FHA and VA Loan Down Payment Requirements for a Home Buyer

The Quick Read: An FHA loan asks for a minimum investment of 3.5% of the home’s value, and the wholesale programs Lendmire places FHA loans with start at a 580 decision score. A VA loan typically asks for no down payment at all when the veteran has full entitlement. Neither program means “no cash at closing,” because insurance, fees and closing costs still apply.

The Short Version in Five Bullets

• FHA: 96.5% maximum financing, which means a 3.5% minimum investment at a 580 score or higher.
• VA: typically no down payment with full entitlement. Putting money down is allowed and lowers the one-time funding fee.
• FHA is for owner-occupants only. You buy a principal residence with one to four units and live in one of them.
• Seller help has a ceiling. On FHA, seller or interested-party contributions go up to 6% of the price, and they pay closing costs, not your down payment.
• Down payment is not cash to close. Plan for closing costs, prepaids, and reserves on top.

FHA vs. VA Down Payment: Side by Side

Every figure above is subject to lender guidelines and full file review. Nothing here is a commitment to lend.

How the FHA Down Payment Works

The FHA down payment is built from four pieces: your score, the value, the base loan, and the premium. Here is the order a lender works through them.

Step 1: Your score sets the leverage tier. Across the wholesale programs Lendmire works with, a decision score of 580 or higher unlocks 96.5% financing. HUD’s own rules reach lower, down to a tier that asks for 10% minimum investment. The wholesale programs behind Lendmire’s FHA loan programs start at 580, so that lower tier is a rule you will read about but not one those programs reach.

Step 2: The appraisal sets “value.” The 3.5% is calculated on the lesser of the price or the appraised value. It is not simply 3.5% of the contract price. Under HUD’s Handbook 4000.1 glossary, the minimum required investment is the cash or cash equivalent you put in, at least 3.5% of the property’s adjusted value. If the home appraises below the price, the math follows the lower number.

Step 3: The base loan comes first, then the premium. The base loan is the price minus your investment. The upfront mortgage insurance premium is 1.75% of the base loan, and most borrowers finance it. That raises the balance but lowers the cash you need on day one.

Step 4: The annual premium follows. It runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. The down payment matters here in a quiet way. On a thirty-year loan above 90% LTV, the annual premium lasts the full term. At or below 90% LTV, it ends after eleven years. Those are program mechanics, not a price quote. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

Step 5: Ratios get checked. The base pair is 31/43. That means housing costs at 31% of income and total debt at 43%, with no compensating factors. Documented factors, such as reserves or a strong payment history, can stretch it to 40/50 at the top tier. The automated underwriting finding governs most files.

The CFPB’s FHA page adds useful context. FHA loans come from private lenders and are insured by the FHA. For buyers with good credit and a mid-sized down payment of 10% to 15%, FHA tends to cost more than conventional. For a smaller down payment or lower credit, it can be a more affordable route.

How the VA Down Payment Works

VA is one of the few mainstream programs where zero down is the normal answer. The reason is the guaranty. The VA promises to cover a share of the loan if the borrower defaults, so the lender takes less risk without a down payment. According to the VA’s loan overview, there is typically no down payment, no monthly mortgage insurance, and no loan limit when you have full entitlement and meet the lender’s financial guidelines.

“No down payment” is not “no qualification.” The lender still reviews your credit, income, and residual income. Residual income is what’s left each month after your major obligations and living costs.

The order of a VA purchase looks like this:

1. Get your Certificate of Eligibility. It shows how much entitlement you have available.

2. Get a VA appraisal. It confirms the value and that the home meets VA’s minimum property requirements.

3. Underwriting. The lender reviews the full file.

4. Funding fee. It’s a one-time fee, charged on the loan amount rather than the price.

The VA’s funding fee page spells out the mechanics. The fee drops in steps as your down payment grows, and it is higher for a repeat use of the benefit. You can pay it in cash or add it to the loan. Veterans who receive VA compensation for a service-connected disability are exempt.

That makes a voluntary down payment a real choice on VA. It does not earn you a better approval. It shrinks the fee tier and the balance. Some buyers put down a few percent for that reason. Others keep the cash.

Where the Down Payment Money Can Come From

Your own savings are the cleanest source. Gifts are the next most common, and both programs can work with documented gift money.

HUD defines a gift as a contribution of cash or equity with no expectation of repayment. In practice, the lender wants a signed letter naming the donor, the amount, and the relationship, with a statement that nothing is owed back. Then the lender traces the money. A donor transfer that shows up in your account without a paper trail slows the file down.

