How Much Down Payment for an FHA Mortgage?
Homebuyers looking for a mortgage that requires a low down payment may want to consider an FHA-insured mortgage. The FHA mortgage programs provide U.S. government-backed insurance on mortgages so lenders can provide loans with a low down payment. The minimum down payment amount is set by FHA rules and not the lender.
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FHA Minimum Down Payment
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The minimum down payment amount for an FHA home loan is 3.5 percent of the home's purchase price. For example, on a $100,000 home the down payment would be $3,500. The down payment would be $8,750 on a home costing $250,000. To have a 3.5 percent down payment, the buyer must meet the FHA credit qualifications and the home must meet the pricing guidelines.
Credit Qualifications
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To qualify for a 3.5 percent down payment, the homebuyer must have a credit score of 580 or higher. If the buyer's score is below 580, the minimum down payment is 10 percent. The Department of Housing and Urban Development touts FHA mortgages for easy credit qualification. However, the lender may require a higher credit score to approve a buyer for an FHA mortgage.
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Pricing Requirements
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A home financed with an FHA-insured loan must have an appraisal, and the appraised value should be in line with the purchase price. If the sales price is above the appraised value, the buyer will need to put up a larger down payment or negotiate the price down to the appraised value. Also, the amount of the loan cannot exceed the FHA loan limit for the area in which the home is located. The national FHA loan limit in 2010 was $271,050. The FHA has higher limits for counties and cities with higher living costs.
Additional Costs
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The 3.5 percent down payment is not the only cost to purchase a home with FHA financing. The FHA charges a 1 percent upfront mortgage insurance premium, which you can pay in cash or roll into the mortgage. Mortgage closing costs will be 3 to 5 percent of the loan amount. By FHA rules, a seller can pay up to 3 percent of the closing costs. This extra payment should be part of the purchase negotiation.
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