Myth #4 about the FHA 203k: You Need a Massive Down Payment

You are on the right track! FHA 203k loans do not require a massive down payment, which is a common misconception.



Here's how the FHA 203k down payment works:

• Minimum down payment: The minimum down payment for an FHA 203k loan is 3.5%, similar to a standard FHA loan. This applies if your credit score is 580 or higher.
• Lower credit score, higher down payment: If your credit score falls between 500 and 579, the FHA requires a higher minimum down payment of 10%.
• Here's the key point: The down payment is calculated based on the combined purchase price and estimated renovation costs. So, let's say you find a fixer-upper for $200,000 and estimate $50,000 in renovations. The total loan amount would be $250,000, and your minimum down payment would be $8,750 (3.5% of $250,000).

While a 3.5% down payment is significantly lower than a conventional 20% down payment, it's still important to factor in additional closing costs associated with the mortgage. It's wise to discuss all potential costs with your lender when considering an FHA 203k loan.