FHA Loan Down Payment Requirements — How Much Do You Really Need?
The low down payment is one of the most well-known features of an FHA loan — and one of the most misunderstood. Here’s everything you need to know about how it works, where the money can come from, and what to expect at closing.
The Minimum Down Payment
With a credit score of 580 or higher, the minimum down payment on an FHA loan is 3.5% of the purchase price or appraised value, whichever is lower. With a credit score between 500 and 579, the minimum increases to 10%.
Where Your Down Payment Can Come From
- Your own savings or bank accounts — most common
- Gift funds from a family member, employer, labor union, close friend, or HUD-approved non-profit — with a proper gift letter stating no repayment is required
- Down Payment Assistance (DPA) programs — several state and national programs can cover your entire 3.5% requirement
- Sale of assets (stocks, bonds, personal property)
- Proceeds from the sale of another property
Gift Funds — The Full Picture
Gift funds are a legitimate and commonly used source for the FHA down payment. Key rules:
- The gift must come from an acceptable donor — family member, employer, labor union, close friend, or approved charitable organization
- A signed gift letter is required specifying the dollar amount, transfer date, and a statement that no repayment is expected
- Cash on hand is not acceptable — gift funds must flow through a bank account with documented transfers
- Family members can also provide a gift of equity when selling a property to a relative
Can the Seller Pay Your Down Payment?
No — sellers cannot contribute toward your down payment. However, sellers can contribute up to 6% of the purchase price toward closing costs and prepaid items, which frees up more of your own funds.
Down Payment Assistance Programs
Multiple programs exist that can provide the 3.5% FHA down payment as a grant or secondary loan. CalHFA’s MyHome program offers up to 3.5% deferred with no monthly payment. National programs can provide up to 5%. These programs have income limits — reach out and we’ll match you with what’s available in your county.
Practical Takeaways
- 3.5% down is the standard with a 580+ credit score
- Gift funds can cover 100% of your down payment
- DPA programs can eliminate your out-of-pocket down payment entirely
- Sellers can pay closing costs (up to 6%) but not your down payment