What first-time buyers put down ranges from 0% to 20%, depending on the loan type
You do not need 20% down to buy a house. That number comes from conventional loans, which are mortgages not backed by the government. First-time buyers often put down 3% to 5% on a conventional loan, or as little as 0% on a Federal Housing Administration (FHA) loan, a U.S. Department of Veterans Affairs (VA) loan, or a U.S. Department of Agriculture (USDA) loan. The amount you put down affects your monthly payment, the interest rate you receive, and whether you pay mortgage insurance on top of your regular payment.
The down payment is the cash you hand over at closing. The lender finances the rest through the mortgage. A smaller down payment means you borrow more, which raises your monthly payment and the total interest you pay over the life of the loan. It also usually means you pay mortgage insurance — an extra monthly fee that protects the lender if you stop paying.
Key Takeaways
- FHA loans allow down payments as low as 3.5%, VA loans often require 0%, and USDA loans in rural areas may require 0%, while conventional loans typically start at 3% but carry mortgage insurance below 20%.
- Mortgage insurance adds $100 to $300+ per month to your payment when you put down less than 20%, and the cost depends on your down payment size and credit score.
- Your down payment affects both your interest rate and your monthly payment — a smaller down payment usually means a higher rate and a higher total cost over time.
- Saving 10% to 15% down often costs less over the life of the loan than saving 3% and paying years of mortgage insurance.
FHA loans: 3.5% down with mortgage insurance built in
An FHA loan is backed by the Federal Housing Administration, which means the government guarantees the lender will be paid even if you default. Because of that may provide, FHA lenders accept smaller down payments and lower credit scores than conventional lenders do. Most first-time buyers use FHA loans because the down payment requirement is 3.5% of the purchase price.
On a $300,000 house, 3.5% down is $10,500. You also pay mortgage insurance premiums (MIP) — an upfront fee at closing, usually 1.75% of the loan amount, plus a monthly fee that runs 0.55% to 0.80% of the loan balance per year. The monthly MIP stays on your loan for the full 30 years, even after you build equity. This is different from conventional mortgage insurance, which you can remove once you reach 20% equity.
FHA loans work best if you have limited savings, a credit score between 580 and 620, or both. The tradeoff is that you pay mortgage insurance for the entire loan term, which adds tens of thousands of dollars to the total cost.
VA loans: 0% down for may be able to access veterans and service members
If you are a current or former member of the U.S. military, a VA loan through the Department of Veterans Affairs requires no down payment. You pay a one-time funding fee instead of mortgage insurance — usually 2.3% of the loan amount for first-time users, though the fee is waived if you receive a disability rating from the VA. The funding fee is often rolled into the loan, so you do not pay it upfront in cash.
VA loans have no mortgage insurance, which saves you $150 to $400+ per month compared to an FHA or conventional loan with a small down payment. You also typically receive a lower interest rate than conventional borrowers. The catch is that you must meet service requirements — generally 90 days of active duty, or 6 years in the National Guard or Reserves — and you need a Certificate of may be able to access from the VA.
If you are may be able to access, a VA loan is usually the cheapest option available. The VA website (va.gov) has a tool to check your may be able to access and request your certificate.
USDA loans: 0% down in rural areas
The U.S. Department of Agriculture backs loans for homes in rural areas and some suburban areas just outside cities. USDA loans require 0% down and no mortgage insurance. Instead, you pay a may provide fee — usually 1% upfront and 0.35% per year — which is similar to mortgage insurance but typically costs less.
USDA loans have income limits that vary by county and household size. You must also buy in an area the USDA classifies as rural, which includes many towns of 10,000 to 20,000 people but excludes most urban centers. Check the USDA Rural Development website to see if your address qualifies.
If you live outside a city and meet the income limits, a USDA loan saves you the down payment and keeps mortgage insurance costs lower than FHA or conventional options.
Conventional loans: 3% to 20% down, with mortgage insurance below 20%
A conventional loan is a mortgage not backed by any government agency. Lenders set their own rules, but most require a minimum credit score of 620 and a down payment of at least 3%. On a $300,000 house, 3% down is $9,000.
