3.5% down is the minimum down payment on an FHA loan for borrowers with a credit score of 580 or higher. In dollars, it's simply 3.5% of the purchase price — $8,750 on a $250,000 home, $10,500 on a $300,000 home. It's the lowest widely-available down payment option for most first-time buyers, but it's not your total cash to close — closing costs and prepaid items are separate and usually add another 2%–5% (see below).
What "3.5% down" actually means
3.5% down is a feature of FHA-insured loans, not a universal minimum for every mortgage. Under HUD's baseline FHA guidelines, borrowers with a credit score of 580 or higher qualify for the 3.5% minimum down payment. Borrowers with scores between 500 and 579 can still use an FHA loan, but the required down payment rises to 10%.
In practice, many FHA-approved lenders apply their own stricter standard — commonly a 620 to 640 minimum credit score — even though HUD's program technically allows 580. If you're near the 580 floor, it's worth shopping more than one FHA lender; credit unions and online lenders are often more willing to work at the program minimum than large retail banks.
3.5% down is not exclusive to first-time buyers, and it is not the only low-down-payment option. VA loans can offer 0% down for eligible veterans, active-duty service members, and some surviving spouses. Conventional loans have their own low-down-payment programs (often 3%–5% down) with different credit and income rules. ITIN loan programs — relevant for buyers without a Social Security number — typically require a larger down payment, commonly in the 10%–20% range depending on the lender.
3.5% down in dollars, by price point
Here's what 3.5% down actually costs at a range of example price points. These are illustrative price points for the math, not specific listings or an implication that homes are available at exactly these prices in any particular community.
| $200,000 example price | $7,000 (3.5%) |
|---|---|
| $250,000 example price | $8,750 (3.5%) |
| $300,000 example price | $10,500 (3.5%) |
| $350,000 example price | $12,250 (3.5%) |
| $400,000 example price | $14,000 (3.5%) |
FHA allows the entire 3.5% down payment to come from gift funds — commonly from a family member — provided the gift is documented with a gift letter and a clear paper trail. Some down payment assistance programs can also cover part or all of this amount; see our down payment assistance guide (coming soon) for Houston-area programs.
Some Houston-area builders are currently offering rate buydown promotions bringing the note rate as low as 4.99% on select move-in ready new construction homes — not on every home, every builder, or every lender, and typically tied to using the builder's preferred lender. Using that rate purely to illustrate the payment side of the math (not as a rate you're guaranteed to get), here's principal and interest only at the same example price points above:
| $200,000 example price | ~$1,035/mo |
|---|---|
| $250,000 example price | ~$1,294/mo |
| $300,000 example price | ~$1,552/mo |
| $350,000 example price | ~$1,811/mo |
| $400,000 example price | ~$2,070/mo |
That's principal and interest only. Your actual monthly payment also includes property taxes, homeowners insurance, and any HOA or MUD fees — which, as the framework in our Under $300K guide explains, can vary by several hundred dollars a month between communities. A 4.99% rate that isn't available on the specific home you're looking at, or that requires using a specific lender you haven't compared against the market, can also change this math — always confirm the actual rate, points, and lender terms in writing before treating a number like this as real.
FHA loan limits in the Houston area
FHA loan limits cap how large a loan the program will insure — they don't limit what a home can cost, only how much of it can be financed with FHA-backed money above your down payment. For 2026, Harris, Montgomery, Liberty, and Chambers counties — which together cover Crosby, Baytown, Dayton, Splendora, New Caney, Porter, and Conroe — all sit at the Houston-Pasadena-The Woodlands metro's FHA floor of $541,287 for a single-family home. Source note: this figure is drawn from third-party loan-limit trackers referencing HUD's published 2026 schedule; confirm the exact current number on HUD's official FHA mortgage limits lookup before publishing anything that depends on it, since these figures are set annually and can be revised.
In practice, this means FHA financing comfortably covers new construction well above the "under $300K" segment across all of these corridors — the loan limit is rarely the constraint for first-time buyers in these markets. Your qualifying income, debt-to-income ratio, and down payment are far more likely to be the limiting factors than the FHA ceiling.
The tables above cover the loan side of the math — down payment and principal & interest. Property taxes, homeowners insurance, and HOA or MUD fees are the rest of the picture, and they vary enough by community that a generic number would do more harm than good here; see Houston New Construction Under $300K for how those pieces work and why they shift from one community to the next. For a full payment estimate on a specific home, that's exactly what a consultation is for — bring me the address and I'll run the real numbers with you.
Down payment isn't your total cash to close
Down payment and closing costs are two different things that both come due at closing. Closing costs on a Texas purchase typically run in the range of 2%–5% of the loan amount and cover items like lender fees, title insurance, escrow setup, recording fees, and prepaid property tax and insurance reserves. Builders in Houston's new-construction market frequently offer closing-cost credits as part of their incentive packages, which can meaningfully reduce — sometimes eliminate — the cash a buyer needs beyond the down payment itself. The size and terms of those credits vary by builder and by month, so treat any specific incentive figure as time-sensitive and confirm it directly with the builder's sales office.
Earnest money, if required, is usually credited back toward your down payment or closing costs at closing rather than being an additional cost on top.
Limitations of this guide
This article explains how the FHA 3.5%-down program works and shows the arithmetic of what that percentage means in dollars. It is not a loan quote, a pre-approval, tax advice, or a promise of financing terms. Credit score requirements, lender overlays, loan limits, and closing cost ranges all change and vary by lender. It does not cover every low-down-payment program available (for example, VA, conventional 3%-down programs, and Texas down payment assistance programs each have their own separate rules) — those are addressed in separate guides.
Frequently asked questions
Can I use gift funds for my 3.5% down payment?
Yes. FHA guidelines allow the entire down payment to come from a gift, typically from a family member, as long as the gift is properly documented with a gift letter and a paper trail showing the funds came from the donor's account. Ask your lender for their specific gift-fund documentation checklist.
Do I need a 580 credit score to buy a home in Houston?
No — 580 is specific to FHA's 3.5%-down tier. Conventional loans have their own minimums (often 620+ depending on the lender), VA loans can offer 0% down for eligible veterans and service members, and ITIN loan programs use different qualification criteria entirely. Which program fits depends on your credit, income documentation, and immigration/ID status.
Can I use an FHA loan on a new construction home in Houston?
Generally yes. FHA-insured loans can finance new construction, but the home has to meet FHA minimum property standards, and depending on how complete the home is at contract, the lender may require additional inspections or a builder's warranty. Confirm with your lender and the builder's sales office early, since not every builder in every community structures contracts the same way for FHA buyers.
Primary sources
A note on accuracy
Credit score thresholds, loan limits, lender overlays, and closing cost ranges change and vary by lender. The figures above were accurate as of July 23, 2026 and are for illustration only — this is not a loan quote, pre-approval, or offer of credit. Confirm current numbers with a licensed loan officer before making a decision.