The minimum required investment (MRI) is FHA's name for the buyer's share of the purchase. With a credit score of 580 or higher it's 3.5% of the home's adjusted value. With a score from 500 to 579 it's 10%.
Most people call it the FHA down payment, and in practice that's what it is. The formal name matters for one reason: HUD's rules about where the money can come from are written around it.
How HUD figures the adjusted value
The 3.5% is measured against the adjusted value, which is the lower of two numbers:
- The contract price, minus any inducements to purchase (for example, seller credits above FHA's 6% cap, or furniture or cash thrown in to close the deal)
- The appraised value
On most purchases the price and the appraisal are close and there are no inducements, so the MRI is 3.5% of the price. When the appraisal comes in low, the MRI shrinks with it, but the gap between the appraisal and the price lands on the buyer.
Where the money can come from
HUD accepts several sources for the MRI:
- Your own savings, checking or retirement funds, documented with statements
- A gift from a family member, employer, labor union, close friend with a documented relationship, or charitable organization, backed by a signed gift letter
- A government agency or housing finance agency providing it as down payment assistance, often as a second mortgage
The seller, the builder, the real estate agents and anyone else who profits from the sale can't provide it. Their money is limited to closing costs, prepaids and similar charges, up to 6% of the price.
An FHA purchase where the appraisal comes in under the price
A buyer with a 640 score signs a contract at $360,000. The appraisal comes back at $355,000.
| Step | Amount |
|---|---|
| Adjusted value (lower of $360,000 and $355,000) | $355,000 |
| MRI, 3.5% of $355,000 | $12,425 |
| Largest FHA base loan, 96.5% of $355,000 | $342,575 |
| Price minus base loan ($360,000 minus $342,575) | $17,425 |
At the original price, the buyer brings $17,425 toward the purchase: the $12,425 MRI plus the $5,000 gap between price and appraisal. If the seller drops the price to $355,000, the buyer's share falls back to $12,425.
The same math at a 560 score uses 10%. On a $300,000 home that appraises at value, the MRI is $30,000 and the base loan is $270,000.
Covering the MRI without savings
FHA 100% financing pays the full 3.5% through a down payment assistance second, starting at a 580 score. A family gift can cover it outright. A buyer between 500 and 579 who can raise the score to 580 or higher cuts the requirement from 10% to 3.5%, which on a $300,000 home is the difference between $30,000 and $10,500.
Plug your price, credit and gift into the cash to close calculator and it shows the MRI and the rest of the cash. Or call AAA Capital Funding at 888-601-8344 and we'll show which assistance programs can pay the 3.5% for you.