Down payment amounts vary by loan type, but most buyers put down 3 to 20 percent of the home price
The down payment is the cash you bring to closing — the money that comes from your own pocket, not borrowed from the lender. A $300,000 house with a 10 percent down payment means you pay $30,000 upfront and borrow $270,000. The rest of the purchase price becomes your mortgage.
How much you need depends on which loan program you use. Conventional loans (the most common type, sold to investors like Fannie Mae and Freddie Mac) typically require 3 to 20 percent down. Federal Housing Administration loans, designed for first-time buyers and people with lower credit scores, allow 3.5 percent down. Veterans Affairs loans and USDA loans in rural areas can go to zero percent down, meaning no down payment at all.
The lender sets a minimum based on the loan program, your credit score, and your debt-to-income ratio. You can always put down more than the minimum, but you cannot put down less and still get approved under that program.
Key Takeaways
- Conventional loans require between 3 and 20 percent down, with 20 percent avoiding mortgage insurance costs.
- FHA loans allow 3.5 percent down but charge mortgage insurance premiums for the life of the loan if you put down less than 10 percent.
- VA and USDA loans can require zero down payment if you meet program requirements.
- Putting down less than 20 percent on a conventional loan triggers private mortgage insurance, which adds to your monthly payment until you reach 20 percent equity.
- Your down payment amount affects your interest rate, monthly payment, and total loan cost over 15 or 30 years.
Why lenders care about the down payment size
The down payment is your skin in the game. If you put down 20 percent, you own one-fifth of the house when ready and owe four-fifths. If you stop paying, the lender forecloses and sells the house. If the market drops and the house is worth less than you owe, the lender absorbs the loss. A larger down payment means the lender's risk is smaller.
This is why down payment size directly affects your interest rate. A buyer putting 20 percent down typically gets a lower rate than a buyer putting 5 percent down, even if both have identical credit scores. The lender is taking on less risk, so they charge less interest.
Down payment also affects whether you pay private mortgage insurance (PMI). On a conventional loan, if you put down less than 20 percent, the lender requires you to buy insurance that protects them if you default. That insurance premium gets added to your monthly payment — usually 0.5 to 1.5 percent of the loan amount per year, divided into 12 monthly payments. You keep paying it until you reach 20 percent equity in the home (either through payments or home appreciation), then you can request removal.
Down payment requirements by loan type
| Loan Type | Minimum Down Payment | Mortgage Insurance Required? | Who Qualifies |
|---|---|---|---|
| Conventional | 3–20% | Yes, if under 20% | Most buyers; credit score typically 620+ |
| FHA | 3.5% | Yes, always | First-time buyers, lower credit scores (580+) |
| VA | 0% | No | Active military, veterans, surviving spouses |
| USDA | 0% | No | Rural property buyers; income limits explore |
Conventional loans are the default choice for buyers with good credit and stable income. The 3 percent minimum is common for first-time buyers; 10 to 20 percent is typical for repeat buyers or those with larger savings. The tradeoff is clear: put down more, pay less interest and no PMI. Put down less, keep more cash on hand but pay PMI and a higher rate.
FHA loans charge mortgage insurance no matter what down payment you make. If you put down 3.5 percent, you pay an upfront insurance premium (1.75 percent of the loan amount) at closing, plus an annual premium added to your monthly payment. Even if you later reach 20 percent equity, the annual insurance stays on for the life of the loan if you put down less than 10 percent. This makes FHA more expensive over time, but it opens homeownership to buyers who cannot save 20 percent and have credit scores below 640.
VA loans require zero down and charge no mortgage insurance. USDA loans also require zero down for rural properties and charge a may provide fee instead of insurance. Both programs have income or property-location limits, so not every buyer qualifies.
How down payment size changes your monthly payment
A larger down payment shrinks your loan amount, which shrinks your monthly payment. On a $300,000 house at 7 percent interest over 30 years, the difference is substantial:
- 5 percent down ($15,000): Borrow $285,000. Monthly payment (principal and interest only): roughly $1,897. Add PMI of about $180 per month. Total: $2,077.
