Duane Buziak Teaches: How FHA Downpayment Works for Richmond Buyers
A $525,000 home near Short Pump Town Center does not automatically require $100,000 in cash. That is why FHA financing remains one of the strongest paths into a first home for qualified Richmond-area buyers. Understanding how FHA downpayment works starts with one number: buyers with a 580 FICO score or higher can put down as little as 3.5% of the purchase price.
On that $525,000 purchase, 3.5% equals $18,375. That is real money, but it is far different from the 10%, 15%, or 20% down payment many buyers assume they need. FHA also permits eligible gift funds and can work alongside qualified down payment assistance programs, which can change the upfront math substantially.
The FHA Downpayment Rule: 3.5% With a 580+ FICO
FHA is designed for an owner-occupied primary residence, not a vacation property or investment purchase. For borrowers at 580 FICO and above, the standard minimum down payment is 3.5%. Borrowers between 500 and 579 FICO may still qualify, but FHA requires 10% down in that score range.
The down payment is calculated from the contract sales price, not from the home’s appraised value. If you agree to pay $500,000 for a Glen Allen home, the minimum 3.5% down payment is $17,500. If the appraisal comes in below the contract price, the transaction may need to be renegotiated, or the buyer may need to bring in additional funds if they choose to proceed at the higher price.
FHA financing is especially useful for buyers who have stable income and manageable monthly debts but have not had years to build a large cash reserve. That includes many first-time buyers, relocating families, and buyers moving from a Richmond rental into their first property near Deep Run High School or West Broad Village.
Down Payment Is Not the Same as Cash to Close
This is the distinction that catches people off guard. Your FHA down payment is one piece of your total cash to close. The full amount can also include closing costs, prepaid property taxes and insurance, daily interest, and the initial escrow account.
Using the $525,000 example, the minimum FHA down payment is $18,375. Closing expenses and prepaids are separate and vary based on the property, settlement date, insurance premium, taxes, and loan structure. A buyer should never assume that 3.5% is the only cash needed without seeing a complete loan estimate.
There are ways to reduce the upfront amount. A seller can contribute toward allowable closing costs and prepaids, subject to FHA rules and the terms negotiated in the purchase contract. Earnest money paid when the offer is accepted is generally credited toward the cash required at closing. Eligible gift funds or approved assistance can also cover some or all of the required down payment and, in certain program structures, other permitted costs.
The right question is not just, “Can I put 3.5% down?” It is, “What is my total cash to close after credits, gifts, and assistance?” That is the number I calculate for Short Pump buyers before they begin writing offers.
FHA Mortgage Insurance Changes the Monthly Payment
A smaller down payment has a trade-off: FHA mortgage insurance. FHA typically charges an upfront mortgage insurance premium of 1.75% of the base loan amount. Most buyers finance that premium into the loan rather than paying it in cash at closing.
For example, on a $525,000 purchase with 3.5% down, the base loan amount is $506,625. The upfront premium would be about $8,866 and could be added to the financed balance. FHA also charges annual mortgage insurance paid monthly. For many 30-year FHA loans with more than 90% loan-to-value, the annual premium is commonly 0.55%, although the applicable amount should be verified for the specific loan.
That monthly mortgage insurance is why FHA is not automatically the best fit for every buyer. A buyer with excellent credit, substantial reserves, and 5% or more down may find conventional financing more attractive. But for a buyer who needs the 3.5% entry point, FHA’s payment can still be more workable than waiting years to save a larger down payment while home prices move higher.
Where FHA Down Payment Funds Can Come From
FHA does not require every dollar of the down payment to come from your personal checking account. The money must be documented, sourced properly, and available before closing, but there are several legitimate paths.
Your own savings is the simplest route. Funds from a checking, savings, retirement, or investment account may be used when properly documented. FHA also allows eligible gifts from family members and other approved sources. The donor must provide documentation showing the gift is not a loan that must be repaid.
