Down payment size depends on the loan type, your credit score, and what the lender will accept

A down payment is the money you give the seller at closing — the portion of the purchase price you pay in cash rather than borrow. The rest comes from a mortgage loan. The size of your down payment affects how much you borrow, what your monthly payment will be, and whether you pay mortgage insurance on top of it.

There is no single required down payment. Conventional loans (the most common type, sold to investors after closing) typically want 3 to 20 percent of the home price. Federal Housing Administration (FHA) loans allow as little as 3.5 percent. Veterans Affairs (VA) loans and United States Department of Agriculture (USDA) loans in rural areas often require zero down. The lender you choose, your credit history, and the property itself all shape what is actually possible for you.

Key Takeaways

  • Down payment size ranges from zero percent (VA and USDA loans) to 20 percent or more (conventional loans), depending on the loan program and your financial profile.
  • Putting down less than 20 percent on a conventional loan triggers private mortgage insurance (PMI), which adds to your monthly payment until you reach 20 percent equity.
  • Your credit score, debt-to-income ratio, and savings history matter as much as the down payment percentage itself when a lender decides whether to approve you.
  • Down payment information programs exist through nonprofits, state housing agencies, and some employers, though they vary widely by location and income level.
  • The lowest down payment is not always the best choice — a larger down payment reduces your monthly cost and may help you win a bid in a competitive market.

How down payment size changes your monthly payment and total cost

A smaller down payment means a larger loan amount. On a $300,000 home, putting down 3 percent ($9,000) means borrowing $291,000. Putting down 20 percent ($60,000) means borrowing $240,000. The difference in monthly principal and interest alone is roughly $300 to $350 per month, depending on interest rates and loan length.

The real cost multiplier is private mortgage insurance (PMI). When you put down less than 20 percent on a conventional loan, the lender requires you to pay PMI — insurance that protects the lender if you stop paying. PMI typically costs 0.5 to 1.5 percent of the loan amount per year, split into monthly payments. On a $291,000 loan, that is roughly $120 to $360 per month added to your mortgage bill. You pay PMI until you reach 20 percent equity in the home (either through payments or home appreciation), then you can request it be removed.

FHA loans require mortgage insurance regardless of down payment size, but the rules differ. FHA mortgage insurance premium (MIP) is typically 0.55 percent annually for loans with less than 10 percent down, and 0.80 percent for loans with 10 percent or more down. Unlike PMI, FHA MIP does not automatically drop off — you pay it for the life of the loan if you put down less than 10 percent.

Loan programs and their down payment rules

Conventional loans are mortgages sold to investors (Fannie Mae, Freddie Mac, or portfolio lenders). They typically require 3 to 5 percent down for first-time buyers with good credit, and 5 to 20 percent for others. Lenders set their own rules within investor guidelines, so two banks may have different minimums. Conventional loans do not require PMI if you put down 20 percent or more.

FHA loans are backed by the Federal Housing Administration and allow 3.5 percent down. They are designed for buyers with lower credit scores (580 or higher) and less savings. FHA loans require both an upfront mortgage insurance premium (paid at closing or rolled into the loan) and an annual MIP. FHA loans are popular with first-time buyers but carry higher total insurance costs than conventional loans.

VA loans are available to military members, veterans, and some surviving spouses. They require zero down payment and no mortgage insurance. VA loans also cap the interest rate and closing costs the lender can charge. If you are a VA borrower, this is typically the lowest-cost path to homeownership.

USDA loans are for rural properties and are backed by the United States Department of Agriculture. They also require zero down and no mortgage insurance. USDA loans have income limits (usually 115 percent of area median income) and property location restrictions, but borrowers who meet those criteria get a significant cost advantage.

What lenders look at beyond the down payment percentage

Lenders do not approve or deny you based on down payment size alone. They examine your credit score, debt-to-income ratio, employment history, and savings behavior. A 5 percent down payment with a 750 credit score and a 35 percent debt-to-income ratio is far more likely to be approved than a 10 percent down payment with a 580 score and a 50 percent ratio.

