Down payments typically range from 3% to 20% of the home's purchase price, depending on the loan type and your financial situation
A down payment is the money you pay upfront when you buy a house. The rest of the purchase price becomes a loan you repay over time. If you buy a $300,000 house with a 10% down payment, you pay $30,000 out of pocket and borrow $270,000.
The percentage you pay down affects how much you borrow, what your monthly payment will be, and whether you'll pay extra insurance costs. A larger down payment means a smaller loan and lower monthly payments. A smaller down payment means you keep more cash on hand now, but you'll owe more later and may pay more in total interest and fees.
The minimum down payment you can make depends on which type of mortgage you get. Conventional loans (the most common kind) usually require at least 3% down. Government-backed loans like FHA mortgages can go as low as 3.5% down. VA loans and USDA loans may require 0% down if you meet their specific requirements.
Key Takeaways
- Down payments range from 0% to 20% depending on loan type; conventional loans typically start at 3%, while FHA loans start at 3.5%.
- Putting down less than 20% usually means you'll pay mortgage insurance (PMI), which adds to your monthly payment until you reach 20% equity.
- A larger down payment lowers your monthly payment and total interest paid, but a smaller down payment lets you buy sooner with less cash saved.
- Your credit score, income, and debt affect whether lenders will approve you at a lower down payment percentage.
What happens when you put down less than 20%
If your down payment is less than 20% of the purchase price, lenders require you to pay mortgage insurance, usually called PMI (private mortgage insurance). This is an extra monthly fee added to your mortgage payment. It protects the lender if you stop paying, but you're the one who pays for it.
The cost of PMI varies based on your down payment size, loan amount, credit score, and the lender. On a $300,000 house with a 10% down payment, PMI might add $150 to $300 per month. Once you've paid down the loan to 80% of the home's original value (or sometimes its current value), you can request to have PMI removed.
This means a smaller down payment costs you more money over time, even though it requires less cash upfront. You need to decide whether keeping that cash now is worth paying extra each month.
Down payment requirements by loan type
| Loan Type | Minimum Down Payment | Who It's For |
|---|---|---|
| Conventional | 3% to 5% | Borrowers with good credit and stable income |
| FHA | 3.5% | First-time buyers or those with lower credit scores |
| VA | 0% | Active military, veterans, and may be able to access spouses |
| USDA | 0% | Buyers in rural areas who meet income limits |
Conventional loans are offered by banks and private lenders. They typically require a 3% to 5% down payment, though some lenders go lower. Your credit score and debt-to-income ratio matter more with conventional loans — lenders want to see that you manage money responsibly.
FHA loans are backed by the Federal Housing Administration. They allow down payments as low as 3.5% and are easier to get if your credit score is lower or you haven't saved as much. However, FHA loans require mortgage insurance for the life of the loan (or at least 11 years), which costs more than PMI on conventional loans.
VA loans are for veterans and active-duty service members. They often require no down payment at all. USDA loans are for buyers in designated rural areas and also typically require no down payment. Both have income and property location limits, so you'll need to check whether you and your target home may have access to.
How your credit score and income affect down payment options
Lenders use your credit score and income to decide whether to approve you and at what down payment level. A higher credit score and stable income make lenders more willing to accept a smaller down payment. A lower credit score or higher debt may require you to put down more money, or the lender may deny you altogether.
Your debt-to-income ratio is the percentage of your monthly income that goes to debt payments. If you earn $5,000 per month and pay $1,000 toward car loans, credit cards, and student loans, your ratio is 20%. Most lenders want this ratio to be 43% or lower before adding a mortgage payment. If your ratio is already high, you may need a larger down payment to offset the risk in the lender's eyes.
If your credit score is below 620 or your debt-to-income ratio is above 50%, conventional loans become very difficult. FHA loans are more flexible, but you'll still need to show that you can afford the monthly payment alongside your other debts.
Saving for a down payment: realistic timelines
How long it takes to save depends on your income, expenses, and target down payment amount. If you want to put 20% down on a $300,000 house, you need $60,000. If you can save $1,000 per month, that's five years. If you can save $500 per month, that's ten years.
Many first-time buyers don't wait for 20%. A 5% down payment on the same house is $15,000, which takes one year at $1,000 per month. You'll pay PMI, but you'll own a home sooner. Some people use gifts from family members to reach their down payment goal faster — most lenders allow this, though they'll ask for proof that it's a gift and not a loan you have to repay.
Down payment information programs exist in many states and cities. These are grants or forgivable loans that help you cover part of the down payment. They're usually limited to first-time buyers or people buying in certain neighborhoods. Your real estate agent or local housing authority can tell you what's available in your area.
The trade-off between down payment size and monthly payment
A larger down payment means a smaller loan, which means a lower monthly payment. On a $300,000 house at current interest rates, the difference between a 3% down payment and a 20% down payment can be $200 to $300 per month — before adding in PMI costs.
But a larger down payment also means waiting longer to buy, which means paying rent instead of building equity in a home. Rent money goes to a landlord; mortgage payments build your ownership stake. If you can afford the monthly payment with a smaller down payment, buying sooner might make financial sense, even with PMI.
The right choice depends on your situation. If you're paying high rent and housing costs are eating your budget, a smaller down payment and sooner purchase might be better. If you're comfortable renting and want to minimize your total interest paid, saving for a larger down payment makes sense.
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'll need to provide a gift letter stating the money is a gift, not a loan you have to repay. The lender will verify the funds came from the person's bank account. Some loans have limits on how much of your down payment can be a gift — conventional loans usually allow 100%, while FHA loans have stricter rules depending on the lender.
What if I can only save 2% down?
Conventional loans typically require at least 3% down. If you can only save 2%, an FHA loan at 3.5% down might work, or you could wait a few more months to reach 3%. Some lenders offer "bank statement" programs that let you use savings you've accumulated over time rather than requiring a specific percentage. Talk to multiple lenders about your options.
Does a bigger down payment mean a lower interest rate?
Usually yes, but not always. Lenders offer lower interest rates to borrowers with higher credit scores and lower debt-to-income ratios. A larger down payment shows you're financially responsible, which can help you get a better rate. However, the interest rate is set based on many factors — your credit, the loan type, current market rates, and the lender's policies. Always compare offers from multiple lenders.
What if I put down 15% instead of 20%?
You'll still pay PMI, but less than if you put down 3% or 5%. The PMI cost decreases as your down payment increases. At 15% down, you're closer to the 20% threshold where PMI stops, so you might only pay it for a few years instead of many years. This can be a middle ground between saving longer and paying extra insurance costs.
Can I borrow money for my down payment?
Most lenders don't allow this. They want to see that the down payment comes from your own savings or a gift. If you borrow the down payment, you're taking on extra debt that increases your debt-to-income ratio, making it harder to get approved for the mortgage itself. The exception is a home equity line of credit from a property you already own.