Down payments range from 0% 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 comes from a mortgage loan. The amount you need depends on which loan program you may have access to for, not on what lenders prefer — some programs require as little as 3% of the purchase price, while others let you put down nothing at all.
If you are buying a $300,000 house, a 3% down payment is $9,000. A 20% down payment on the same house is $60,000. The difference matters because a smaller down payment means a larger monthly mortgage payment and additional costs (called mortgage insurance) that protect the lender if you stop paying. A larger down payment lowers your monthly payment and may eliminate that insurance entirely.
The down payment comes from your own savings — not from the mortgage itself. You bring it to closing, the final meeting where you sign papers and the house officially becomes yours.
Key Takeaways
- Conventional loans typically require 3% to 20% down, while FHA loans require 3.5% and VA loans may require 0%.
- Putting down less than 20% usually means paying mortgage insurance, which adds $100 to $300+ per month depending on your loan size and down payment amount.
- Your down payment must come from your own savings, not borrowed money, though some programs let you receive a gift from a family member.
- The down payment is separate from closing costs, which typically run 2% to 5% of the purchase price and cover appraisals, inspections, title work, and lender fees.
Common down payment amounts by loan type
The loan program you use determines the minimum down payment. Most first-time buyers use one of three: conventional loans (backed by Fannie Mae or Freddie Mac), FHA loans (insured by the Federal Housing Administration), or VA loans (for military members and veterans).
| Loan Type | Minimum Down Payment | Mortgage Insurance Required? |
|---|---|---|
| Conventional | 3% to 5% | Yes, unless 20% or more |
| FHA | 3.5% | Yes, always |
| VA | 0% | No |
| USDA | 0% | Yes, always |
Conventional loans are the most common and often the cheapest over time if you can put down at least 5%. FHA loans are easier to get if your credit score is lower or your savings are limited, but the mortgage insurance costs more and stays on your loan longer. VA and USDA loans have no down payment requirement but come with their own insurance or may provide fees.
What happens when you put down less than 20%
If your down payment is less than 20% on a conventional loan, you pay private mortgage insurance (PMI). This is an insurance policy that protects the lender, not you. It typically costs 0.5% to 1.5% of your loan amount per year, split into monthly payments added to your mortgage bill.
On a $300,000 house with a 5% down payment ($15,000), your loan is $285,000. PMI might cost $1,425 to $4,275 per year, or roughly $120 to $360 per month. This amount varies based on your credit score, the size of your down payment, and the lender's pricing.
You can remove PMI once you have paid your loan down to 80% of the home's original purchase price. If you put down 5% and the house was worth $300,000, you can request PMI removal once your loan balance drops to $240,000. This usually takes 8 to 12 years of regular payments, though you can speed it up by making extra payments toward principal.
FHA loans require mortgage insurance for the life of the loan if you put down less than 10%, or for at least 11 years if you put down 10% or more. This insurance is called mortgage insurance premium (MIP) and works similarly to PMI but costs more.
Saving for a down payment
The down payment must come from your own money or from a gift. You cannot borrow it from another lender or use a credit card. Lenders verify the source of your down payment by asking for bank statements showing the money has been in your account for at least two months (called "seasoning").
If a family member gives you money for the down payment, most lenders allow it as long as you provide a signed gift letter stating the money does not need to be repaid. The gift giver does not have to be a close relative — some programs accept gifts from employers or nonprofits.
Some employers, nonprofits, and state programs offer down payment help. These may be grants (money you do not repay), forgivable loans (loans that disappear if you stay in the house for a set time), or second mortgages (a separate loan you repay). Your lender can tell you which programs work with their loans in your state.
Down payment versus closing costs
The down payment and closing costs are two separate amounts. Closing costs cover the expenses of buying the house: the appraisal, title search, title insurance, home inspection, credit report, lender fees, and attorney fees. These typically run 2% to 5% of the purchase price.
On a $300,000 house, closing costs might be $6,000 to $15,000. You pay these at closing, the same day you pay the down payment. Some lenders let you roll closing costs into the mortgage (called "financing closing costs"), but this increases your loan amount and your monthly payment.
Budget for both the down payment and closing costs when you are saving. If you are putting down 5% on a $300,000 house, you need $15,000 for the down payment plus $6,000 to $15,000 for closing costs — roughly $21,000 to $30,000 total out of pocket.
How your down payment affects your monthly payment
A larger down payment lowers your monthly mortgage payment in two ways: it reduces the loan amount, and it may eliminate mortgage insurance.
On a $300,000 house at 7% interest over 30 years, the monthly payment (principal and interest only) is roughly $1,996 with a 5% down payment ($285,000 loan) or $1,597 with a 20% down payment ($240,000 loan). Add PMI to the 5% scenario and your total monthly payment could be $2,100 to $2,360. The difference is $500 to $760 per month.
Over 30 years, that difference adds up to $180,000 to $274,000 in extra payments. However, this assumes you keep the house for 30 years. If you plan to sell or refinance in 7 to 10 years, a smaller down payment may make sense because you will not recoup the savings from a larger one.
Frequently Asked Questions
Can I use a 401(k) or IRA to fund my down payment?
Some plans allow you to borrow from your 401(k) or withdraw from an IRA penalty-free for a first-time home purchase. A 401(k) loan must be repaid, but an IRA withdrawal of up to $10,000 is penalty-free for first-time buyers. Consult your plan administrator and a tax professional before withdrawing, as this affects your retirement savings and may have tax consequences.
What if I do not have enough saved for a down payment?
FHA loans require only 3.5% down and are designed for buyers with limited savings. Some states and nonprofits offer down payment grants or forgivable loans. You can also ask family members for a gift, which most lenders allow with a signed letter. If none of these work, you may need to wait and save more, or look at less expensive homes.
Does the down payment have to be paid all at once?
Yes, the down payment is due at closing. You cannot pay it in installments. However, you can save it gradually before you make an offer — you just need the full amount available when you are ready to close, typically 30 to 45 days after your offer is accepted.
Can I put down more than 20%?
Yes. Putting down more than 20% lowers your monthly payment further and may help your offer stand out in a competitive market. However, it ties up more of your cash upfront. Make sure you keep an emergency fund of three to six months of expenses separate from your down payment savings.
What happens if I cannot afford the down payment the lender quoted?
Talk to your lender about lower down payment options, such as FHA loans or state down payment information programs. You can also look at less expensive homes, save longer, or ask family for a gift. Do not borrow the down payment from another source — lenders will reject it.