A $300,000 house with an FHA loan can require a $10,500 down payment. That is 3.5%, the headline number that makes FHA loans popular with first-time buyers. The catch is that $10,500 is not the whole cash story. Closing costs, prepaid taxes and insurance, and the credit score tied to your down payment can change what you need at the closing table.
The 3.5% FHA down payment, explained
FHA mortgages are insured by the Federal Housing Administration, but they are approved and funded by private lenders. That insurance lets lenders accept lower down payments than they might otherwise. For most approved borrowers, the minimum FHA loan down payment is 3.5% of the purchase price.
Why the appraisal matters
The percentage applies to the lesser of the contract price or the appraised value. If you agree to pay $310,000 but the appraisal comes in at $300,000, your 3.5% is based on $300,000. You need to cover the $10,000 gap separately unless the seller lowers the price. A $300,000 purchase with 3.5% down means $10,500 from you, plus closing costs and prepaid expenses.
Your credit score can change the required down payment
The 3.5% figure is not available at every credit score. FHA guidelines set a 580 minimum credit score for the 3.5% down payment. Borrowers with scores between 500 and 579 can still qualify, but the required down payment rises to 10%.
On a $250,000 home, that difference is $8,750 at 3.5% versus $25,000 at 10%. Same house, same loan program, $16,250 more cash. Many lenders also add their own credit and reserve requirements on top of FHA rules. A 600 score may meet FHA guidelines but fail a lender overlay. Check FHA loan credit score requirements: what 500, 580, and 620 actually mean before you assume the 3.5% path is open. Also review FHA loan requirements: what gets you approved (and what quietly doesn’t) for the paperwork and property rules that can trip up a file.
The down payment is only part of the cash you need
Buyers often save for 3.5% and then get surprised at the closing table. Closing costs on an FHA loan commonly run 3% to 6% of the loan amount, depending on the state, lender, and title fees. On a $300,000 loan, that is roughly $9,000 to $18,000. You may also need money upfront for taxes, insurance, and the appraisal.
- Closing costs: lender origination, underwriting, title search, title insurance, escrow fees, recording fees, and courier charges.
- Prepaids: homeowners insurance for the first year and property taxes that must be funded into escrow.
- Third-party reports: appraisal, home inspection, radon or pest inspection if required.
- Reserves: some lenders want one or two months of mortgage payments left in savings after closing.
- Move-in costs: moving truck, utility deposits, locks, and immediate repairs.
Add those to the 3.5%, and the real cash requirement on a $300,000 FHA purchase can land between $20,000 and $30,000. Ask your lender for a Loan Estimate with a cash-to-close line, not just a down payment quote.
Where the FHA down payment can come from
FHA rules allow more funding sources than many buyers expect. You can use your own savings, a checking or savings account, a gift from a family member, a grant, or down payment assistance from a qualified government or nonprofit program. Some borrowers sell a car, liquidate stocks, or use funds from a retirement account, though you should understand the tax and penalty consequences first.
Gift funds need a paper trail
A $10,000 gift from a parent needs a signed gift letter, proof of the donor’s ability to give it, and a paper trail showing the money moving into your account. Cash in a shoebox does not count. Large, unexplained deposits can delay underwriting even when the money is legitimate. Seller concessions are another lever, but they generally apply to closing costs and prepaids, not the down payment itself. Negotiating a 3% seller credit can free up your own cash for the down payment.
FHA versus conventional: compare the whole bill, not just the down payment
A 3.5% down payment looks better than a 5% or 10% conventional down payment, but the FHA loan carries mortgage insurance premiums. You pay an upfront premium at closing and an annual premium in monthly installments. Conventional loans also have private mortgage insurance below 20% down, but it can drop off once you reach enough equity. The cheaper down payment is not always the cheaper loan.
Run the numbers side by side for your credit score and purchase price. FHA vs conventional loan: which is better for your down payment and credit score? breaks down how credit and cash interact. If you have 5% or more to put down, also look at mortgage types with low down payment: what actually works below 20%. You may find a conventional or state-backed program that costs less over five years.
How to calculate your real cash-to-close number
Work backward from the house price, then add the costs that do not show up in the 3.5% headline.
- Purchase price multiplied by 3.5%: your base FHA down payment.
- Estimated closing costs: ask for a range of 3% to 6% of the loan amount.
- Prepaids and escrow deposits: one year of insurance plus several months of taxes.
- Appraisal and inspection: often $800 to $1,300 combined, depending on the market.
- Reserves and moving costs: a cushion your lender and your life will both want.
On a $280,000 purchase, 3.5% is $9,800. At 4% closing costs, that adds $11,200. Prepaids, appraisal, and inspection might add $3,000 to $4,000. A realistic cash target is closer to $24,000 to $25,000, not $9,800. Compare Loan Estimates from at least two lenders and use how to compare mortgage loan types without losing $28,000 to the wrong quote to avoid judging a loan by its rate alone.
Mistakes that quietly raise the down payment or sink approval
Most FHA problems are not caused by the 3.5% rule. They come from the details around it.
- Moving money between accounts without keeping statements, which makes underwriting ask for more paperwork.
- Depositing a large gift without a gift letter or donor paper trail.
- Changing jobs or taking on new debt during the approval process.
- Draining savings to make the down payment and leaving no reserve for the first mortgage payment.
- Assuming the appraised value will match the contract price when the down payment is based on the lower number.
A loan officer can pre-approve you, but underwriting is where the cash story gets verified. Keep bank statements clean for at least 60 days, document every unusual deposit, and do not open a new credit card before closing. If a family member is helping, confirm the gift rules with your lender before the money moves.
Build a down payment plan that survives underwriting
The lowest advertised FHA loan down payment is 3.5%, and for some buyers that is exactly the right number. The safer approach is to save for 3.5% plus closing costs plus a cushion. If that total is out of reach today, down payment assistance or a gift could close the gap. If it leaves you with $200 in the bank after closing, the loan is too tight.
Start with a realistic purchase price, add the 3.5%, then layer in the costs that do not fit in a headline. Get a Loan Estimate, compare the total cost of FHA with other low-down programs, and keep your paperwork boring. A slightly smaller down payment with a stable reserve is usually better than a perfect 3.5% that leaves you unable to handle a $1,400 repair.