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
Key takeaways
How much do I need to make to buy a $300K house with an FHA loan? ›
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.
Are FHA loans always 3.5% down? ›
FHA loans require a down payment as part of the home purchase transaction. Depending on the credit score of the applicant, the FHA loan down payment requirement can either be 3.5% or 10% of the total purchase price. There are other FHA loan fees to be aware of, mainly mortgage insurance premiums.
How much is 3.5 down payment on a $400,000 house? ›
Meanwhile, an FHA loan requires a slightly higher down payment of $14,000, equivalent to 3.5 percent of the purchase price. Home buyers using either a VA loan or a USDA loan can qualify for a mortgage with zero down payment on a $400K home.
What happens if I put $20 down on an FHA loan? ›
Still, you can avoid FHA mortgage insurance by: Putting down 20 percent – This is the simplest way to avoid FHA mortgage insurance — but if you have the savings to put down 20 percent, it might make more sense to work on your credit score to qualify for a conventional loan instead.
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.
What is the downfall of an FHA loan? ›
FHA Loan: Cons
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. Interest rates are higher than with conventional loans (based on relaxed borrower eligibility requirements)
What is the FHA 5% rule? ›
"Closed-end debts do not have to be included if they will be paid off within 10 months and the cumulative payments of all such debts are less than or equal to 5 percent of the Borrower's gross monthly income. The Borrower may not pay down the balance in order to meet the 10-month requirement."
Why is my FHA down payment so high? ›
FICO Scores and Down Payment Requirements
Those who have marginal FICO scores are required to make a 10% down payment. According to FHA home loan minimum standards, those with FICO scores between 500 and 579 are required to come up with this higher down payment.
The FHA approves loan amounts based on several factors, such as your monthly income and expenses, credit score, interest rate, the loan term and the value of the property. The maximum FHA loan in most areas of the country for a single-family home is currently $420,680 for 2022.
How much house can I afford with a 30k salary? ›
One rule of thumb is to aim for a home that costs about two-and-a-half times your gross annual salary. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may need to set your sights lower.
How much house can I afford if I make $40000 a year? ›
How much house can I afford on 40K a year?
| Annual Salary | $40,000 |
|---|
| Home Purchase Budget (25% monthly income on mortgage payments) | $103,800 |
| Home Purchase Budget (28% monthly income) | $109,500 |
| Home Purchase Budget (36% monthly income) | $141,100 |
| Home Purchase Budget (40% of monthly income) | $156,900 |
4 more rowsMay 10, 2023
FHA loans require borrowers to pay mortgage insurance premiums (MIPs) at closing and throughout the life of the loan. Specifically, you'll pay 1.75% of the loan amount at closing as your upfront MIP. Then, you'll pay MIPs of 0.15% to 0.75% of the loan amount every year.
What is the 2 FHA loan rule? ›
A second FHA loan may be allowable for homebuyers who meet these qualifying criteria: You're relocating for a new job and need a new primary residence. The new home is more than 100 miles away from your current FHA-financed home. You're getting a divorce and you intend to purchase a new home in your name only.
How do I avoid a downpayment on my FHA loan? ›
Can I get an FHA loan with no down payment? No. FHA loans require at least 3.5% down for borrowers with credit scores of 580 or higher, and a 10% down payment from borrowers with scores between 500-579. The USDA and VA loan programs offer 0% down payment mortgages, but you must meet the eligibility requirements.
What is the minimum income for a 300K mortgage? ›
With a 5% down payment and an interest rate of 7.158% (the average at the time of writing), you will want to earn at least $6,644 per month – $79,728 per year – to buy a $300,000 house. This is based on an estimated monthly mortgage payment of $2,392.
How much money should I have to buy a $300 K house? ›
Having a down payment of at least 20% increases your chances of qualifying for a $300K home. To meet a 20% down payment on a 300K home, you should have at least $60,000 saved. Remember, this total is separate from your closing costs. On average, expect to pay 3% to 6% of your loan amount in closing costs.
What are the income requirements for a FHA loan? ›
There is no minimum or maximum salary that will qualify you for or prevent you from getting an FHA-insured mortgage. However, you must: Show an income history of at least two years through employment verification or proof of enrollment in school or the military.
What is effective income for FHA? ›
The FHA looks at your effective income when determining your eligibility for one of its home loans. Effective income may include your salary, hourly wages, overtime, bonuses, tips, commissions, and employer-provided mortgage assistance.
