Picture this: you’ve been renting in Tuckahoe or Lakeside for a few years now, watching home values climb, and every time you start thinking seriously about buying, one number stops you cold. Twenty percent. You’ve heard it so many times it feels like a law of nature: you need 20% down to buy a house. On a $325,000 home, that’s $65,000 sitting in a savings account before you can even schedule a showing.
That assumption is costing buyers real time. And in most cases, it simply isn’t true.
FHA loans were created specifically to lower the barrier to homeownership for buyers who have steady income and reasonable credit but haven’t had decades to stockpile a large down payment. The actual minimum is a fraction of 20%, and the rules around where that money can come from are more flexible than most buyers realize. What the FHA program does require, though, is that you understand exactly how it works, because the details around credit score thresholds, mortgage insurance, and loan limits can significantly affect your total cost of ownership.
This article covers everything Henrico County homebuyers need to know about FHA loan down payment requirements: the two credit-score-based tiers, what funds are acceptable, what costs sit outside the down payment, how the 2026 FHA loan limits apply locally, and how working with a Henrico-based mortgage broker can open up options a single-shelf lender simply can’t match.
Written by Duane Buziak, NMLS #1110647 | Coast2Coast Mortgage LLC NMLS #376205
The Two Down Payment Tiers Every FHA Borrower Faces
FHA loan down payment requirements are not one-size-fits-all. They split cleanly into two tiers based on your credit score, and knowing which tier you fall into before you start shopping changes everything about your planning.
The 3.5% Tier (Credit Score 580 and Above): If your credit score is 580 or higher, the FHA minimum down payment is 3.5% of the purchase price. On a $350,000 home in Glen Allen, that translates to $12,250 out of pocket. Compare that to $70,000 at 20% down, and you can see why FHA financing opens doors for buyers who are financially ready to own but haven’t had the runway to save a massive lump sum.
At this tier, the entire 3.5% can come from gift funds, which we’ll cover in the next section. There is no requirement for the borrower to contribute from personal savings when the credit score is 580 or above. That’s a meaningful flexibility that many buyers don’t know about until they sit down with a broker who works with FHA regularly.
The 10% Tier (Credit Score 500 to 579): If your score falls between 500 and 579, FHA financing is still available, but the minimum down payment rises to 10%. On that same $350,000 Glen Allen home, you’re now looking at $35,000 rather than $12,250. That’s a real difference in cash requirements, and it’s worth understanding before you apply.
At this tier, there’s also an important restriction on gift funds: borrowers in the 500–579 range must contribute at least the full 10% from their own funds. Gift money cannot cover the entire requirement at this credit level, per HUD’s Single Family Housing Policy Handbook 4000.1, available at hud.gov.
Below 500: A Hard Floor, Not a Lender Preference: Credit scores below 500 are not eligible for FHA financing at all. This is not a lender overlay or a local policy decision, it is the HUD floor. No broker, no matter how experienced, can get an FHA loan approved for a borrower below this threshold. If you’re in this range, the path forward involves credit repair and a clear timeline for getting above 500 before applying.
Here’s where it gets interesting for buyers who are sitting just below the 580 line. Many retail lenders and direct lenders impose what are called overlays, internal credit score minimums that are stricter than HUD’s actual rules. A lender might require 620 or even 640 minimum for FHA, even though HUD allows 580. This is a lender business decision, not a legal requirement. A mortgage broker with access to multiple wholesale investors can find one whose overlays match your actual credit profile, rather than the retail lender’s internal policy. More on that in Section 5.
The practical takeaway: before you assume you don’t qualify for the 3.5% tier, or don’t qualify at all, get your actual score in front of someone who can run it against multiple investors, not just one shelf.
Where Your Down Payment Money Can Actually Come From
One of the most underused advantages of FHA financing is the flexibility around down payment sources. Buyers often assume the money has to come from a personal savings account that’s been sitting untouched for months. The actual rules are considerably broader than that.
Gift Funds: FHA permits gift funds from a defined list of acceptable donors, including family members, employers, labor unions, close friends with a documented relationship to the borrower, approved charitable organizations, and government agencies. The key requirement is a gift letter that documents the donor’s name, address, relationship to the borrower, the dollar amount, the property address, and a clear statement that no repayment is required. If repayment is expected, the funds are classified as a loan, not a gift, and cannot be used as a down payment source.
As noted above, when your credit score is 580 or higher, the entire 3.5% can come from gift funds. You don’t need to contribute a single dollar from personal savings if the gift is properly documented. This is a legitimate, HUD-sanctioned path that many first-time buyers in neighborhoods like Lakeside and Twin Hickory have used to get into homeownership sooner than they expected.
