FHA 3.50% Down Payment FHA Home Mortgage

How a FHA Mortgage Works

The FHA does not lend the money; it simply insures that the total mortgage will be paid to the lender if the buyer defaults. It is always the decision of the private lender (a bank, credit union, or savings and loan) to decide if they will or will not lend the money. 

The FHA mortgage program tends to be more forgiving than conventional mortgages in terms of past credit history. A bankruptcy discharged as little as two years ago may not hinder a homebuyer from qualifying for the FHA program.

Typically, FHA mortgages require a 3.5 % down payment. Unlike traditional loans, this money may also be a gifted to the homebuyer from a family member. It does not need to be secured as the homebuyer's own money. 

Borrowers will have to pay MIP (mortgage insurance premium) on the mortgage. MIP is used to ensure that the total amount of the mortgage will be paid to the lender if the buyer defaults. If you pay 10% down payment the FHA MIP disappears after 8 years. 

FHA mortgage amounts have a cap based on the county.    In 2025, the FHA cap is set at $524,225.

Closing costs on FHA are usually between 3-6 % of the total mortgage amount. They are usually the responsibility of the buyer. Currently the FHA allows the buyer to ask the seller to contribute up to 6% of the purchase price to be applied to closing costs and prepaid items. This money may also be gifted to the homebuyer from a family member. It does not need to be secured as the home buyer's own money.