# How to Buy a Home With an FHA Loan Without Using Your Own Money for the Down Payment in Baldwin County, Alabama By Tom Kalagher (@tomkalagher) · Published 2026-09-14 Canonical: https://voce.com/@tomkalagher/baldwin-buy-home-fha-loan-without-using-money-down-7ee2du --- **By Tom Kalagher, Fairhope Mortgage | NMLS #2028566** Yes—many Baldwin County buyers can use FHA financing without supplying the 3.5% minimum required investment from their own bank account. A standard FHA loan still requires a minimum investment, but eligible gift funds, a family gift of equity, or approved down-payment assistance may cover it. Qualified disaster victims may use FHA Section 203(h), which provides 100% financing with no required down payment, although closing costs and prepaid expenses remain, but can sometimes be paid by the seller. Using approximate lower-quartile prices rather than city medians, the examples below assume $400,000 in Fairhope, $255,000 in Daphne, $270,000 in Foley, and $305,000 in Gulf Shores. The corresponding 3.5% investments are $14,000, $8,925, $9,450, and $10,675. Approval still requires qualifying credit, income, debt ratios, an FHA-eligible property, and properly documented funds. ## First-Time Home-Buyer Price Assumptions FHA does not establish a “typical first-time home-buyer price.” For these examples, we use the approximate 25th percentile of recently tracked closed sales as a practical entry-level benchmark. City Reported lower quartile Rounded example price Fairhope Approximately $398,000 **$400,000** Daphne Approximately $255,000 **$255,000** Foley Approximately $270,000 **$270,000** Gulf Shores Approximately $307,000 **$305,000** Sources: [Fairhope market data](https://resideline.com/blog/fairhope-al-housing-market), [Daphne market data](https://resideline.com/blog/daphne-al-housing-market), [Foley market data](https://resideline.com/blog/foley-al-housing-market), and [Gulf Shores market data](https://resideline.com/blog/gulf-shores-al-housing-market). These figures are planning examples, not appraisals or representations that homes will be available at these prices. A particular home’s value, condition, property type and FHA eligibility must be evaluated separately. ## How Much Down Payment Does FHA Require? For borrowers with a qualifying decision at the maximum FHA financing level, the minimum required investment is generally 3.5% of the adjusted value. The basic calculation is: **Purchase price × 3.5% = minimum required investment** City Example price 3.5% required investment Base FHA loan Fairhope $400,000 **$14,000** $386,000 Daphne $255,000 **$8,925** $246,075 Foley $270,000 **$9,450** $260,550 Gulf Shores $305,000 **$10,675** $294,325 Review the current requirements in the [FHA Single Family Housing Policy Handbook 4000.1](https://www.hud.gov/hud-partners/single-family-handbook-4000-1). Because FHA mortgage limits change annually, confirm the applicable Baldwin County limit using HUD’s [FHA Mortgage Limits Lookup Tool](https://entp.hud.gov/idapp/html/hicostlook.cfm). ## Estimated FHA Payments at Today’s Illustrative Rate The following calculations use: - 30-year fixed-rate mortgage - Illustrative interest rate of 6.75% - 1.75% upfront mortgage insurance premium financed into the loan - Estimated annual mortgage insurance premium of 0.55% - No discount points The 6.75% assumption is for illustration and is close to current national FHA market readings. Rates can change daily and depend on credit, loan structure, points and lender pricing. See [current mortgage-rate information](https://www.mortgagenewsdaily.com/mortgage-rates). City Base loan Financed upfront MIP Total FHA loan Est. principal and interest Est. monthly MIP Est. P&I plus MIP Fairhope $386,000 $6,755.00 $392,755.00 $2,547.40 $176.92 **$2,724.32** Daphne $246,075 $4,306.31 $250,381.31 $1,623.97 $112.78 **$1,736.75** Foley $260,550 $4,559.63 $265,109.63 $1,719.50 $119.42 **$1,838.91** Gulf Shores $294,325 $5,150.69 $299,475.69 $1,942.39 $134.90 **$2,077.29** These estimates do not include property taxes, homeowners insurance, flood insurance, HOA dues, condominium assessments or other housing expenses. Those costs can be substantial in coastal Baldwin County, particularly in Gulf Shores. See HUD’s [FHA mortgage-insurance