It sounds like the underwriter(uw) may be asking you to put down 5% for one of the following reasons; your credit score, to lower your debt ratios, or to get the automated undwerwriting system to respond with an "Accept." Many lenders now require a minimum credit score, 640 is typical. If your middle score is below this amount most lenders require you to put down a higher down payment to offset the perceived higher risk. Do you know what your middle score is? Your back ratio(all of your debt payments + new anticipated mortgage payment /your gross monthly income), may be above the lenders allowable scores. For most lenders that max is between 50-52%. The uw may be asking for the higher down payment to either lower your debt ratios to an acceptable level, or use the higher down payment to justify approving the loan with the higher ratios. The last reason could be FHA's Automated Underwriting system may come back with an "accept", which means FHA is ok with the profile. If the system gives a "referred" instead of an accept the underwriter has to justify why they are overruling the system. if the loan goes into default it impacts the underwriter's delegated underwriting authority. It sounds like the 5% is required for you to get the loan. If you have the additional money then you should go ahead an pay it. Putting more money down only gets you closer to paying off the home. If you have any additional questions, you can email me at firstname.lastname@example.org.