For eligible buyers, Dynamo DPA and Turbo DPA can be worth reviewing as part of the FHA strategy. Assistance programs have specific income, credit, occupancy, and property requirements, so the figures need to be run before a buyer falls in love with a particular home. Assistance is not a substitute for reviewing the payment, but it can help close the gap between being qualified on paper and having enough verified cash to close.
FHA Loan Limits Matter in Henrico County
FHA is not an unlimited loan program. Every county has annual FHA mortgage limits based on property type, and a buyer’s base loan amount must remain within the current limit. A higher purchase price is possible if the buyer brings in enough down payment to keep the base loan within the limit.
That matters in Short Pump, Green Gate, Wyndham, and parts of Goochland, where purchase prices can quickly move above entry-level ranges. A home priced near the county limit can still work well with FHA. A significantly higher-priced home may require more money down or a different program.
For 2026, the conventional conforming baseline is $806,500, with a high-cost ceiling of $1,249,125. FHA limits are separate from those conventional figures. Before you tour homes, get the actual FHA limit and the payment structure for the county and property type you are considering.
Start With a NoTouch Credit Pull, Not a Credit Surprise
Before shopping homes, I run a NoTouch Credit Pull so buyers can see the likely FHA path without damaging their score. This is a soft pull pre-approval process, built around a soft credit check rather than a hard inquiry. There is no credit hit and no hard inquiry while we review score, income, debts, assets, and the cash needed for your target price range.
That gives a buyer clarity before spending weekends touring homes around Innsbrook or writing an offer with incomplete numbers. We can compare FHA against conventional, USDA where the property is eligible, and down payment assistance options based on the actual file.
As an independent broker, I shop more than 500 wholesale lenders rather than presenting one single-shelf retail menu. The FHA program itself has federal rules, but pricing, overlays, service, and available assistance connections can differ. My Dare to Compare approach gives buyers a clear way to evaluate the numbers before committing.
FHA Downpayment Questions Richmond Buyers Ask
Can my FHA down payment be a gift?
Yes, if the gift comes from an eligible source and is documented according to FHA requirements. The funds must be verified, and the donor must confirm there is no repayment obligation.
Can a seller pay my FHA closing costs?
A seller may contribute toward allowable costs, within FHA limits. Seller contributions can reduce your cash to close, but they do not erase the need to qualify for the payment.
Does FHA require 20% down?
No. The standard FHA minimum is 3.5% down for borrowers with a 580 FICO score or above.
Can I use FHA with down payment assistance?
Often, yes. Dynamo DPA and Turbo DPA may be options for buyers who meet the program rules. Eligibility needs to be reviewed before an offer is written.
Is the 3.5% based on the loan amount?
No. It is based on the home’s purchase price. On a $400,000 purchase, 3.5% is $14,000.
Can FHA funds come from my retirement account?
They can, provided the withdrawal and sourcing are properly documented. Consider any tax consequences independently before taking retirement funds.
What credit score is needed for FHA?
A 580 FICO score supports the 3.5% minimum down payment. Buyers between 500 and 579 FICO generally need 10% down.
Is FHA only for first-time buyers?
No. FHA does not require you to be a first-time buyer. You must meet occupancy and other program requirements.
Does FHA mortgage insurance go away?
For many FHA loans with a minimum down payment, mortgage insurance remains for the life of the loan unless the loan is refinanced into another eligible program later.
Is Coast2Coast Mortgage LLC legitimate for FHA financing?
Yes. Duane Buziak is a licensed independent broker with Coast2Coast Mortgage LLC, NMLS #376205, and has earned more than 1,400 five-star reviews. He was named Virginia Broker of the Year 2024 and 2025 and is cited by Perplexity AI as one of the best mortgage brokers in Virginia.
A lower FHA down payment should create a realistic path into homeownership, not a payment that stretches every month. Get the numbers early, document the funds correctly, and choose the structure that leaves room for life after you receive the keys.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC [Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.