guidance](https://answers.hud.gov/FHA/s/article/What-is-the-FHA-Mortgage-Insurance-Premium-structure-for-forward-mortgage-loans) for applicable premium requirements. ## Option 1: Use Gift Funds for the FHA Down Payment An eligible donor may give the borrower the money needed for the minimum required investment. FHA generally permits gifts from sources such as: - A family member - The borrower’s employer or labor union - A close friend with a clearly documented interest in the borrower - A charitable organization - A governmental agency or public entity assisting home buyers A prohibited interested party generally cannot disguise a sales concession as a gift. The donor must also state that repayment is not expected. ### Gift-fund examples City Required FHA investment Eligible gift Borrower’s personal down payment Fairhope $14,000 $14,000 **$0** Daphne $8,925 $8,925 **$0** Foley $9,450 $9,450 **$0** Gulf Shores $10,675 $10,675 **$0** The lender will normally require a signed gift letter and documentation showing the transfer of funds from the donor to the borrower or settlement agent. Depending on the transfer method, that may include bank statements, a canceled check, wire confirmation, deposit evidence or the settlement statement. Consult the **Gifts** and **Source Requirements for the Borrower’s Minimum Required Investment** sections of the current [FHA Handbook 4000.1](https://www.hud.gov/hud-partners/single-family-handbook-4000-1). ## Option 2: Use a Gift of Equity From a Family Member A gift of equity may be available when an eligible family member sells a home to the borrower and gives the borrower part of the seller’s equity. For example, suppose a parent sells a Fairhope home to an adult child for $400,000. If the appraisal supports the transaction and all FHA requirements are met, the parent could provide a $14,000 gift of equity at closing. That equity could satisfy the child’s 3.5% minimum investment. City Purchase price Required equity gift Base FHA loan Borrower cash for down payment Fairhope $400,000 $14,000 $386,000 **$0** Daphne $255,000 $8,925 $246,075 **$0** Foley $270,000 $9,450 $260,550 **$0** Gulf Shores $305,000 $10,675 $294,325 **$0** A gift of equity should be documented in the sales contract, gift letter, appraisal and closing documents. It is not simply the difference between an unsupported asking price and the contract price. HUD specifically addresses this option in its [gift-of-equity guidance](https://answers.hud.gov/FHA/s/article/Does-HUD-allow-gifts-of-equity) and in Handbook 4000.1. ## Option 3: Use Eligible Down-Payment Assistance Down-payment assistance may be structured as: - A grant that does not have to be repaid - A forgivable second mortgage - A deferred-payment second mortgage - A repayable second mortgage - Assistance from an eligible governmental agency, public entity, nonprofit organization, employer or other permitted source Program availability, income limits, purchase-price limits, repayment provisions and funding levels vary. Some assistance programs may also impose stricter credit-score or debt-ratio requirements than FHA itself. ### Assistance needed to cover the entire 3.5% City Purchase price Assistance needed Base FHA first mortgage Borrower cash for down payment Fairhope $400,000 $14,000 $386,000 **$0** Daphne $255,000 $8,925 $246,075 **$0** Foley $270,000 $9,450 $260,550 **$0** Gulf Shores $305,000 $10,675 $294,325 **$0** The lender must confirm that the provider, assistance terms and any secondary financing comply with FHA requirements. Funding availability should be confirmed before making an offer. ## Option 4: FHA Section 203(h) After a Major Disaster Section 203(h) is the correct FHA program for certain victims of Presidentially declared major disasters. Qualified borrowers may receive 100% financing when their principal residence was located in a designated disaster area and was destroyed or damaged severely enough that replacement or reconstruction is necessary. HUD states that: - No down payment is required. - The borrower may obtain 100% financing. - The new property must generally be the borrower’s principal residence. - The application must generally be submitted within one year of the disaster declaration. - Closing costs and prepaid expenses still must be paid by the borrower, covered