When you put down less than 20%, you pay private mortgage insurance (PMI) — a monthly fee that protects the lender. PMI typically costs 0.5% to 1.5% of the loan amount per year, which works out to $100 to $300+ per month on a $300,000 loan. The exact rate depends on your down payment size, credit score, and the lender.
The advantage of conventional loans is that you can remove PMI once you reach 20% equity in the home — either by paying down the principal or by refinancing when the home value rises. This is not possible with FHA loans, where mortgage insurance lasts the full term. Conventional loans also offer better interest rates if you have a credit score above 740.
How down payment size affects your total cost
The smaller your down payment, the more you borrow and the more you pay in interest and insurance over time. Here is how the numbers work on a $300,000 house with a 30-year mortgage at 7% interest:
| Down Payment | Loan Amount | Monthly Payment (Principal + Interest) | Monthly Mortgage Insurance | Total Monthly Payment | Total Interest + Insurance Over 30 Years |
|---|---|---|---|---|---|
| 3% ($9,000) | $291,000 | $1,938 | $145 | $2,083 | $440,880 |
| 10% ($30,000) | $270,000 | $1,797 | $68 | $1,865 | $381,400 |
| 15% ($45,000) | $255,000 | $1,698 | $0 | $1,698 | $311,280 |
| 20% ($60,000) | $240,000 | $1,598 | $0 | $1,598 | $275,280 |
Putting down 10% instead of 3% saves you $218 per month and $78,480 over 30 years. Putting down 15% instead of 10% saves you $167 per month and $60,120 over 30 years. The jump from 15% to 20% saves you $100 per month because mortgage insurance drops to zero.
If you can save an extra $20,000 to $30,000 beyond a 3% down payment, the monthly savings usually justify the wait. However, if you are paying rent and home prices are rising in your area, buying sooner with a smaller down payment may cost less overall than waiting.
What happens at closing when you hand over your down payment
Your down payment is due at closing, the final meeting where you sign the mortgage and receive the keys. You also pay closing costs at this time — typically 2% to 5% of the purchase price for things like the appraisal, title search, homeowners insurance, and lender fees. Closing costs are separate from your down payment.
On a $300,000 house with a 3% down payment and 3% closing costs, you need $9,000 down plus $9,000 in closing costs, for a total of $18,000 in cash at closing. Some lenders allow you to roll closing costs into the loan, which means you borrow the money instead of paying it upfront, but this raises your monthly payment and total interest.
Your lender will give you a Closing Disclosure three days before closing that shows your down payment, closing costs, monthly payment, and total interest. Review it carefully to make sure the numbers match what you agreed to.
Frequently Asked Questions
Can I borrow my down payment from family or a credit card?
Lenders allow gifts from family members, but you must provide a signed letter stating it is a gift, not a loan. You cannot borrow the down payment from a credit card or personal loan — lenders check your debt before closing and will deny the mortgage if you took on new debt. If a family member gives you money, the lender may ask them to sign a letter confirming they expect no repayment.
What if I do not have enough saved for the down payment?
FHA loans start at 3.5% down, and some first-time buyer programs offer down payment help through grants or second mortgages. Check with your state housing finance agency and local nonprofits — many offer $5,000 to $15,000 in down payment information. Your lender can also refer you to programs in your area.
Does a larger down payment always mean a better interest rate?
Usually, yes. Lenders offer lower rates to borrowers with larger down payments because there is less risk. However, the difference is often small — maybe 0.25% to 0.5% lower. Compare offers from multiple lenders to see the exact rate for your down payment size and credit score.
Can I remove mortgage insurance after I pay off part of the loan?
On conventional loans, yes — you can request PMI removal once you reach 20% equity. On FHA loans, no — mortgage insurance stays for the full 30 years if you put down less than 10%. This is one reason some buyers choose to put down 10% or more on an FHA loan rather than the minimum 3.5%.
What if the house appraises for less than the purchase price?
If the appraisal comes in low, your down payment percentage rises because you are borrowing less. For example, if you agreed to pay $300,000 with 10% down ($30,000), but the appraisal is $280,000, your lender will only finance $252,000 (90% of $280,000). You must either pay the difference in cash, renegotiate the price, or walk away. This is why a home inspection and appraisal are critical before closing.