The FHA minimum down payment is 3.5% of the purchase price for borrowers with a credit score of 580 or higher, and generally 10% for scores of 500–579. The money can come from savings, a documented gift from an approved source, or an eligible down payment assistance program. Closing costs are separate, and sellers may contribute up to 6% of the sales price toward them, subject to approval.
How much you'll put down
FHA calls it the minimum required investment. It's figured on the lower of the purchase price or the appraised value. With a decision credit score of 580 or higher, the minimum is 3.5%. With a score of 500–579, it's generally 10%.
You can always put down more. A larger down payment reduces the loan amount, and if it reaches 10% or more, it also shortens how long annual mortgage insurance lasts — see FHA mortgage insurance. Some buyers choose the minimum anyway so they keep cash for reserves, moving costs, or repairs. There's no single right answer; it depends on your savings and goals.
Acceptable sources of funds
- Checking and savings — seasoned funds are easiest; large recent deposits need a paper trail.
- Gifts from approved donors (next section).
- Down payment assistance from government agencies and eligible nonprofits.
- Retirement accounts — withdrawals or loans against a 401(k), documented with statements and terms.
- Sale of assets — a car, boat, or other property, documented with proof of ownership, value, and the sale.
- Earnest money already deposited counts toward your investment when it's verified.
Cash kept at home is hard to document and generally needs extra verification. Borrowed money that isn't secured by an asset — like a cash advance on a credit card — generally can't be used.
Want a straight answer for your situation? Skip the call center — Matthew will review your credit, budget, and FHA options himself.
Talk with MatthewGift funds and the gift letter
FHA is generous about gifts. The entire minimum down payment can come from a gift if the donor is eligible:
Eligible donors
Relatives, your employer or labor union, a close friend with a clearly documented relationship, charitable organizations, and government agencies or programs.
Not eligible
Anyone with an interest in the sale — the seller, real estate agents, builders, or anyone else who benefits from the transaction.
A gift letter signed by the donor typically states the dollar amount, the donor's name, address, phone, and relationship to you, the property address, and that no repayment is expected. The lender will also want to see the money move: the donor's account showing the withdrawal and your account (or the closing agent's) showing the deposit.
Pairing FHA with down payment assistance
State housing finance agencies, cities, counties, and some nonprofits offer grants or second loans that cover all or part of the down payment and sometimes closing costs. Many are built specifically to pair with FHA first mortgages. Programs differ on income limits, purchase price caps, first-time-buyer rules, homebuyer education, and whether the help must be repaid.
For a state-by-state overview, DownPaymentAssistanceGuide.com is a good starting place. Texas buyers can find program details at TexasDPAPrograms.com. Availability and funding change, so Matthew will confirm which programs are open where you're buying.
Closing costs are a separate bucket
The 3.5% minimum covers the down payment only. Closing costs — appraisal, title, recording, prepaid taxes and insurance, and lender fees — are on top of it. They can't be used to satisfy the minimum investment, but they can be covered in other ways:
- Seller contributions of up to 6% of the sales price toward closing costs, prepaids, and certain other items — negotiated in your offer.
- Lender credits in exchange for pricing adjustments, where available.
- Gifts and assistance from the same eligible sources as above.
Seller contributions can't exceed your actual costs, and they can't be used for your down payment. Your real estate agent and Matthew can help structure an offer that stays inside the rules.
Putting it together
Picture a buyer with a 620 score and modest savings. She meets the 580 tier, so the 3.5% minimum applies. Her parents give part of it with a gift letter and a documented transfer; she covers the rest from savings. In the purchase contract, the seller agrees to pay a portion of her closing costs, well within the 6% cap. She keeps a small cushion in savings after closing for moving and first-month expenses.
Every file is different, but that mix — some savings, a gift, and seller help — is common. The details that trip people up are usually documentation, not eligibility: an undocumented cash deposit, a gift that arrives without a letter, or a transfer from an account the lender hasn't seen. Handle those before you apply and the down payment review tends to be the easiest part of the file. HUD updates its handbook regularly and lenders can add their own overlays, so Matthew will confirm the current guidelines for your file.
Frequently asked questions
Can I get an FHA loan with no money down?
Standard FHA loans require the 3.5% minimum investment. Eligible gifts or down payment assistance can cover it, so some buyers bring little of their own cash. The 203(h) disaster program is a separate exception — see the special programs page.
Can the seller pay my down payment?
No. Sellers can contribute up to 6% of the sales price toward closing costs and similar items, but not toward the down payment.
Can a friend give me gift money?
Yes, if the friendship is close and documented. The lender will look for evidence of a real, established relationship.
Does the gift have to be seasoned?
Gift funds don't have to sit in your account for months, but the transfer must be fully documented with a gift letter and bank records.
Can I use money from a 401(k) for my FHA down payment?
Generally yes. A 401(k) loan or withdrawal can be used if it's documented with account statements and the loan or withdrawal terms. Weigh taxes, penalties, and repayment before tapping retirement savings.
Is a 10% down payment worth it?
It can be. Putting 10% or more down generally limits annual MIP to 11 years instead of the life of the loan. Whether that's worth tying up more cash depends on your plans.
Ask Matthew about your FHA home loan
Tell Matthew a little about the property and your plans. He'll follow up by phone or email — no obligation.
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