Down Payment Assistance Programs: Virginia Housing (formerly VHDA) offers down payment assistance programs that can be layered with FHA loans to help cover part or all of the 3.5% minimum. These programs have their own eligibility requirements around income limits, purchase price limits, and first-time buyer status, and the terms change periodically, so it’s worth confirming current availability with a broker who works with these programs regularly.
One important compliance note: double-stacking multiple grant programs on a single transaction is not permitted. You can layer one assistance program with an FHA loan, but combining multiple grant sources in a way that exceeds program rules is not allowed and can jeopardize your loan approval.
Personal Savings and Other Acceptable Sources: Standard personal savings and checking accounts are always acceptable, provided you can document the source of the funds. FHA requires that lenders verify where the money came from, not just that it’s there. Large deposits that appear shortly before closing will trigger documentation requests.
Retirement accounts are also acceptable as a source, including 401(k) funds accessed through a withdrawal or loan, but you’ll need to document the account statement and the terms of any withdrawal. Proceeds from the sale of another property are acceptable as well, with appropriate documentation of the transaction.
Sourcing and Seasoning: FHA has sourcing and seasoning requirements that apply to all down payment funds. Sourcing means you can document where the money came from. Seasoning refers to how long the funds have been in your account. Funds that have been in a verified account for at least 60 days are generally considered seasoned and require less documentation. Funds that appeared recently will require a paper trail explaining their origin.
The bottom line is that FHA gives buyers more options for assembling a down payment than most people realize, but each source comes with documentation requirements that need to be handled correctly. A broker who works with FHA regularly knows exactly what underwriters will ask for and can help you organize your documentation before you’re under contract.
What the Down Payment Doesn’t Cover: Closing Costs and MIP
Here’s a number that surprises a lot of first-time buyers: your down payment and your total cash needed to close are not the same number. Two significant costs sit outside the down payment, and understanding them is essential for accurate financial planning.
FHA Mortgage Insurance Premium (MIP): FHA MIP is mandatory on every FHA loan, regardless of how much you put down. It comes in two parts. The upfront MIP is 1.75% of the base loan amount, paid at closing or rolled into the loan balance. On a $313,625 loan (a $325,000 purchase with 3.5% down), the upfront MIP is approximately $5,488. Rolling it into the loan is a common choice because it preserves cash at closing, but it does increase your loan balance and your monthly payment slightly.
The annual MIP is an ongoing monthly charge that varies based on your loan term, loan-to-value ratio, and loan amount. Current annual MIP rates are published by HUD and updated periodically. You can verify the current rates applicable to your specific loan scenario at HUD’s Single Family Housing Policy Handbook page. Do not rely on a rate quoted verbally without confirming it against the current HUD table, as these rates have changed in recent years.
The MIP Duration Problem: This is one of the most important differences between FHA and conventional financing, and it affects long-term cost significantly. For FHA loans with terms greater than 15 years and a down payment below 10%, originated after June 2013, mortgage insurance typically lasts the life of the loan. It does not automatically cancel when your equity reaches 20%, unlike private mortgage insurance (PMI) on conventional loans.
The only way to remove MIP from an FHA loan in this situation is to refinance into a conventional loan once you’ve built sufficient equity. That’s a real option, and many buyers use FHA to get into a home and then refinance later, but it’s a cost to factor into your total ownership calculation, not an afterthought.
Closing Costs: Closing costs in the Henrico County market typically run in the range of 2–5% of the purchase price, covering items like lender fees, title insurance, appraisal, prepaid property taxes, and homeowners insurance. These are separate from your down payment and must be planned for independently.
There are ways to reduce out-of-pocket closing costs. Seller concessions, where the seller agrees to contribute toward your closing costs as part of the purchase negotiation, are permitted on FHA loans up to 6% of the purchase price. No-out-of-pocket closing options can also be structured in some scenarios. These arrangements need to be structured correctly within FHA guidelines, and a broker can walk you through what’s realistic in the current Henrico market based on your specific purchase price and negotiating position.
The practical planning message: when you’re budgeting for an FHA purchase, the number you need to have ready is your down payment plus closing costs, plus any cash reserves your lender requires. Running the full picture before you start making offers is how you avoid surprises at the closing table.
FHA Loan Limits in Henrico County for 2026
FHA financing has a ceiling, and in some parts of Henrico County, that ceiling becomes relevant faster than buyers expect. Understanding the 2026 FHA loan limits for the Richmond MSA is an essential step before you start shopping at specific price points.
Henrico County falls within the Richmond Metropolitan Statistical Area for FHA lending purposes. The FHA loan limit for a given area is set annually by HUD and determines the maximum loan amount you can borrow using FHA financing. For 2026, the national baseline FHA floor for a single-family home is $524,225. However, the Richmond MSA has a specific limit that may differ from the national floor, and you should confirm the current number directly using HUD’s official mortgage limits lookup tool at entp.hud.gov before making purchase decisions based on FHA financing.
