3.5% or 10%, depending on your credit score. This is a great plan for first-time buyers because the rent from the other units can help you get a bigger loan and pay for your housing costs. For multi-unit properties, the FHA loan limits are higher. Check HUD's website for the limits in your area.
No, that's a common mistake. The FHA says that a first-time buyer is someone who hasn't owned a primary residence in the last three years. But this definition only matters for some programs that help with down payments. Anyone who meets the credit, income, and property requirements can get an FHA loan, whether it's their first home or their fifth. According to HUD's FY2024 annual report, 82.64% of FHA purchase loans went to first-time buyers. This means that almost 18% of the loans went to people who had already bought a home before.
The FHA's waiting period for bankruptcy is usually two years from the discharge date for Chapter 7 bankruptcy. However, if you can show that there were circumstances beyond your control that made it impossible for you to wait that long, you may be able to get an exception after one year. You can file for Chapter 13 bankruptcy if you've made 12 months of on-time payments to your trustee, the court agrees, and you haven't gotten any new bad credit. If you want to foreclose, you have to wait three years from the completion date. However, there are some exceptions for special situations. The most important thing is to show that you have re-established credit by making all of your payments on time since the event.
Yes, but the condo building has to be on HUD's list of approved condos. FHA financing is more strict than regular financing because it requires the whole condo project to meet certain financial and occupancy standards, not just your unit. In condo-heavy markets, you may not have as many choices because many condo buildings aren't FHA-approved. Before you start shopping, you can look up which condos in your area are approved by HUD in their database. If you find a condo you love that isn't FHA-approved, the condo association can ask for approval, but that process takes time and isn't always successful.
Self-employed people can get FHA loans, but you'll need to show two years of tax returns, profit and loss statements, and maybe more paperwork to prove that your income is stable. Most of the time, lenders will average your income over 24 months unless you can show that it is clearly going up. The most important thing is to show that your income is steady. If your income changes a lot from year to year, you can expect more scrutiny and requests for documentation. Many self-employed people who want to get a mortgage benefit from working with a knowledgeable loan officer who knows how to properly document business income.
Yes, and a lot of borrowers do just that. You can refinance into a regular loan to get rid of the monthly mortgage insurance premium once you've built up enough equity (usually 20%) and your credit has improved. This is a common way for FHA borrowers to use the program to get to homeownership. Just do the math carefully. You'll have to pay closing costs on the refinance, which are usually 2–3% of the loan amount. Make sure the monthly savings are worth the upfront cost. It might not make sense to refinance if you plan to move in a few years anyway.
No, the FHA program doesn't have any income limits. You only need to make enough money to qualify based on your debt-to-income ratio, which usually can't be higher than 43–50% depending on your lender and other factors. But some down payment help programs that work with FHA loans do have income limits. These limits are usually set at 80% or less of the median income in your area. The American Enterprise Institute's 2023 study found that the average first-time FHA buyer made about $116,000 a year. However, this number varies a lot depending on where they live and how many people live in their household.
There are more options than just seller concessions. If you agree to pay a little more in interest, your lender can use lender credits to pay for some of the closing costs. Many down payment assistance programs pay for closing costs as well as the down payment. Some state and local programs help first-time buyers with closing costs if they meet certain requirements. More and more companies are offering help to their employees, such as home buyer grants or loans that don't have to be paid back. We can help you figure out which combination of these strategies will work best for you at AmeriSave.
No, 3.5% is the least amount of money the FHA will let you invest if your credit score is 580 or higher. Even with help programs, this can't be lowered. The help programs can give you the full 3.5% in the form of grants or low-interest loans, so you might not have to pay anything at closing. You still need to have at least 3.5% of the money, but it can come from an approved assistance program instead of your own savings. This is why it's so important to look into the help programs that are available in your area before you start looking for a home.
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