Three rules trip people up:

• Seller credits do not fund the FHA down payment. Interested-party contributions go toward closing costs, prepaids, and points, up to 6% of the price. Credits beyond actual costs or above that limit can reduce the value the loan is based on.
• Large unexplained deposits raise questions. Move money early and keep statements.
• A non-occupant co-borrower is allowed on FHA. A parent can sign on to help you qualify, but the home must still be your principal residence.

Down Payment Is Not Your Cash to Close

Your down payment is one line in a longer list. The Loan Estimate shows a “Cash to Close” figure, and the Closing Disclosure confirms it. Between them you’ll see closing costs, prepaid items such as insurance and property tax reserves, and any upfront premium or fee you chose to pay in cash.

Financing the FHA upfront premium or the VA funding fee lowers today’s cash. It also raises your balance, which raises the monthly obligation. Neither choice is wrong. You are trading cash now for cost later.

Reserves are the other half of the picture. A zero-down VA buyer who closes with an empty account has met the program rules and skipped the sensible ones. Keep some cash after closing for repairs and the first surprise bill. Gaining a home and losing your cushion in the same week is a bad trade.

Where the General Rule Breaks

The score cliff. The 3.5% tier starts at 580. If your score sits just under it, a few months of paying down balances and keeping payments on time can move you across. Check the score the lender actually uses. It can differ from the free score on your banking app. Some lenders also set a higher floor than the program minimum. Those extra requirements are called overlays.

The low appraisal. If the appraisal comes in under the price, both programs work from the lower value. You have three paths: bring more cash, renegotiate the price, or walk away if your contract allows it.

Partial VA entitlement. Entitlement can be tied up by a current VA loan, or by an earlier one that was paid off but not restored. The VA’s guaranty calculation sheet shows the two cases. With full entitlement, the guaranty is a fixed share of the loan, whatever the county. With partial entitlement on a larger loan, it is capped by a share of the county limit minus what you have already used. Lenders usually want your remaining entitlement plus any down payment to cover that share of the loan. A shortfall shows up as a required down payment. Lendmire’s piece Can a Veteran Buy a High-Cost Home on a VA Loan With No Down Payment? walks through that edge in more detail.

Construction. Lenders may ask for a down payment on VA construction loans because the risk is higher.

Multi-unit FHA. One-to-four-unit purchases are allowed if you occupy one unit. Your score still drives the down payment tier. Occupancy is the test: FHA is not a path to a rental you will not live in.

Occupancy. Both programs are built for a home you will live in. FHA expects you to move in shortly after closing.

County loan limits. FHA limits are set by county and change every year, so check the current limit for your county before you shop. Limits matter for VA only with partial entitlement.

Which Loan Fits Which Buyer?

Picture a first-time buyer with a 640 score, modest savings, and no military service. FHA is the program that fits. The 3.5% investment is the main cash need, and a family gift can cover part of it with the right letter.

Now picture a veteran with full entitlement and a similar score. VA usually looks stronger on cash and on monthly cost, since there is no monthly mortgage insurance. Lendmire’s piece VA Loan vs FHA Loan for a First-Time Buyer With Little Down covers the borrower who is eligible for both.

A veteran can still land on FHA. It happens when entitlement is mostly used, when the home is more than the county limit allows without a down payment, or when the numbers simply come out better. Run both files side by side before choosing.

A few cautions apply to everyone:

• Do not drain savings to hit the minimum.
• Do not assume 580 means approval. It is a floor, not a promise.
• Do not count on seller credits for the down payment.
• Do not skip the Loan Estimate comparison. Both programs have costs that sit outside the down payment.

Key Terms Defined

Minimum required investment (MRI): the cash you must put into an FHA purchase, at least 3.5% of the home’s adjusted value.

Adjusted value: the lesser of the sale price or the appraised value, which the FHA math starts from.

Base loan amount: the loan before any financed upfront premium is added.

Upfront mortgage insurance premium: the one-time FHA premium of 1.75% of the base loan, usually financed.

Entitlement: the amount of the VA guaranty you have available to use.

Funding fee: the one-time VA fee that replaces monthly mortgage insurance, charged on the loan amount.

Overlay: a lender’s own requirement that sits above the program minimum.

Next Step

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.

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

About Lendmire

Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Handbook 4000.1 Glossary

2. CFPB: FHA Loans

3. VA: Home Loan Overview

4. VA: Funding Fee and Closing Costs

5. VA: Maximum Guaranty Calculation