Can You Buy With the Minimum Down Payment on an FHA Loan?

The Quick Read: Yes, for many buyers. With a decision credit score of 580 or higher, an FHA purchase loan can finance up to 96.5% of the lesser of price or appraised value, so the minimum investment is 3.5%. Everything else, including your credit, ratios, and cash for closing costs, is reviewed by the lender and subject to lender guidelines and full file review.

What Does “the Minimum” Actually Mean?

It is the flip side of the loan-to-value cap: borrow up to 96.5%, put in at least 3.5%.

Why “lesser of”? Say the contract price is higher than the appraisal. The loan is sized off the appraised value, not the price. You cover the gap from your own pocket. That is the most common surprise at the minimum, and it is covered in the risks section below.

Lendmire is a mortgage broker. It arranges FHA loan programs through wholesale lenders and does not lend the money itself. The same is true of FHA as an agency. As the CFPB explains, FHA loans come from private lenders and are insured by the government, and FHA does not lend directly.

Across the wholesale programs we place FHA files with, a few other basics hold:

• One to four units, owner-occupied as your principal residence.
• A non-occupant co-borrower is allowed.
• Seller or other interested-party contributions are allowed up to 6% of the price.
• County loan limits apply. They change every year, so check your county before you shop.

How Does Your Credit Score Change the Minimum?

At a decision score of 580 or higher, the minimum is 3.5%. HUD also has a lower tier, scores of 500 to 579, with a 10% minimum investment. The wholesale programs we place FHA loans with start at 580, so for our files the 3.5% tier is the working one.

The “decision score” is the single score the underwriter uses for the whole file. When more than one borrower is on the loan, the lender picks one score for the transaction. It is not simply the best score on the file.

HUD has announced that more credit scoring models will be accepted for case numbers assigned in 2027 and later. Its letter, Mortgagee Letter 2026-11, says the score thresholds stay the same. A new model changes how your score is measured. It does not lower the bar.

One more point. Some lenders set a higher credit floor than HUD does. The 3.5% is HUD’s floor, not a promise. Your file is underwritten like any other.

Can You Put Down Less Than 3.5%, or Nothing?

No. There is no zero-down FHA purchase loan. If an ad suggests one, look closely: it is usually a down payment assistance program or a gift sitting on top of the required investment, not a waiver of it.

Where the money comes from is a different question, and it is more flexible than most people think. Acceptable sources include your own savings, the proceeds of selling assets, and gifts. For a deeper look at that last one, see Lendmire’s piece Can a Whole FHA Loan Down Payment Be a Gift?.

The paper trail matters. Expect the lender to ask where each deposit came from. Money that appears in your account right before you apply, with no explanation, gets questioned.

Can the Seller Pay Your Down Payment?

No. HUD’s guidance on seller and interested-party contributions says those contributions cannot be used for the required investment. The seller, the builder, and the real estate agent are all interested parties.

What they can do is help with closing costs, up to 6% of the price. Anything above that cap is treated as an inducement to purchase. HUD reduces the value used to size your loan dollar for dollar by the excess. That shrinks your loan and raises the cash you need.

So seller credits help with costs, not with the 3.5%. Think of them as a second bucket. The two do not mix.

What Does the Minimum Really Cost?

More than the down payment alone. Three things stack on top of it.

Closing costs and prepaids. The down payment is not your total cash to close. Closing costs, prepaid taxes and insurance, and reserves all come from somewhere. Seller help, within the cap, may cover part of this layer.

The upfront mortgage insurance premium. Across our programs it is 1.75% of the base loan, and it is financed into the loan. You do not pay it out of pocket at the table, but it does raise your balance.

The annual premium. It runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV. This is a program fact, not a quote. The duration is what catches people. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90% LTV, it ends after eleven years. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.

At the minimum you are always above 90% LTV. So on a thirty-year loan, plan on carrying that premium for the life of the loan, or until you refinance out of it. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.

The CFPB notes that mortgage insurance protects the lender, not you, and adds to the cost of the loan. That is the trade. You get in with little down. The insurance is the price of the low entry.

The Risks of Going Minimum

The minimum is allowed. That does not make it free of tradeoffs. Three risks come up on real files.

Thin cash after closing. Put every dollar into the down payment and you may arrive at move-in day with nothing left. A new roof does not care about your closing statement. Think about what you hold in reserve before you decide how much to put in.

The low appraisal. Because the loan is sized off the lesser of price or value, a low appraisal creates a gap. Say you are buying at a price the appraiser does not support. The loan shrinks. You either bring more cash, renegotiate with the seller, or walk. At the minimum, you rarely have extra cash to absorb that.

Little equity cushion. With 3.5% in, a small dip in prices can leave you owing more than the home is worth. That only matters if you have to sell soon. If you plan to stay for years, it matters less.

There is also the payment itself. A smaller down payment means a bigger loan, and a bigger loan means a bigger insurance base. Your ratios have to carry it. Across the programs we place, the base pair is 31/43 (housing payment over income, and total debts over income) with no compensating factors. Documented compensating factors can push that to 40/50 at the top tier. Most files are decided by the automated finding, so those numbers are guideposts, not guarantees.

Is FHA a More Affordable Way to Do It?

Not always. The CFPB says FHA can often be a more affordable option for borrowers with lower credit scores or smaller down payments. For someone with good credit and a medium down payment of 10 to 15 percent, FHA tends to cost more than a conventional loan.

That points to a simple method. Do not pick the loan first. Ask for a Loan Estimate on both and compare the full terms side by side.

Here is a rough way to think about it:

On that last row: if you served, a VA loan may let you buy with no down payment at all. Lendmire covers it in its piece Can a Veteran Who Used a VA Loan Before Buy With No Down Payment?.

A Quick Readiness Check

Before you commit to the minimum, run through this list.

• Decision score at 580 or higher. Below that, the 3.5% tier is off the table with the programs we place.
• Documented funds. Every deposit has a source you can explain.
• Cash beyond the 3.5%. Closing costs, prepaids, and a reserve cushion.
• A payment that fits. Taxes, insurance, and mortgage insurance all included.
• A plan for the appraisal gap. Know what you will do if the value comes in under the price.
• Owner occupancy. The home must be your principal residence. Occupancy decides the leverage, so this is not a loan for a rental or a second home.

If you can check most of those, the minimum may be a fit. If not, a larger down payment, or a different program, may serve you better.

Key Terms Defined

Minimum Required Investment: the smallest amount you must put into the purchase yourself, 3.5% of the lesser of price or appraised value at a 580+ score.

Loan-to-value (LTV): the loan amount as a percentage of the home’s value. FHA’s maximum on a purchase is 96.5%.

Decision score: the one credit score the underwriter uses to decide your tier.

Upfront mortgage insurance premium: a one-time premium, 1.75% of the base loan, that is financed into the loan.

Annual mortgage insurance premium: a yearly premium collected monthly, between 0.15% and 0.75% of the balance, depending on term, amount, and LTV.

Inducement to purchase: seller or interested-party help above the 6% cap, which lowers the value used to size your loan.

Interested party: the seller, builder, real estate agent, or anyone else with a stake in the sale.

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. Every program figure here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.

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

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB: FHA loans

2. HUD Mortgagee Letter 2026-11

3. HUD FHA Q&A: seller and interested-party contributions

4. CFPB: What is mortgage insurance?