The full explanation
Federal law sets the minimum cash investment at 3.5% of the property's value and caps the loan amount at the FHA limit, which changes by county. In exchange for the insurance you pay a mortgage insurance premium.
An example
María has little saved and a short credit history. With an FHA loan she can buy with a small down payment, because the FHA's insurance gives the bank confidence. Her monthly payment will also include the insurance premium.
With real numbers
Computed with official data for the whole U.S. In your county the numbers may differ.
- Minimum down payment (3.5%)
- $11,645
- Upfront premium (1.75%)
- $5,618
- Annual premium, per month (0.55% a year)
- $147
On a $332,700 home, the typical U.S. value, an FHA loan with the minimum down payment (3.5%, that is $11,645) would be $321,056. On that loan you would pay an upfront premium of $5,618 (1.75%) and an annual premium of about $147 a month (0.55% a year).
Computed with: American Community Survey (ACS) 5-year estimates (2020–2024) · HUD Handbook 4000.1 (Update 18), II.A.2.a.iv — Minimum Required Investment (October 17, 2026) · HUD Mortgagee Letter 2023-05: Reduction of FHA Annual MIP Rates (October 9, 2026) · Conforming loan limits (FHFA) (2026)
You will see it in…
- The Loan Estimate, in the “Loan type” box (FHA)
- State assistance program pages, which often pair with FHA loans
- Our mortgage calculator, when you choose the loan type
