How to Cover the Cash to Close on a Condo With an FHA Loan

The Quick Read: Build the number first, then fund it in a set order. Cash to close is the down payment plus lender and title charges, prepaids and escrow deposits, and the upfront mortgage insurance premium if you don’t finance it, minus the earnest money and credits already counted. Savings, documented gifts, seller credits and assistance programs can each cover part of it, but none covers every piece.

What Does “Cash to Close” Mean on an FHA Condo?

Cash to close is the money you bring on closing day. It is not the same as the down payment. The down payment is one line inside it.

On an FHA purchase, the borrower’s own contribution is called the minimum required investment. Across the wholesale programs Lendmire places FHA files with, that is 3.5% of the lesser of the price or the appraised value, with maximum financing of 96.5%. Those programs start at a 580 decision score. Everything else on the closing statement sits on top of that 3.5%.

Condos add pieces a house doesn’t have: HOA-related prepaids, possible transfer or move-in charges, and a building approval that has to be in place before the loan can be insured. Details on the cash side depend on the building, the lender and the full file review. Nothing here is a commitment to lend.

What Goes Into the Number?

Think in six buckets. Here is how each one behaves on a condo.

The upfront premium is 1.75% of the base loan. HUD Mortgagee Letter 2023-05 sets the upfront premium at 175 basis points of the base loan amount on all mortgages and lists the narrow exceptions. The FDIC’s FHA 203(b) summary notes the lender collects annual premiums monthly. On the programs Lendmire places, the upfront premium is financed into the loan. That lowers cash at closing. It also means interest accrues on it. Cash saved today is cost added later.

The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan above 90% LTV it lasts for the term. At or below 90% it ends after eleven years. It rides in the monthly payment, not in cash to close. Leverage and reserves vary by lender and program; final terms follow the full file review.

Why Does the Building’s Approval Status Come First?

Check the building before you spend on anything else. Per HUD’s FHA Connection condominium help page, a condominium project must be approved before FHA insurance applications for individual units can be processed. Approved projects get a Condo ID. Review runs through one of two routes: HUD staff, or a qualified lender.

If the building isn’t on the approved list, the lender may try Single-Unit Approval. The project has to be complete, have at least five units, and pass a subset of tests covering FHA concentration, owner-occupancy and financial condition. The lender submits a project data form, and the HOA or management company usually has to complete its part.

Here is the cash problem. Single-Unit Approval adds steps before the appraisal and closing dates are firm. Money you spend early, such as inspection and appraisal fees, goes out before you know the building will pass. Some buildings fail outright: too many rentals, too much FHA concentration, too much delinquent HOA debt. Budget for that risk, and ask the lender about status before you pay for anything. Lendmire’s piece How to Use Single-Unit Approval for an FHA Cash-Out on a Condo walks through the same approval path from the refinance side.

One caution on the HUD page above: it is older. It describes concentration limits, but confirm current numbers with your lender rather than relying on any printed figure.

How Do You Build the Number, Step by Step?

Work from your Loan Estimate, then compare it to the Closing Disclosure.

1. Start with the minimum required investment. That is the 3.5% of the lesser of price or appraised value.

2. Add lender and title charges. These appear in the first sections of the Loan Estimate.

3. Add prepaids and escrow deposits. Include HOA-related items. Dues paid ahead and any reserve contributions belong here.

4. Add the upfront premium only if you pay it in cash. If it’s financed, it stays out of cash to close.

5. Subtract earnest money, seller credits and other credits. What’s left is your cash to close.

The CFPB’s Closing Disclosure explainer separates closing costs from the down payment and from the Cash to Close line. It also notes that rolling costs into the loan lowers upfront cost but adds interest. Compare the final Cash to Close figure against the Loan Estimate, and ask your lender to explain any large change.

One more moving part: the appraisal. FHA bases the loan on the lower of appraised value or price. A low appraisal shrinks the loan and raises the cash you need, even when the contract price doesn’t change.

What Can Each Funding Source Pay For?

Four sources cover most deals. Each has a boundary.

Seller credits

Seller or interested-party contributions are allowed up to 6% of the price on the programs Lendmire places. They can offset closing costs, prepaids and similar charges. They cannot fund your minimum required investment. A credit larger than your actual eligible costs doesn’t just disappear into your pocket. The excess is treated as an inducement and can reduce the loan. Ask for a number that matches real costs.

