FHA Loan Down Payment and Mortgage Requirements

Down payment graphicFHA loans are a popular financing option for first-time homebuyers and those with limited down payment funds. But how much do you actually need to put down on an FHA loan? This article will provide an overview of the FHA down payment requirements, as well as tips on how to save for your down payment and other associated costs.

Do You Need a Down Payment for an FHA Loan?

The FHA loan program is one of the most popular mortgage programs in the United States. FHA loans are backed by the Federal Housing Administration, which is a part of the U.S. Department of Housing and Urban Development (HUD). FHA loans are available to all types of borrowers, and they offer a variety of benefits, including low down payment requirements and flexible credit guidelines.

If you're thinking about applying for an FHA loan, you might be wondering how much money you'll need for a down payment. Here's what you need to know about FHA loan down payment requirements.

The short answer is that you can get an FHA loan with a 3.5% minimum down payment. However, it's important to note that your down payment can come from a variety of sources, including family members, employers, or charitable organizations.

If you have the cash on hand for a large down payment, that's great! But don't worry if you don't have tens of thousands of dollars saved up - you may still be able to qualify for an FHA loan with a smaller down payment.

Can My FHA Down Payment Be a Gift?

FHA down payment giftThe FHA loan program has become increasingly popular in recent years, due in part to the added benefit of a low down payment. In fact, many homebuyers are now able to purchase a home with as little as 3.5% down. However, there are some rules and regulations that must be followed when it comes to down payment gifts for FHA loans.

First and foremost, the payment gift must come from an acceptable source. This can include a family member, employer, close friend, or approved nonprofit organization. The donor must also provide a written statement that no repayment is expected in order for the gift to be considered valid.

Additionally, the down payment gift must be used towards the purchase of the primary residence and cannot be used for any other purpose. Lastly, borrowers who receive a down payment gift will still need to meet all other requirements of the FHA loan program, such as having a minimum credit score of 580.

According to the gift rules for FHA loans, "All sources of down payment funds may be gifted." This means you can use money from a family member, friend, or employer as your down payment.

Acceptable donors include:

  • The borrower’s relative
  • The employer or labor union of the borrower
    a close friend who has a well-defined, verifiable interest in the borrower
  • A charitable organization
  • A government agency or public institution with a program that assists low- and moderate-income families or first-time homebuyers with house ownership.

There are some restrictions on who can give you money for your down payment, however.

The person gifting the funds cannot be someone who has a financial interest in the property you're buying (i.e. seller, builder etc.).

If you're receiving a gifted down payment, you'll need to provide the FHA with documentation proving that the funds are indeed a gift and not a loan. The donor will also need to sign a gift letter stating that they do not expect anything in return for their generosity.

Can the FHA Down Payment Be Borrowed?

The FHA down payment can be borrowed in certain circumstances, but it’s important to know the rules before you get started.

Collateralized Loans

The borrower may obtain a loan for the entire amount of the needed investment if sufficient documentation is supplied that the loan is completely secured by assets such as investment accounts or real estate.

These assets may include equities, bonds, and real estate in addition to the property being acquired.

Certain forms of loans secured by deposited cash, where payback may be recovered by extinguishing the asset, do not need repayment consideration for qualifying reasons.

The asset that serves as collateral for the loan may not be included in the borrower's closing assets or deemed otherwise accessible.

The money may be utilized for signature loans on certificates of deposit, loans on the cash value of life insurance policies, or loans secured by 401(k) accounts. 

FHA will accept funds from savings and bank accounts, home savings, private savings club finds, and other account types. Other forms of cash, such as savings bonds, IRAs and 401K accounts, investments, gift monies, and the proceeds from the sale of personal property, are also permitted.

Unacceptable loans include the following: 

  • borrowing against household goods and furniture
  • cash advances on credit cards
  • unsecured signature loans
  • other similar unsecured financing.

When Do You Pay the Down Payment on an FHA Loan?

Loan closing graphicYou may have heard that you need a 20% down payment to get a mortgage. While this is true for some loans, it's not the case for all loans, including FHA loans.

With an FHA mortgage, you can put as little as 3.5% down. This means that you can get into a home with a much lower down payment than you would need with a conventional loan.

So when do you pay the down payment on an FHA loan?

The down payment is due at closing. This means that you'll need to have the funds available when you sign the closing documents.

You can use savings, a gift from family or friends, or a down payment assistance program. If you're using a down payment assistance program, you may not need to bring any money to closing.

Talk to your loan officer to learn more about your down payment options and how to make sure you're ready to close on your new home.

