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FHA Down Payment & Rules: Two Truths To Know

If you’re wondering how much you need to put as a down payment on a FHA loan, then you have come to the right place.

The FHA down payment is 3.5% of the home purchase price. This low down payment is very flexible and reasonable for the first time home buyer. To put another way, you’re more likely to save up 3.5% to attain your goal of buying a house than to save for a conventional loan. The down payment for a conventional loan is 20% of the home price.

Check out: 5 Signs You’re Not Ready to Buy a House.

For example, if you see a house that you’d like to buy and it costs $350,000, then a 3.5% down payment is $12,250. That’s the amount you will put down. Also note that you can use other people’s money for that down payment as well (more on this below).

But there are some rules you need to know. In addition to this low FHA down payment, among other things, you need to have a certain credit score.

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What is an FHA loan?

An FHA loan is a loan insured by the Federal Housing Administration (hence, the acronym “FHA”), so a lender can offer you a great deal. Your down payment can be as low as 3.5% of the home purchase price, and your credit score can be as low as 580.

Note that the FHA itself does not provide any direct loan. To start a FHA loan application, contact any FHA approved lender. To find an approved FHA lender in your are, click here.

Nor does the FHA set interest rates. Again FHA approved mortgage lenders do that as well. However, FHA loans have better interest rates because the government insure the loans. Click here to compare FHA loan rates with LendingTree.

FHA down payment rules

The down payment can come from any of these sources:

In 2019, the Department of Housing and Urban Development (HUD), which manages the FHA loan program allowed the 3.5% down payment to come from a third party.

They can be a family member, a friend, a charitable organization or an employer as a gift. So this is good news! That means you don’t have to use your own money, which can significantly reduce your costs.

But if you’re going to use a third party money as your FHA down payment, you must provide a crucial document. The mortgage lender who is going to offer you the FHA loan must obtain a gift letter from the 3rd party who is going to give you the down payment.

The letter must say that the 3rd party does not expect any repayment of the down payment. And finally, the letter must describe the relationship between you and the third party.

Find out if you’re eligible for an FHA loan at

Your credit score must be at least 580 for an FHA loan

In other to be qualified to this low FHA down payment of 3.5%, your credit score needs to be at least 580 or higher. If your credit score is between 500 and 579, then you will need to put at least 10% down. To know where you stand, get a free credit score at CreditSesame.

Overcoming the FHA down payment limitations.

Even if the FHA down payment is low, some people can still have a hard time to come with it, especially if they live paycheck to paycheck. If you’re in this situation, and no one else can help you out, don’t panic just yet — your dream of owning a home can still be a reality.

Here are some of the things you can do if you can’t come up with the 3.5% FHA down payment right away:

  • Postpone your purchase. If you have difficulty coming up with the 3.5% FHA down payment, you’re most likely going to have difficulty with the extra cost associated with owning a home. So if you don’t want to have any headache, a good option is to delay your purchase and start saving more money.
  • Evaluate your spending by cutting back on unnecessary costs. And start saving money regularly from your paycheck, no matter how small. While saving money, don’t forget to put it into a high-interest savings account, where you will earn a higher interest payment as high as 2.20%.
  • Increase your income. If your paycheck is not enough to allow you to save up for the FHA down payment, a good option is to make more money. You can do this by asking for a raise at work, pursue another career, obtain a part time job, or get a side hustle.

In summary:

Do you need a down payment for a FHA loan? Yes you do. FHA offers a low down payment and is a good option for first time home buyers with little money. The minimum is 3.5% of the home purchase price. The only loan where no down payment is required is a Veteran loan. But to be qualified, you would to be a veteran or an active military member.

Frequently asked questions:

What is the FHA down payment percentage? As mentioned above, the FHA down payment percentage is 3.5 of the purchase price, provided that your credit score is at least 580. If your credit score falls between 500 and 579, then you will need to put down 10% of the home purchase price. Get your credit score in order by getting a free credit report at CreditSesame.

Can I get FHA down payment assistance? The answer is yes, you can definitely receive FHA down payment assistance through a third party. If you can’t come up with that low 3.5% FHA down payment on your own, a family member, an employer, or a charitable organization can provide you with that fund for the down payment.

What is the conventional loan down payment percentage? The conventional loan down payment is 20% of the purchase price. That’s a lot of money comparing to the low 3.5% FHA down payment. Plus your credit score needs to be at least in 650-750 range to be receive a competitive mortgage interest rate. Click here to compare FHA loan rates with conventional loan rates to find one that suits you.

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