Unlock Homeownership with Just 3.5% Down: How an FHA Purchase Loan Makes It Possible

  • Tags: Calculators, New Construction, Spec Homes

Buying a home may seem daunting—especially when you’re trying to budget for upfront costs and future payments. But for many buyers, especially first-timers, the FHA Purchase Loan offers a realistic path forward with lower down payments, flexible credit requirements, and the possibility of seller and down payment assistance.

Here’s what it looks like when you run the numbers.

FHA Purchase Loan Example:

Home Price: $300,000
Down Payment: 3.5% ($10,500)
Loan Term: 30 years
Estimated Interest Rate: 7%
Annual Insurance: $2,400
Annual Taxes: $3,600
HOA Dues: $0

Monthly Breakdown

ExpenseMonthly Amount
Principal & Interest$1,926
Property Taxes$300
Homeowners Insurance$200
FHA Mortgage Insurance (MI)$184
HOA Fees (if any)$0
Total Estimated Payment$2,610

This all-in monthly housing expense keeps your payment predictable and within most FHA lending guidelines.

Loan Details

  • Base Loan Amount: $289,500
  • Upfront Mortgage Insurance Premium (UFMIP @ 1.75%): $5,066
  • Final Loan Amount (Base + UFMIP): $294,566

How Much Cash Will You Need to Close?

Without any seller credits or assistance, here’s your estimated cash out of pocket:

  • Total: $28,500 (Includes down payment + 6% estimated closing costs)

But here’s where it gets better:

  • With Seller Credit (6%): ~$10,500 out of pocket
  • With Seller Credit + Down Payment Assistance (DPA): $0 out of pocket

Down Payment Assistance (DPA) and seller credits can dramatically reduce your cash requirement, but be sure to understand the terms. Some DPA programs may require repayment if you sell or refinance early.

What Income Do You Need to Qualify?

  • Estimated Monthly Income Needed: $5,220
    This is based on FHA’s general debt-to-income ratio (DTI) cap of 43%, though FHA may allow up to 50% DTI with compensating factors like a strong credit history or extra savings.

Already Own a Home?

You may still qualify for another FHA loan under specific exceptions such as:

  • Relocating for work
  • Needing a larger home for a growing family
  • Divorce or legal separation
  • Being a co-signer or non-occupying co-borrower on another FHA loan

Why Choose an FHA Loan?

  • Only 3.5% Down – Use your savings, gift funds, or down payment assistance.
  • Lenient Credit Guidelines – More flexible than conventional loans.
  • Low Interest Rates – Even with MI, FHA rates are often competitive.
  • Seller Can Help – Ask for up to 6% in closing cost credits.
  • One Step Closer to Generational Wealth – You don’t have to wait to own.

Take the Next Step Toward Homeownership

Whether you’re a first-time buyer or getting back into the market, FHA purchase loans make it easier to move forward with confidence.

Get Preapproved and Own Your First—or Next—Home Sooner Than You Think.

Ready to Take Your First Step?

Skip the guesswork. Take our quick Discovery Quiz to uncover your top financial priorities, so we can guide you toward the wealth-building strategies that fit your life.

  • 💡 Takes just 5 minutes
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Need a Pre-Approval Letter—Fast?

Buying a home soon? Complete our short form and we’ll connect you with the best loan options for your target property and financial situation—fast.

  • 💡 Only 2 minutes to complete
  • 📊 Quick turnaround on pre-approval
  • 🔒 No credit score impact
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Got a Few Questions First?

Let’s talk it through. Book a call and one of our friendly advisors will be in touch to guide you personally.

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Important Disclaimer

This calculator is for illustrative purposes only and does not constitute financial, legal, or investment advice. Results are based on general assumptions and may not reflect actual performance or eligibility. This is not a loan estimate or approval. Please consult with a licensed mortgage advisor before making financial decisions.

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