Down payments range from zero to 20 percent of the home's price, depending on the loan type and lender

A down payment is the money you give the seller at closing — the percentage of the purchase price you pay upfront instead of borrowing. The rest comes from a mortgage loan. A $300,000 house with a 10 percent down payment means you pay $30,000 and borrow $270,000.

The amount you need depends on which loan program you use. Federal Housing Administration (FHA) loans allow down payments as low as 3.5 percent. Conventional loans (the most common type, not backed by the government) typically require 5 to 20 percent. VA loans and USDA loans, available to military members and rural buyers, often require zero down. Some lenders will go lower than the standard minimum, but you pay a higher interest rate and mortgage insurance to offset their risk.

Down payment size directly affects your monthly payment and total interest paid over the life of the loan. A larger down payment means a smaller loan, lower monthly costs, and less interest overall. It also determines whether you pay private mortgage insurance (PMI) — an extra monthly fee lenders charge when you put down less than 20 percent on a conventional loan.

Key Takeaways

  • FHA loans require as little as 3.5 percent down; conventional loans typically start at 5 percent; VA and USDA loans often require nothing down.
  • Putting down less than 20 percent on a conventional loan triggers PMI, which adds $100 to $300+ per month depending on loan size and credit score.
  • Your down payment comes from your own savings and must be documented; lenders verify the source to prevent fraud.
  • A larger down payment lowers your monthly payment and total interest, but you should keep enough cash in reserve for closing costs and emergencies.

How down payment minimums differ by loan type

FHA loans, insured by the Federal Housing Administration, are designed for first-time buyers and people with lower credit scores. They allow down payments as low as 3.5 percent of the purchase price. You pay mortgage insurance for the life of the loan (called mortgage insurance premium, or MIP), which is built into your monthly payment. This makes FHA loans accessible but more expensive over time.

Conventional loans are not backed by any government agency. Most lenders require 5 to 20 percent down, though some will go as low as 3 percent if your credit score is strong. If you put down less than 20 percent, you pay PMI until you reach 20 percent equity in the home. PMI typically costs 0.5 to 1.5 percent of the loan amount per year, divided into monthly payments. On a $270,000 loan, that can be $100 to $400 per month.

VA loans are available to military members, veterans, and surviving spouses. The Department of Veterans Affairs guarantees the loan, which allows lenders to offer zero down. You pay a one-time funding fee (1 to 3.3 percent of the loan amount) instead of PMI, though some borrowers are exempt. USDA loans, for rural homebuyers, also allow zero down and charge a may provide fee instead of PMI.

What lenders actually verify about your down payment

Your down payment must come from your own funds or from an approved source. Lenders verify this through bank statements, investment account statements, and gift letters. They want to see that the money has been in your account for at least two months (called seasoning) to prove it is not borrowed money disguised as savings. If a family member gives you money as a gift, you must provide a signed letter stating it does not need to be repaid.

Lenders will ask where large deposits came from. If you received a bonus, inheritance, or tax refund, you may need to provide documentation. The goal is to prevent fraud and may support you actually have the funds. Some sources — like loans from family members — are not allowed because they increase your debt-to-income ratio and suggest you cannot afford the purchase.

Down payment information programs exist in many states and cities. These programs provide grants or forgivable loans to help with down payments, usually for first-time buyers or low-income households. Your lender can tell you which programs you may be able to use, and some will count information toward your down payment requirement.

How down payment size affects your monthly payment and total cost

A larger down payment directly lowers your monthly mortgage payment because you are borrowing less. On a $300,000 house at 7 percent interest over 30 years, a 3 percent down payment ($9,000) results in a loan of $291,000 and a monthly payment around $1,935 (before taxes and insurance). A 20 percent down payment ($60,000) results in a loan of $240,000 and a monthly payment around $1,596 — a difference of $339 per month.

The total interest you pay over 30 years also drops significantly with a larger down payment. On the same house, the 3 percent down scenario costs roughly $407,000 in total interest; the 20 percent down scenario costs roughly $314,000. That is a $93,000 difference over the life of the loan, not counting PMI.