Whether a credit can cover HOA-related items depends on the contract, the HOA’s rules and the lender’s read of the file. Raise it early.

Gift funds

Gifts can cover the minimum required investment as well as closing costs. Under FHA rules, acceptable donors include family members, an employer or labor union, a close friend with a clearly defined interest in the borrower, a charity, and a government agency or public entity running a program for lower-income or first-time buyers. Cash kept at home is not an acceptable source of donor funds.

HUD’s help portal lists what the gift letter has to contain: donor name, address and phone, relationship to the borrower, the dollar amount, and a statement that no repayment is required. Expect the lender to ask for the paper trail from the donor’s account to yours. A gift that shows up as an unexplained deposit is the classic way this goes wrong.

Assistance programs

Down payment assistance varies by agency and area. HUD describes a secondary financing program that lets HUD-approved nonprofits and governmental entities provide second-lien help alongside an FHA first mortgage, and the lender needs specific documentation when a government entity provides the investment as a gift or second loan. Availability depends on where you buy and who qualifies, so treat it as something to check, not something to count on.

Savings and other documented funds

Plain savings are the simplest source. Large deposits without a clear origin draw questions. Keep statements, and explain any lump sum before the lender asks.

How Do You Stack These Sources on One Deal?

Fill them in a set order. Cover the 3.5% first with your own funds or a documented gift, since seller credits can’t touch it. Then apply seller credits to eligible closing costs and prepaids, up to the cap and only up to actual costs. Use gift or savings for whatever remains. Subtract earnest money last, since you’ve already paid it.

Picture a buyer with modest savings and a family gift. The gift and savings go to the 3.5% and the upfront premium is financed. A seller credit covers title, lender charges and prepaids. The buyer arrives at closing with a small remaining balance. Now picture a second buyer with no gift. Savings cover the 3.5%, the credit covers most costs, and the buyer has to decide whether to pay HOA-related charges from cash. Same loan, different stack.

Where Does the General Rule Break?

Occupancy. FHA is for a principal residence, one to four units. Occupancy rules decide the loan, so a condo bought as a rental or vacation home takes a different loan type. Building-level owner-occupancy is a separate test from your own.

A building that fails the tests. No cash source fixes a project that can’t be approved. You change buildings or change loan types.

Refinancing FHA to FHA. The FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. The premium continues. Some project paperwork is lighter on that path, but confirm with the lender.

HOA debts and liens. HUD has noted that condo and HOA fees can take priority over the security instrument in some lien contexts. That is one reason lenders look hard at HOA financials.

Debt ratios. HOA dues count toward your monthly obligations. The base ratios are 31/43 with no compensating factors, and documented factors can reach 40/50 at the top tier. The automated finding governs most files. A high HOA due can tighten ratios even when cash to close looks fine.

For the ratio side of a refinance, Lendmire’s piece How to Close a Texas FHA Cash-Out to Pay Off Debt on a High DTI covers it in more detail.

What If You’re Still Short?

Pull levers in this order:

1. Confirm every cost on the Loan Estimate. Some are estimates. Others can be shopped.

2. Ask for a seller credit, sized to real costs. Stay under the 6% cap.

3. Add a documented gift. Get the letter and the donor’s records lined up now.

4. Check assistance programs for your area and buyer type.

5. Finance the upfront premium if you haven’t. Understand that interest accrues on it.

6. Reconsider the property. A different building, or a lower price, may change the math more than any credit.

Walking away is a legitimate move. If the building’s approval is uncertain and your cash is thin, a second option protects you.

Key Terms Defined

Cash to close: The total you bring to closing after credits and earnest money are subtracted.

Minimum required investment: The borrower’s own contribution on an FHA purchase, 3.5% on the programs described here.

Upfront mortgage insurance premium: A 1.75% charge on the base loan that can be financed.

Single-Unit Approval: A lender-run path to insure one unit in a building that isn’t on the approved list.

Prepaids: Taxes, insurance, interest and HOA amounts collected ahead of time at closing.

Seller credit: Money the seller agrees to apply toward your costs, within a cap.

If you are buying a home and want to see whether an FHA loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Read more on Lendmire’s FHA loan programs.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Mortgagee Letter 2023-05

2. FDIC FHA 203(b) summary

3. HUD FHA Connection condominium help

4. CFPB Closing Disclosure explainer