For reference, the 2026 conforming loan baseline set by FHFA is $806,500, which is the ceiling for standard conventional financing. FHA limits are typically set below the conforming limit in most markets, which means buyers at higher price points may exhaust FHA eligibility before they hit the conventional ceiling.
Where This Becomes Relevant in Henrico: Neighborhoods like Short Pump, Wyndham, and the River Road corridor have seen home prices trend upward in recent years. Buyers targeting properties at the higher end of those markets may find that the purchase price, minus a 3.5% down payment, produces a loan amount that exceeds the FHA ceiling for the Richmond MSA. In that case, FHA financing is not available for that transaction, and the buyer would need to explore conventional financing or other programs instead.
In more price-accessible neighborhoods like Tuckahoe, Lakeside, Deep Run Park, and Twin Hickory, FHA loan limits are less likely to be a binding constraint. A $325,000 purchase in those areas, for example, would produce a loan amount well within typical FHA limits after a 3.5% down payment.
Planning Around the Limit: If you’re targeting a home that might be close to the FHA ceiling, the calculation is straightforward: take the purchase price, subtract your down payment, and compare the resulting loan amount to the 2026 Richmond MSA FHA limit. If the loan amount exceeds the limit, you’re outside FHA territory for that transaction. A broker can run this calculation quickly and help you identify whether FHA, conventional, or another program is the right fit for your specific target price range before you start making offers.
How a Broker’s Wholesale Access Changes the FHA Equation
There’s a structural difference between working with a mortgage broker and walking into a retail bank or direct lender for an FHA loan, and it’s not subtle. Understanding it can affect both your rate and your eligibility.
Single-Shelf vs. Multiple Investors: A retail lender or direct lender offers FHA loans from their own single product shelf. Their rates, their overlays, and their underwriting guidelines are the only options available to you through that channel. A mortgage broker, by contrast, works with multiple wholesale lenders and investors, each of whom has their own FHA pricing, their own overlay policies, and their own appetite for different borrower profiles. The broker’s job is to match your specific profile to the investor whose terms work best for your situation.
In practice, this means that on an FHA loan, a broker can shop rate and structure across multiple sources simultaneously. The difference in rate between investors can be meaningful over a 30-year loan, and the difference in overlay policies can determine whether you qualify at all.
Lender Overlays Are Real: HUD sets the minimum credit score floor at 500 for FHA financing. But many retail lenders and direct lenders impose overlays, internal minimums that are stricter than HUD’s rules. It’s common to encounter lenders who require a 620 or even 640 minimum credit score for FHA, even though HUD allows 580. If you walk into one of those lenders with a 595 score, they’ll tell you that you don’t qualify. That’s their overlay talking, not HUD policy.
A broker with access to multiple wholesale investors can find one whose overlay matches your actual score. The 580 HUD floor is real and accessible through the right wholesale channel, even if it’s not available through every retail counter in town. This is a concrete, factual advantage, not a marketing claim.
The NoTouch Credit Pull Advantage: One of the friction points in early-stage mortgage exploration is the credit pull. Many lenders require a hard inquiry just to give you a rate quote or a pre-approval letter. Hard inquiries affect your credit score, and multiple hard pulls in a short window can add up, particularly for buyers who are already working to strengthen their credit profile.
Henrico Mortgage’s NoTouch Credit Pull pre-qualification lets buyers explore FHA eligibility and get a clear picture of where they stand without triggering a hard inquiry. You can find out whether you’re in the 3.5% tier or the 10% tier, understand what loan amounts you’d qualify for, and identify any credit issues worth addressing, all before a single hard pull hits your report. That’s a meaningful difference for buyers who want to plan carefully before committing to an application.
Duane Buziak has been serving Henrico County homebuyers since 2014, working as a broker with wholesale access across hundreds of investors. Buyers in Tuckahoe, Lakeside, Glen Allen, and surrounding neighborhoods can reach him directly at 804-212-8663.
FHA vs. Conventional: The Down Payment Comparison That Actually Matters
The question isn’t just “which loan has the lower down payment?” It’s “which loan costs less over the time I plan to own this home?” Those are different questions, and the answer depends on your credit score, your purchase price, and your timeline.
The Down Payment Comparison: Conventional financing through Fannie Mae’s HomeReady or Conventional 97 programs allows as little as 3% down for qualified first-time buyers. FHA requires 3.5% at the 580+ tier. On a $325,000 purchase, that’s $9,750 conventional vs. $11,375 FHA. The conventional down payment is lower by $1,625.
But that’s where the simple comparison ends, because the mortgage insurance picture tells a different story depending on your credit score.
The Mortgage Insurance Difference: Conventional loans with less than 20% down require private mortgage insurance (PMI). Under the Homeowners Protection Act, PMI on a conventional loan cancels automatically when your loan balance reaches 80% of the original purchase price, assuming you’re current on payments. FHA MIP, for loans with less than 10% down and terms greater than 15 years originated after June 2013, does not cancel automatically. It typically lasts the life of the loan.
