FHA's 3.5% rule is a minimum-required-investment calculation—not a slogan.
For borrowers eligible for maximum financing, the familiar FHA structure is generally 96.5% maximum LTV, creating a 3.5% minimum required investment. Credit score and transaction structure can change the maximum mortgage.
Maximum financing
With an FHA Minimum Decision Credit Score of 580 or higher, maximum financing is generally 96.5% LTV. Scores from 500–579 are generally limited to 90% LTV under FHA policy, subject to lender overlays.
MRI is not the same as total cash to close
The Minimum Required Investment (MRI) is the borrower's required investment in the property under FHA's maximum-mortgage calculation. Total cash to close can also include closing costs, prepaid taxes/insurance, discount points and other transaction costs—less permitted credits, gifts, assistance and deposits already paid.
Acceptable sources
FHA recognizes numerous acceptable sources when properly verified, including borrower funds, eligible gifts, gifts of equity, qualifying secondary financing/DPA, retirement assets, investments, proceeds from sale of assets and other Handbook-permitted sources.
Official FHA policy baseline
Primary source: HUD/FHA Single Family Housing Policy Handbook 4000.1. HUD identifies it as the consolidated, comprehensive source of FHA Single Family policy; the current update was published August 12, 2026.