For most buyers, FHA loan down payment requirements come down to one number: 3.5% of the purchase price, available with a FICO score of 580 or higher. Drop below 580 and HUD’s minimum rises to 10%. In practice, though, the number on the rulebook is only the starting point. Your credit score, the extra requirements wholesale lenders layer on top of HUD’s rules, and the documented source of your funds decide what you can actually do.
Below are the minimums, the rules on gifts and assistance, a worked example with real math on a $350,000 home, a comparison with conventional loans, and a side-by-side of a broker versus a single-shelf direct company. As a licensed mortgage broker in Virginia, Florida, Tennessee, and Georgia, I see where these deals succeed and where they stall.
By Duane Buziak, NMLS #1110647
The 3.5% and 10% Minimums, Tied to Your Credit Score
HUD sets the FHA down payment by credit score. With a FICO of 580 or higher, you can finance up to 96.5% of the value, which means 3.5% down. With a score from 500 to 579, maximum financing drops to 90%, so you need 10% down. Below 500, FHA financing is not available. The rule appears in HUD’s Single Family Housing Policy Handbook 4000.1 and is summarized on HUD’s FHA buyer page.
What “minimum required investment” means
HUD calls your down payment the minimum required investment (MRI). It is calculated on the lesser of the purchase price or the appraised value. If you agree to pay $350,000 and the home appraises at $340,000, your 3.5% is figured on $340,000, and you either cover the $10,000 gap in cash or renegotiate. This catches buyers off guard more often than any other FHA detail.
The mistake of treating 3.5% as guaranteed
HUD’s minimum is a floor for the program, not a promise from every company that offers it. Many wholesale lenders add overlays, which are extra requirements stacked on top of HUD’s rules. A common one is a minimum score of 600 or 620 even though HUD allows 580. Some also restrict loans for borrowers in the 500-579 band entirely. The same borrower can be approved with one wholesale lender and declined by another with a stricter overlay, so where your file goes matters.
That is a main reason to work with a broker. I am Duane Buziak, a licensed mortgage broker in Virginia, Florida, Tennessee, and Georgia. I am not a direct lender and I do not aggregate other people’s loans. I match your file to a wholesale lender whose overlays fit your score, from a pool of more than 500.
Where the Down Payment Can Come From
HUD accepts several sources: your own savings, checking, or retirement withdrawals, documented gifts, and approved down payment assistance (DPA). Under Handbook 4000.1, gifts can come from a family member, an employer or labor union, a close friend with a clearly defined interest in the borrower, or a charitable organization or government agency. The FHA also lets a gift cover the entire minimum required investment, which many conventional programs do not.
What a gift needs to be valid
- A signed gift letter stating the amount, the donor’s relationship to you, the property address, and that no repayment is expected.
- A paper trail: the donor’s withdrawal and your deposit, or a wire or cashier’s check to the closing agent.
- No involvement from anyone with a financial stake in the sale, such as the seller or agent.
Compare that with a large, unexplained cash deposit in your own account. Underwriters typically ask you to document any deposit that is big relative to your income, and cash with no paper trail often cannot be used at all. Moving money into your account two or three days before applying is a classic way to create a problem. Keep your funds where they are and tell me what is coming in before it arrives.
Closing costs are a separate bucket
Buyers often assume a seller credit can reduce the down payment. It cannot. Seller concessions can help with closing costs, and HUD caps them as a percentage of the sale price. As of this writing the FHA cap is 6%, but confirm the current figure on HUD.gov. They can never be applied to your minimum required investment.
Down payment assistance
Programs vary by state, county, and city, and many have income limits, purchase price caps, or homebuyer education requirements. Funds can run out, and terms change often. I will not name a specific Virginia, Florida, Tennessee, or Georgia program here, because availability as of today may differ from what you read. Ask me for the programs currently open for your county, and I will check eligibility before you commit to a home.
Worked Example: Cash Needed on a $350,000 FHA Purchase
Suppose you buy a $350,000 home that appraises at $350,000 with a 640 FICO. This is an illustration, not a quote. Mortgage insurance rates and loan limits change, so confirm current figures on HUD.gov before relying on them.
- Down payment: $350,000 x 3.5% = $12,250.
- Base loan amount: $350,000 – $12,250 = $337,750.
- Upfront mortgage insurance premium (UFMIP): 1.75% x $337,750 = $5,910.63. Most buyers finance this rather than paying it in cash.
- Total loan amount: $337,750 + $5,910.63 = $343,660.63.
- Annual MIP: a yearly premium collected in monthly installments. As of the most recent HUD schedule I know of, a 30-year loan at this size and a loan-to-value above 95% carries 0.55%. That works out to roughly $1,858 a year, or about $155 a month, on the $337,750 base. Treat that as an estimate, because HUD recalculates it on the declining balance, and I will confirm the rate on your actual loan.
Cash to close
Now add closing costs. For illustration, assume they run 3% of the price, or $10,500. Your total cash need is $12,250 + $10,500 = $22,750. If a family member gifts the $12,250 and the seller agrees to a $10,500 credit toward closing costs, which is within a 6% cap, your own money at closing could be little to nothing. That outcome depends on the seller agreeing, your documentation, and the actual costs, so treat it as one scenario and not a promise.
The same home at 10% down
With a score in the 500-579 band, the math changes: $350,000 x 10% = $35,000 down. The base loan is $315,000, and UFMIP of 1.75% is $5,512.50, for a total loan of $320,512.50. At 90% loan-to-value, the annual MIP rate is typically lower (0.50%), about $131 a month. So the lower score costs you $22,750 more in cash on day one, in exchange for a smaller payment. Many buyers in that band do better spending a few months improving their score to 580 than saving the extra $22,750.
