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FHA Loan Down Payment Rules: A Reader Question

110A reader asks, “Without having the 20% down on a property at the purchase of a home, can the loan be refinanced, to achieve the 20% in a short time period less than 3 years?”

It’s not entirely clear what the reader is getting at in this question, but in general, FHA loan requirements include a minimum down payment of 3.5% which must be paid on or before the loan’s closing date. This is known as the “minimum cash investment” and is non-negotiable. It must be paid up front.

Some lenders may, depending on circumstances, require a larger down payment as a condition of loan approval. This may be due to credit issues which require the loan to have “compensating factors” which can include a down payment of more than 3.5%.

What the reader seems to be suggesting–that a new purchase home loan be managed in such a way to avoid the down payment–is not possible for FHA loans.

FHA refinance loans may be offered as no-cash-out-of-pocket transactions, which means the lender has either increased the interest rate or added costs to the loan to offset the fees normally paid up front by the borrower.

If you are interested in an option such as this discuss it with your lender to see what may be possible depending on lender rules and current FHA loan guidelines. FHA loan rules do change from time to time and what may be an option for an FHA home loan today could be modified tomorrow by changes in the law, the FHA loan program or other factors.

Do you have questions about FHA home loans? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

August 25, 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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