PMI adds another layer of cost. If you put 10 percent down on a $300,000 house, your PMI might be $150 to $250 per month. You pay this until you reach 20 percent equity, which on a 30-year loan takes roughly 10 to 12 years. That is $18,000 to $36,000 in PMI alone — money that builds no equity and disappears once you hit the threshold.

Balancing down payment size with cash reserves

Putting down the maximum you can afford is not always the right choice. Lenders and financial advisors often recommend keeping cash in reserve for closing costs, home inspections, appraisals, and emergencies after purchase. Closing costs typically run 2 to 5 percent of the purchase price and include title insurance, attorney fees, appraisal, and lender fees.

A common strategy is to put down 10 to 15 percent and keep the rest in savings. This gives you a manageable monthly payment and PMI cost while maintaining a financial cushion. If the roof needs repair or the furnace fails in your first year, you have money to cover it without taking on debt.

Some buyers use down payment information to bridge the gap. If a program covers 5 percent and you contribute 5 percent, you reach 10 percent down without depleting your savings. This approach is especially useful in high-cost markets where saving 20 percent takes years.

When a smaller down payment makes financial sense

If mortgage rates are low and your savings are earning interest, borrowing more and keeping cash invested can be smarter than putting down 20 percent. If you can earn 4 percent on savings but your mortgage rate is 6 percent, the math favors paying more down. But if rates flip — your mortgage is 4 percent and savings earn 5 percent — keeping cash in the bank may be better.

First-time buyers often benefit from smaller down payments because they free up cash for unexpected costs. Homeownership brings surprises: property taxes are higher than expected, insurance costs more, or maintenance needs emerge. Having $20,000 in reserve is worth more than saving $200 per month on a mortgage payment.

Buyers in appreciating markets sometimes put down less to buy sooner. If home prices are rising 5 to 10 percent per year, waiting two more years to save 20 percent means paying significantly more for the same house. A 10 percent down payment now may cost less in total dollars than a 20 percent down payment two years later, even with PMI included.

Down payment requirements for second homes and investment properties

Lenders treat second homes and rental properties differently than primary residences. Second homes typically require 10 to 20 percent down, and investment properties usually require 20 to 25 percent. Lenders see these as higher risk because the borrower is not living there and may walk away if the market turns.

Investment property loans also carry higher interest rates and stricter debt-to-income limits. You must show that rental income covers the mortgage payment, property taxes, insurance, and maintenance — usually at 75 to 80 percent of the rent collected. This means a $2,000 monthly rent must cover a mortgage payment of $1,500 or less.

Frequently Asked Questions

Can I borrow my down payment from family or a credit card?

No. Lenders require the down payment to come from your own funds or approved information programs. Borrowed money increases your debt-to-income ratio and disqualifies you. A gift from family is allowed if documented with a signed letter stating no repayment is required.

What happens if I put down less than 3 percent?

Most conventional lenders will not go below 3 percent, and FHA is the lowest at 3.5 percent. Some portfolio lenders (banks that keep loans in-house rather than selling them) offer 1 to 2 percent down, but rates are higher and requirements are stricter. VA and USDA loans remain the only zero-down options for may be able to access borrowers.

Can I remove PMI once I reach 20 percent equity?

Yes, but the process varies. On most conventional loans, PMI drops automatically when you reach 20 percent equity through payments. You can request removal earlier if you have paid down the loan faster or if the home has appreciated. FHA mortgage insurance is permanent on loans with less than 10 percent down; it drops after 11 years on loans with 10 percent or more down.

Do I need to pay the full down payment at closing?

Yes. The down payment is due at closing, along with closing costs. Your lender will tell you the exact amount needed and where to wire it (usually to the title company or escrow agent). Funds must clear before closing can happen, so wire transfers are standard.

What if I do not have enough saved for the down payment I want?

Look into down payment information programs in your state or city — many offer grants or forgivable loans for first-time buyers. You can also ask the seller to cover some closing costs, which frees up your cash for the down payment. Alternatively, start with a smaller down payment and plan to refinance to remove PMI once you have built equity.