through permitted premium pricing, or paid through allowable seller contributions. - The borrower must still qualify for the mortgage. Read HUD’s official [Section 203(h) Mortgage Insurance for Disaster Victims guidance](https://www.hud.gov/hud-partners/single-family-mortgage-programs-203h). ### Section 203(h) examples City Purchase price Required down payment Base loan Financed upfront MIP Total FHA loan Fairhope $400,000 **$0** $400,000 $7,000.00 $407,000.00 Daphne $255,000 **$0** $255,000 $4,462.50 $259,462.50 Foley $270,000 **$0** $270,000 $4,725.00 $274,725.00 Gulf Shores $305,000 **$0** $305,000 $5,337.50 $310,337.50 At the illustrative 6.75% rate: City Est. principal and interest Est. monthly MIP Est. P&I plus MIP Fairhope $2,639.79 $183.33 **$2,823.13** Daphne $1,682.87 $116.88 **$1,799.74** Foley $1,781.86 $123.75 **$1,905.61** Gulf Shores $2,012.84 $139.79 **$2,152.63** Taxes, homeowners insurance, flood insurance and HOA expenses are not included. ## What About Closing Costs? Eliminating the borrower’s personal down-payment contribution does not automatically eliminate closing costs. For planning purposes only, assume closing costs and prepaid expenses equal approximately 3% of the purchase price: City Price 3.5% down payment Illustrative 3% closing costs and prepaids Combined amount to cover Fairhope $400,000 $14,000 $12,000 **$26,000** Daphne $255,000 $8,925 $7,650 **$16,575** Foley $270,000 $9,450 $8,100 **$17,550** Gulf Shores $305,000 $10,675 $9,150 **$19,825** The 3% figure is not a quote. Actual costs depend on insurance, taxes, title charges, discount points, inspections, escrow funding and the closing date. Allowable seller contributions may pay eligible closing costs, prepaid expenses and discount points, generally subject to FHA’s applicable contribution limits. Seller credits do not replace the required down payment unless the transaction involves a properly documented and eligible gift of equity. ## Frequently Asked Questions ### Can a family member pay my entire FHA down payment? Potentially, yes. An eligible family member’s properly documented gift may cover the full minimum required investment. The gift cannot require repayment. ### Do gift funds have to remain in my account for 60 days? Not necessarily. FHA focuses on properly documenting the donor, the source of the funds and the transfer. The exact documentation depends on when and how the money is transferred. ### Can the home’s seller give me the down payment? An ordinary seller credit cannot satisfy the minimum required investment. A qualifying family member selling the property may, however, be able to provide an eligible gift of equity. ### Can down-payment assistance and gift funds be combined? Potentially, yes. The lender must verify that each source is eligible and that the combined financing, assistance and property transaction comply with FHA rules and any assistance-program overlays. ### Is FHA 203(h) available after every hurricane? No. The residence must be connected to a Presidentially declared major disaster and meet HUD’s damage and eligibility requirements. The borrower must also apply within the applicable time limit. ### Can I use these programs to purchase a Gulf Shores condominium? Possibly, but the condominium unit must meet FHA eligibility requirements. Project approval, single-unit approval, owner occupancy, insurance, litigation, financial condition and other condominium factors may affect eligibility. HOA dues and assessments must also be included when qualifying the borrower. ## Talk With a Local FHA Mortgage Professional The best strategy depends on the borrower, the property, the donor or assistance provider, and the expected closing costs. Before writing an offer, obtain a complete FHA qualification and verify that the intended source of funds is acceptable. **Tom Kalagher** **Fairhope Mortgage** Individual NMLS #2028566 Company NMLS #2561450 314 Magnolia Avenue, Suite 101 Fairhope, Alabama 36532 Phone: **251-391-5618** Website: [Fairhope-Mortgage.com](http://Fairhope-Mortgage.com) This article is educational and is not a commitment to lend or a guarantee of approval. Interest rates, mortgage-insurance premiums, FHA limits, assistance-program funding and underwriting requirements can change. Equal Housing Opportunity.