FHA vs. Conventional Down Payment Requirements
Conventional loans can undercut FHA on the down payment. Fannie Mae’s HomeReady and Freddie Mac’s Home Possible both allow 3% down for eligible borrowers, though they carry income limits and other conditions. On a $350,000 home, that is $10,500 versus FHA’s $12,250. It is a modest gap, so down payment alone rarely decides the choice.
Where each one tends to win
FHA usually wins on flexibility. It accepts lower credit scores and tolerates higher debt-to-income ratios, and gift funds are widely accepted. Conventional usually wins on the cost of mortgage insurance over time. Private mortgage insurance on a conventional loan can be removed once you reach sufficient equity. FHA mortgage insurance is different: with less than 10% down, the annual MIP generally lasts for the life of the loan. With 10% or more down, it runs 11 years. The usual way out of lifetime MIP is refinancing later.
A quick decision framework
- Score under 640: FHA is usually the stronger fit, since conventional pricing penalizes low scores heavily.
- Score 640 to 700: compare both. Run the monthly payment and total cost for each.
- Score above 700: conventional often costs less, especially if you plan to stay more than five to seven years and want to drop mortgage insurance.
- Planning to sell or refinance within a few years: the lifetime MIP matters less, which can favor FHA.
Other low-down options to rule in or out
If you are an eligible veteran or service member, a VA loan can require no down payment. Buyers in eligible rural areas may qualify for a USDA guaranteed loan, which also allows zero down subject to income and location rules. Check these before you commit to saving for FHA.
Broker vs. Direct Lender: Comparison Table and Soft-Pull Pre-Approval
A broker and a direct company can both deliver an FHA loan. The difference is how many rate sheets and overlay sets your file can be matched against. Rocket Mortgage and Movement Mortgage are large, well-known direct originators that work from their own single shelf of programs. They can be a good fit for buyers who value a big brand and one company handling everything. The table summarizes how the models differ. Practices change, so confirm the current details with any company before you apply.
| Factor | Duane Buziak at Up Lending | Rocket Mortgage | Movement Mortgage |
|---|---|---|---|
| Access to wholesale lenders | 500+ wholesale lenders, shopped for each file | One company, one shelf | One company, one shelf |
| Program breadth | FHA, conventional, VA, USDA, jumbo, DSCR, HELOC, foreign national, and more | Broad range under one roof | Broad range under one roof |
| Credit-pull approach | Soft pull to start with NoTouch Credit Pull | Full application and hard pull typically needed for a firm pre-approval | Full application and hard pull typically needed for a firm pre-approval |
| FHA score overlays | Can steer toward wholesale lenders whose overlays fit a 580-620 score | One set of overlays applies | One set of overlays applies |
| DPA access | Checked against what is open in VA, FL, TN, and GA | Depends on company participation | Depends on company participation |
| Rate shopping | Compare multiple wholesale rate sheets | One rate sheet | One rate sheet |
How the soft pull works
NoTouch Credit Pull is the name for my soft credit pull mortgage option. A soft pull lets me see your credit profile without placing a hard inquiry on your report, so there is no credit hit when we start. That makes it a no hard inquiry mortgage pre approval to begin with, and it gives me enough to tell you whether you sit near the 580 line and which wholesale lenders are worth approaching. A hard pull comes later, when you are ready to move forward on a specific loan. I will walk you through how it applies to your file.
As for scale and credibility, I rank #114 on the Scotsman Guide’s Top Originators list and was named VA Broker of the Year for 2024-2025. Being independent means I can put hundreds of rate sheets behind your file, which is more leverage than any single shelf offers.
Steps to Get Ready to Put Down 3.5%
- Check your scores. Pull your reports from all three bureaus at AnnualCreditReport.com and note the middle score. If you are at 575, even a 10-point gain can drop your down payment requirement from 10% to 3.5%.
- Set a full savings target. Include the 3.5% down payment, closing costs, and reserves. The CFPB’s homebuying guide is a good place to estimate costs.
- Gather documents. Two months of bank statements, pay stubs, tax returns, and, if a relative is helping, a signed gift letter and the donor’s transfer records.
- Start a mortgage pre approval without hard pull. I review your numbers, then pick the wholesale lender whose overlays suit your score and income.
- Confirm the home qualifies. FHA requires the property to meet HUD’s appraisal and minimum property standards, and peeling paint, a failing roof, or safety problems must be fixed before closing. See HUD.gov for the standards. Loan limits also vary by county, so check your county’s 2026 limit.
I serve buyers in Virginia, Florida, Tennessee, and Georgia only. If your purchase is elsewhere, I cannot originate your loan.
Your Real FHA Path: 3.5% Is the Benchmark, Documentation Decides the Rest
With a 580 or higher score, 3.5% down is the benchmark. The number that matters more is how you reach it: the source of your funds, the paper trail behind them, and the overlays of whichever wholesale lender reviews your file. Fix those early and the 3.5% usually holds.
Ready to experience a fast, simple, and stress-free path to homeownership or refinancing? Connect with our trusted mortgage experts today and discover the right loan solution tailored to your unique financial situation, whether you’re a first-time buyer, seasoned investor, or anywhere in between. If you are buying in Virginia, Florida, Tennessee, or Georgia, call 804-212-8663 or start a soft-pull pre-approval with Up Lending by Duane Buziak.