FHA Down Payment Requirement for a Duplex

The down payment requirement for a 2 to 4 unit property is 3.5 percent of the purchase price. If you are buying a duplex or multiunit property, make sure to include the down payment requirement in your budget.

How to Get a FHA Loan With No Down Payment

The FHA single-family mortgage program does not offer a no-money-down option. The FHA loan requirements permit the use of gift money and collateralized funding to pay the required 3.5% down payment.

Are FHA Loans Guaranteed by the Government?

FHA loans are not guaranteed by the government. They are insured by the Federal Housing Administration, which is a part of the Department of Housing and Urban Development. The FHA does not actually make the loan; they just insure it in case the borrower defaults. This way, the FHA lender can be sure they will get their money back if the borrower does not make their payments.

Are FHA Loans Required to Have Escrow?

The Federal Housing Administration (FHA) is a government-sponsored program that makes it possible for people with good credit and modest incomes to buy a home. FHA home loans require an escrow account, which is a separate account from the loan itself. The escrow account helps to ensure that the homebuyer is able to pay the real estate taxes, homeowner's iinsurance and keep up with other obligations.

How to Get FHA Down Payment Assistance

There are numerous down payment assistance programs for eligible home buyers. If you're in need of assistance, contact a HUD housing counseling agency. The housing agency will guide you through the intriccies of the home purchasing maze; and may be able to direct you to available assistance programs.

Do FHA Loans Require Inspections?

There are a lot of misconceptions out there about FHA loans and inspections. Some people believe that FHA loans require a home inspection before the loan can be approved. Others think that FHA loans come with their own inspectors who will evaluate the property. Neither of these things are true.

So, do FHA loans require inspections? The answer is no, but there are circumstances where an inspection may be recommended or required. Here’s what you need to know about FHA loan inspections.

If you’re buying a home, there is always the potential that something could be wrong with the property that you’re unaware of. That’s why it’s generally a good idea to get a home inspection, even if it’s not required by your lender. With an FHA loan, you can choose to have an inspection done before closing on the loan or after you’ve already closed on the loan.

If you choose to have an inspection done before closing, it will need to be paid for by you, the buyer. The cost of a home inspection varies depending on the size and location of the property, but it typically ranges from $200 to $500

Does a FHA Loan Require Mortgage Insurance?

FHA mortgage insurance graphicIf you're considering an FHA loan, one of the first questions you might have is whether or not you'll need mortgage insurance. While all loans backed by the FHA require some form of mortgage insurance, the amount and type can vary depending on several factors. In general, FHA loans with smaller down payments (i.e., 3.5% or less) will require higher mortgage insurance premiums than those with larger down payments.

There are two types of required FHA mortgage insurance: upfront mortgage insurance and annual mortgage insurance. Upfront mortgage insurance is a one-time premium that's paid at closing; annual mortgage insurance is an ongoing premium that's included in your monthly payment.

Upfront Mortgage Insurance: All FHA loans require a 1.75% upfront premium (which can be rolled into the loan), regardless of down payment size. This premium can be financed, which means it doesn't add to your out-of-pocket costs at closing.

Annual (Monthly) Mortgage Insurance: Annual mortgage insurance premiums for FHA loans are determined based on several factors, including loan size, length of the loan, and down payment size.

Why Do FHA Loans Require Mortgage Insurance?

If you're looking to get an FHA loan, you might be wondering why you have to pay for mortgage insurance. Mortgage insurance is required for all FHA loans, regardless of the down payment amount. Here's a look at why this insurance is required, and how it benefits both borrowers and lenders.

Mortgage insurance protects lenders from losses that can occur when borrowers default on their loans. This type of insurance is typically required for loans with low down payments, like those offered by the FHA. Mortgage insurance premiums (MIPs) can add up, but they're still usually lower than the private mortgage insurance (PMI) required by most conventional loans.

FHA loans are attractive to borrowers with less-than-perfect credit or limited funds for a down payment. But even if you qualify for an FHA loan, there's no guarantee that you'll get approved. Lenders still consider factors like your employment history, income, and debts when deciding whether or not to approve your loan.

If you do get approved for an FHA loan, you'll be responsible for paying two types of mortgage insurance: an upfront premium and an annual premium. The upfront premium is paid at closing and can be financed into the loan. The annual premium is paid monthly and must be paid by you directly to the mortgage insurance company.


FHA loans are a great option for first-time home buyers who may not have the necessary funds for a conventional down payment. However, it's important to remember that FHA loans do require a minimum down payment of 3.5%. If you're thinking about taking out an FHA loan, be sure to speak with a mortgage lender about your options and compare different down payment requirements.

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