This means that over a 5-year or 10-year horizon, the FHA borrower continues paying MIP while the conventional borrower may have already had PMI removed. That ongoing cost difference can outweigh the lower initial down payment advantage of conventional financing, depending on the loan size and the MIP/PMI rates applicable to your specific scenario.
The Credit Score Factor: Here’s the nuance that most comparison articles skip. At credit scores below approximately 680, FHA MIP is often more competitive than conventional PMI on a monthly cost basis. Conventional PMI pricing is heavily credit-score-driven, and at lower scores, the PMI rate can be high enough that FHA’s MIP, despite lasting longer, is cheaper month to month. At higher credit scores, conventional PMI typically becomes more competitive, and the auto-cancellation feature makes conventional the stronger long-term choice.
A Worked Dollar Example: Consider a $325,000 purchase in the Tuckahoe or Lakeside area. Under FHA with 3.5% down, the down payment is $11,375, leaving a base loan amount of $313,625. The upfront MIP is 1.75% of that base loan amount, which equals approximately $5,488. This can be rolled into the loan, bringing the financed amount to approximately $319,113. Under conventional with 3% down, the down payment is $9,750, leaving a loan amount of $315,250, with no upfront mortgage insurance charge.
The monthly cost comparison between the two depends on the annual MIP rate applicable to your FHA loan and the PMI rate applicable to your conventional loan, both of which vary based on your credit score, loan term, and current market pricing. Before making a final decision between FHA and conventional at a specific purchase price, run the actual numbers with a broker who can pull current MIP and PMI quotes side by side. The CFPB’s overview of FHA loans at consumerfinance.gov provides a solid consumer-facing foundation for understanding the structure, but the specific cost comparison requires current, real numbers from an actual lender quote.
The right loan type is the one that fits your credit score, your cash position, your purchase price relative to FHA limits, and your expected ownership timeline. That’s a calculation worth running carefully, not guessing at.
Your Next Steps as a Henrico County FHA Buyer
If you’ve read this far, you have a clearer picture of how FHA down payment requirements actually work than most buyers do when they start shopping. Here’s how to translate that into action.
Step 1: Know Your Credit Score Tier. Find out whether you’re at 580 or above, between 500 and 579, or somewhere that needs attention before you apply. This determines your minimum down payment, your gift fund eligibility, and your overlay options across different investors.
Step 2: Identify Your Down Payment Source. Whether it’s personal savings, gift funds, or a Virginia Housing assistance program, confirm that your source is FHA-eligible and that you can document it properly. If you’re relying on gift funds, make sure the donor is on the approved list and that you understand the gift letter requirements.
Step 3: Verify the 2026 Henrico FHA Loan Limit. Before you fall in love with a specific home at a specific price point, confirm that the loan amount after your down payment falls within the 2026 Richmond MSA FHA limit. Use HUD’s official lookup tool at entp.hud.gov.
Step 4: Get a NoTouch Pre-Qualification. Before you start touring homes in Deep Run Park, Twin Hickory, Innsbrook, or anywhere else in Henrico County, get a clear picture of where you stand without a hard inquiry on your credit. Duane Buziak has been helping Henrico County buyers navigate exactly this process since 2014. You can reach him directly at 804-212-8663.
Get pre-qualified today and take the first step toward homeownership with a local mortgage broker who understands the Henrico County market from the inside out.
Putting It All Together
FHA loan down payment requirements come down to two numbers: 3.5% if your credit score is 580 or above, and 10% if your score falls between 500 and 579. Scores below 500 are not eligible. Gift funds, Virginia Housing assistance programs, and personal savings can all contribute to meeting that threshold, each with their own documentation requirements.
The down payment is not the only cost to plan for. FHA MIP adds an upfront charge of 1.75% of the loan amount plus an ongoing monthly cost that, for most borrowers with less than 10% down, lasts the life of the loan. Closing costs in Henrico County typically run separately from the down payment, and no-out-of-pocket closing options exist but must be structured correctly within FHA guidelines.
Whether FHA or conventional is the right choice depends on your credit score, your purchase price relative to the 2026 Richmond MSA FHA limit, and your long-term cost calculation including mortgage insurance. That’s not a decision to make based on a quick online comparison. It’s a calculation worth running across multiple investors with a broker who has access to more than one shelf.
Duane Buziak has been serving homebuyers in Tuckahoe, Lakeside, Glen Allen, Deep Run Park, Twin Hickory, Innsbrook, and surrounding Henrico County neighborhoods since 2014. The NoTouch Credit Pull pre-qualification gives you a clear picture of your FHA eligibility without affecting your credit score. Call 804-212-8663 or get pre-qualified today to find out exactly where you stand before you start making offers.