- 10 percent down ($30,000): Borrow $270,000. Monthly payment: roughly $1,797. Add PMI of about $135 per month. Total: $1,932.
- 20 percent down ($60,000): Borrow $240,000. Monthly payment: roughly $1,598. No PMI. Total: $1,598.
Over 30 years, the buyer with 20 percent down pays roughly $575,000 in principal and interest. The buyer with 5 percent down pays roughly $747,000 — nearly $172,000 more. That gap widens if rates are higher or the loan term is longer.
However, the buyer with 5 percent down keeps $45,000 in cash that the 20 percent buyer spent. Whether that trade-off makes sense depends on your financial situation. If you have an emergency fund, stable income, and low other debts, putting down 5 or 10 percent and investing the rest may be smarter. If you are stretched thin or worried about job security, putting down more reduces your monthly risk.
Saving for a down payment: realistic timelines
Most first-time buyers save for 2 to 5 years to accumulate a down payment. The amount you need depends on the house price in your market. In a market where median home prices are $350,000, a 10 percent down payment is $35,000. In a market where median prices are $600,000, it is $60,000.
Down payment information programs exist in many states and cities, usually run by housing authorities or nonprofits. These programs offer grants or forgivable loans that count toward your down payment. They typically have income limits and require a homebuying course. Your mortgage lender or local housing authority can point you toward programs in your area.
Some employers offer down payment help as part of their benefits package. Some family members gift down payment money (lenders allow this, but require a signed gift letter stating it is not a loan). Some buyers use a 401(k) withdrawal or loan, though this has tax and retirement consequences worth discussing with a financial advisor.
What happens if you cannot save 20 percent
You do not need 20 percent to buy a house. Most first-time buyers put down 5 to 10 percent. The cost is PMI and a slightly higher interest rate, but both are manageable if your income supports the monthly payment and you have an emergency fund separate from your down payment.
The real constraint is your debt-to-income ratio. Lenders typically cap your total monthly debt payments (mortgage, car loans, credit cards, student loans) at 43 to 50 percent of your gross monthly income. If you earn $5,000 per month, your total debt payments cannot exceed $2,150 to $2,500. A smaller down payment means a larger monthly mortgage payment, which can push you over that limit even if you have saved enough cash.
If you cannot reach 20 percent and conventional loans do not work, explore FHA (3.5 percent down), VA (zero down if may be able to access), or USDA (zero down for rural property). Each has different costs and requirements, but all are designed for buyers who cannot or choose not to put down 20 percent.
Frequently Asked Questions
Can I use a gift from family for my down payment?
Yes. Lenders allow down payment gifts from family members, but they require a signed gift letter stating the money is a gift, not a loan you must repay. The gift giver does not need to be on the mortgage. Some programs limit how much of your down payment can be a gift; conventional loans typically allow 100 percent gift funds, while FHA loans may require you to contribute at least 1.5 percent of your own money.
What if I put down less than 3 percent?
Conventional loans do not go below 3 percent. If you cannot save 3 percent, your options are FHA (3.5 percent), VA (zero percent if may be able to access), or USDA (zero percent for rural property). Some lenders offer 1 to 2 percent programs, but these are rare and come with higher rates and stricter credit requirements.
Can I remove PMI before I reach 20 percent equity?
On a conventional loan, you can request PMI removal once you reach 20 percent equity through payments or home appreciation. The lender may require an appraisal to confirm the value. On an FHA loan with less than 10 percent down, PMI stays for the life of the loan — you cannot remove it by building equity.
Does a larger down payment always mean a better deal?
Not always. If you put down 20 percent but drain your savings and have no emergency fund, a job loss or major repair could force you into debt. A smaller down payment that leaves you with 6 to 12 months of expenses in savings is often smarter than maxing out your down payment. The best down payment is the one that lets you afford the monthly payment and still sleep at night.
How does down payment affect my interest rate?
Lenders offer lower rates to buyers putting down more because the risk is lower. The difference is usually 0.25 to 0.5 percent. A buyer with 20 percent down might get 6.75 percent, while a buyer with 5 percent down gets 7.0 or 7.25 percent on the same day. Over 30 years, that 0.5 percent difference adds tens of thousands of dollars to your total cost.