Your debt-to-income ratio is your total monthly debt payments divided by your gross monthly income. Most lenders want this below 43 percent. If you earn $5,000 per month and already owe $1,500 in car loans, student loans, and credit cards, your new mortgage payment cannot exceed about $1,650 (43 percent of $5,000 minus $1,500). A smaller down payment means a larger loan and a larger monthly payment, which can push you over that threshold.

Lenders also verify that your down payment comes from your own savings, not a loan. If you borrowed the down payment money, the lender will count that debt in your debt-to-income ratio. Some lenders allow gifts from family members (documented in writing) but not loans.

Down payment information and where to find it

Many states, cities, and nonprofits offer down payment information programs. These typically take the form of grants (money you do not repay), forgivable loans (loans that disappear if you stay in the home for a set period), or second mortgages at favorable rates. information ranges from $2,000 to $50,000 or more, depending on the program and your income.

State housing finance agencies administer most programs. You can find yours through the National Council of State Housing Agencies website or by searching "[your state] down payment information." Local nonprofits like NeighborWorks and community action agencies also run programs. Some employers, particularly in healthcare and education, offer down payment help as a recruitment or retention benefit.

information programs typically have income limits (often 80 to 120 percent of area median income), require you to complete a homebuyer education course, and may restrict the price range or property type you can buy. Approval timelines vary from two weeks to two months. If you are exploring information, start early — many programs have limited funding and close when money runs out.

Deciding between a smaller and larger down payment

A smaller down payment (3 to 10 percent) preserves your cash and lets you buy sooner. It makes sense if you have limited savings, want to keep an emergency fund, or plan to invest the money you did not put down. The trade-off is a higher monthly payment and PMI costs.

A larger down payment (15 to 20 percent or more) lowers your monthly payment, eliminates PMI, and reduces the total interest you pay over the life of the loan. It also strengthens your offer in a competitive market — sellers often prefer buyers with larger down payments because the deal is less likely to fall apart due to financing issues. A larger down payment makes sense if you have the savings, are not worried about liquidity, and want the lowest possible monthly cost.

The math depends on your situation. If mortgage rates are low and you could earn more by investing the money elsewhere, a smaller down payment may be smarter. If rates are high and you want to minimize total interest, a larger down payment usually wins. A mortgage lender or financial advisor can run the numbers for your specific scenario.

Frequently Asked Questions

Can I use a gift from family for my down payment?

Yes, most lenders allow down payment gifts from family members. You will need a signed gift letter stating the money is a gift, not a loan, and the family member typically cannot expect repayment. Some lenders require the gift to come from your account before closing, so plan ahead if the money is coming from out of state.

What happens if I put down less than 3 percent?

Conventional loans rarely go below 3 percent down. If you have less than 3 percent saved, your options are FHA (3.5 percent), VA (zero), USDA (zero), or waiting until you save more. Some lenders offer 2 percent conventional loans, but they are uncommon and usually require excellent credit and a higher interest rate.

Can I remove PMI before I reach 20 percent equity?

Yes, if your home has appreciated or you have paid down the principal significantly, you can request PMI removal once you reach 20 percent equity. Some lenders allow removal at 15 or 17 percent equity if you have made on-time payments and your credit score has improved. Ask your lender about their specific policy.

Is a larger down payment worth it if I have to delay buying?

Not always. If delaying means paying higher rent or missing out on a home you want, a smaller down payment and PMI may be the better choice. PMI is temporary — you can remove it once you build equity. Waiting years to save an extra 10 percent down might cost you more in rent than you save in PMI.

Do I have to put down 20 percent to avoid PMI?

On conventional loans, yes — 20 percent is the threshold where PMI stops. On FHA loans, PMI (called MIP) is required regardless of down payment size if you put down less than 10 percent. VA and USDA loans have no PMI requirement at any down payment level.