May 21, 2019

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FHA Loan Down Payments

016One important question about any home loan transaction involves the down payment.

How much should a borrower save? When it comes to FHA home loans, there are rules about the minimum required “cash investment” (down payment) specified in HUD 4155.1 Chapter Two. The amount of the down payment depends on the appraised value and/or the sale price of the home.

According to Chapter Two, the maximum amount the borrower can get with the FHA loan guarantee is calculated as follows “The maximum mortgage amount that FHA will insure on a purchase is calculated by multiplying the appropriate loan-to-value (LTV) factor by the lesser of the property’s

• sales price, subject to certain required adjustments, or

• appraised value.”

The next step according to this portion of Chapter Two is calculating the down payment. “In order for FHA to insure this maximum loan amount, the borrower must make a required investment of at least 3.5% of the lesser of the appraised value or the sales price of the property.”

But what does this down payment consist of? Can other payments such as the appraisal cost or similar expenses be factored into the down payment amount? Could the money you pay for flood zone determination, for example, count toward the down payment?

Not according to Chapter Two, which basically states that the down payment is a completely separate expense that must be paid in full. “Closing costs (non-recurring closing costs, pre-paid expenses, and discount points) may not be used to help meet the borrower’s minimum required investment.”

For more information on closing costs versus down payment costs, speak to your loan officer or contact the FHA directly for assistance.

Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at, a private company and not a government website.

Joe Wallace - Staff Writer

By Joe Wallace

April 21, 2014

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for for (8) years and is currently the Associate Editor for

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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