If you’re considering an FHA loan, one of the first questions is usually: How much do I need to put down?
For many buyers, the answer is 3.5%. But your credit score plays an important role, and in some cases, the requirement is higher.
Let’s walk through what determines your FHA down payment and what to expect.
Are FHA Loans always 3.5% down?
Not necessarily. FHA loans have two minimum down payment thresholds based on your credit score.
If your credit score is between 500 and 579, FHA guidelines require a 10% down payment instead. And even if you qualify for 3.5% down, you can always choose to put more money down if it fits your goals.
Putting more down can:
Lower your monthly payment
Reduce the total interest you pay over time
Help you build equity faster
How Your Down Payment Affects Your Monthly Costs
Your down payment doesn’t just change how much you borrow – it also affects how much you pay each month.
Here’s how:
1. It Lowers Your Loan Amount
The more you put down, the less you borrow. A smaller loan balance typically means a lower monthly principal and interest payment and less total interest paid over time.
For example, on a $300,000 home (at 6% interest):
| 3.5% Down | 10% Down | |
|---|---|---|
| Home Purchase Price | $300,000 | $300,000 |
| Down Payment | – $10,500 | – $30,000 |
| Total Loan Amount | $289,500 | $270,000 |
| Estimated Monthly Principal & Interest | ~$1,735 | ~$1,619 |
2. It Impacts Your FHA Mortgage Insurance
FHA loans require mortgage insurance, called a mortgage insurance premium (MIP). There are two parts:
Upfront MIP: 1.75% of the loan amount (often rolled into the loan)
Annual MIP: A percentage of your loan balance, divided into monthly payments
Your down payment plays an important role in how long you’ll pay annual mortgage insurance.
If you put less than 10% down, annual MIP typically remains for the life of the loan.
If you put 10% or more down, the annual MIP can be removed after 11 years.
So while putting more down requires more upfront savings, it may reduce how long you pay mortgage insurance, which can lower your long-term housing costs.
Neighborly Advice
Although FHA guidelines allow for credit scores as low as 500 with a 10% down payment, many lenders set their minimum credit score requirements higher to reduce risk. Lenders that accept lower scores may apply stricter terms, such as higher interest rates or additional documentation requirements.
Neighbors Bank’s current minimum credit score requirement is 620.
Can you get down payment assistance with an FHA loan?
Yes. FHA loans allow several forms of down payment assistance, which can help cover your down payment and closing costs (which typically range from 3% to 6% of the purchase price). Here are a few common ways to reduce or completely cover these upfront fees:
Down Payment Assistance (DPA) Programs
Many state and local housing agencies offer down payment assistance programs for eligible buyers. These programs may provide:
Grants that don’t need to be repaid
Forgivable loans (often forgiven after you live in the home for a certain number of years)
Low-interest second loans to help cover upfront costs
Availability and requirements vary by location, income level, and property type, but these programs are often designed specifically for first-time or moderate-income buyers.
Gift Funds
Gift funds are gifts of money that can be used to help cover a borrower’s down payment and certain closing costs. FHA loans allow gift funds from family members and other approved donors to cover your down payment. To use a gift fund with your loan, you’ll need a signed letter confirming that the funds do not need to be repaid and documentation showing the transfer of funds.
Seller Concessions
While a seller cannot directly pay your down payment, they may be able to contribute toward your closing costs. FHA loans allow seller concessions up to 6% of the purchase price.
FHA Loan Down Payment vs. Other Loan Types
Every mortgage program has its own down payment rules, credit guidelines, and long-term costs. Here’s a simple side-by-side look at how FHA compares to other common options:
| Loan Type | Minimum Down Payment | Typical Credit Score | What to Know |
|---|---|---|---|
| FHA | 3.5% (580+ credit score) | 500+ allowed by FHA (lenders may require higher) | Flexible credit guidelines; mortgage insurance required |
| Conventional | 3%–20% | Typically 620+ | PMI required if under 20% down; can be removed once you build equity |
| USDA | 0% | Typically 620+ | No down payment; income limits and location restrictions apply |
| VA | 0% | Varies by lender | Available to eligible service members and certain spouses |
FHA vs. Conventional
Certain conventional loan programs allow as low as 3% down, however, they often require stronger credit profiles and have household income limits. Mortgage insurance on conventional loans (called PMI) can eventually be removed once you reach enough equity, while FHA mortgage insurance may last longer, depending on your down payment.
Read our full guide on FHA vs. Conventional loans.
FHA vs. USDA
USDA loans require no down payment, but they’re limited to eligible rural areas and have household income limits. FHA loans don’t have location restrictions and may offer more flexibility for buyers outside USDA zones.
Read our full guide on FHA vs. USDA loans.
FHA vs. VA
VA loans also require no down payment and do not charge monthly mortgage insurance. However, they’re only available to eligible Veterans, active-duty service members, and certain military spouses.
What else do you need to qualify for an FHA Loan?
Your down payment is just one of the requirements needed for FHA loan approval. You’ll also need:
A qualifying credit score (lenders may require higher than FHA minimum guidelines)
An acceptable debt-to-income (DTI) ratio
A home that meets FHA safety and property standards
To use the home as your primary residence for at least one year
If you’re unsure whether you meet these requirements, we can walk through them with you and help you understand where you stand. Get started!
Dan Bartelt has over 16 years of mortgage industry experience. He’s held roles as a loan officer and processor and has spent the past 8 years as an underwriter. Dan views underwriting as solving a puzzle—piecing together details to create a compelling loan story.
