Most first-time buyers can put down less than 20 percent, and some programs let you put down 3 percent or even nothing
You do not need a 20 percent down payment to buy a house as a first-time buyer. That number is a myth that stops people from buying when they could. The real requirement depends on the loan type you choose and the lender you work with.
If you get a conventional loan (not backed by the government), you can put down as little as 3 to 5 percent. If you go with an FHA loan (insured by the Federal Housing Administration), you can put down 3.5 percent. A VA loan (for military members and veterans) often requires zero down. A USDA loan (for rural properties) also often requires zero down. The catch with lower down payments is that you will pay mortgage insurance—an extra monthly fee that protects the lender if you stop paying.
The lender sets the minimum down payment, not you. Different lenders have different rules. Some will accept 3 percent down; others want 5 or 10 percent. Your credit score, income, and debt also affect what a lender will offer you. The best move is to talk to multiple lenders and see what they will actually approve you for, rather than guessing what you need to save.
Key Takeaways
- First-time buyers can put down 3 to 5 percent on a conventional loan, 3.5 percent on an FHA loan, or zero percent on a VA or USDA loan.
- Putting down less than 20 percent means you will pay mortgage insurance each month until you build enough equity or refinance.
- Your credit score, income, and debt-to-income ratio determine what down payment percentage a lender will accept, not a fixed rule.
- The total cash you need includes the down payment plus closing costs, which typically run 2 to 5 percent of the home price.
- Some first-time buyer programs offer down payment help through grants or forgivable loans, but availability varies by state and county.
How down payment size affects your monthly payment and total cost
A smaller down payment means a larger loan amount, which raises your monthly mortgage payment. It also means you pay more interest over the life of the loan because you are borrowing more money.
If you put down 3 percent instead of 20 percent on a $300,000 house, you borrow an extra $51,000. That extra $51,000 costs you thousands in interest over 30 years. You also pay mortgage insurance, which adds $150 to $300 per month depending on the loan size and your credit score. Mortgage insurance does not build equity—it is pure cost until you reach 20 percent equity or refinance.
However, waiting years to save a larger down payment has its own cost: you miss out on building equity, you pay rent instead, and home prices may rise. The math is not always in favor of waiting. A financial advisor or mortgage calculator can show you the numbers for your specific situation.
What closing costs are and why they are separate from the down payment
Closing costs are fees you pay to complete the purchase. They are not part of the down payment—they are money on top of it. Closing costs typically run 2 to 5 percent of the home price and cover things like the appraisal, title search, title insurance, loan origination fees, and attorney fees.
On a $300,000 home, closing costs might be $6,000 to $15,000. If you put down 3 percent ($9,000), you need $15,000 to $24,000 in total cash just to close the deal. Some lenders let you roll closing costs into the loan, which means you do not pay them upfront but you pay interest on them for 30 years. Others require you to pay them at closing. Ask your lender what is included in their quote and what you will owe at the closing table.
Some first-time buyer programs help with closing costs as well as down payment. Your real estate agent or local housing authority can tell you what is available in your area.
FHA loans, VA loans, and USDA loans: lower or zero down options
An FHA loan requires a 3.5 percent down payment and is open to anyone with a credit score of 580 or higher (though some lenders want 620 or better). You pay mortgage insurance for the life of the loan, which costs more than conventional mortgage insurance. FHA loans are slower to close and have stricter property requirements, but they are easier to get if your credit is not perfect.
A VA loan is for active-duty military, veterans, and some surviving spouses. It requires zero down payment and no mortgage insurance. The VA guarantees part of the loan, which means the lender takes less risk. You pay a one-time funding fee (usually 1.5 to 3.3 percent of the loan amount) unless you are disabled or a surviving spouse. VA loans are the best deal available if you may have access to.
A USDA loan is for rural properties and is open to buyers with moderate income. It also requires zero down and no mortgage insurance. You pay a may provide fee upfront and an annual fee, but the total cost is often lower than FHA mortgage insurance. USDA loans are slower to close and the property must meet USDA location and condition standards.
Each loan type has trade-offs. FHA is fastest but costs more over time. VA is the cheapest but only for military. USDA is free down but only for rural areas. Talk to a lender about which one fits your situation.
Down payment help programs for first-time buyers
Many states and counties offer down payment help through grants or forgivable loans. A grant is money you do not have to repay. A forgivable loan is a loan that disappears if you stay in the house for a set number of years (usually 5 to 10). Both reduce the cash you need upfront.
These programs vary widely by location. Some cover down payment only; others cover closing costs too. Some have income limits; others do not. Some require you to take a homebuyer education class. Your state housing finance agency, your county assessor's office, or a local nonprofit can tell you what exists where you live. The National Council of State Housing Agencies has a searchable database of state programs.
Employer programs also exist. Some large employers offer down payment help as a benefit. Ask your HR department if yours does. Credit unions sometimes offer down payment assistance to members as well.
What happens if you cannot save a down payment right now
If you have no savings, you have three paths: wait and save, look for down payment help programs, or explore a zero-down loan (VA or USDA if you may have access to). Waiting is the slowest but requires no outside help. Down payment programs are faster if they exist in your area and you meet the requirements. Zero-down loans are immediate if you are may be able to access.
Some people also ask family members for a gift. If a relative gives you money for the down payment, the lender needs to see proof it is a gift, not a loan you have to repay. You will sign a gift letter stating the money does not need to be paid back. The lender wants to know because they calculate your debt-to-income ratio, and a loan from family would count against you.
Do not borrow the down payment from a credit card, personal loan, or other source unless the lender says it is okay. Most lenders prohibit it because it raises your debt and makes you look riskier. If you borrow money and do not tell the lender, they can deny your loan or cancel it after closing.
How your credit score and debt affect the down payment a lender will accept
Lenders use your credit score and debt-to-income ratio to decide what down payment they will accept. A higher credit score and lower debt ratio mean you can put down less. A lower credit score or higher debt ratio means you may need to put down more, or the lender may deny you altogether.
If your credit score is 740 or higher and your debt-to-income ratio is below 36 percent, most lenders will accept 3 to 5 percent down on a conventional loan. If your score is 620 to 680 and your ratio is 43 to 50 percent, you may need 10 to 15 percent down, or you may need to use an FHA loan instead. If your score is below 620, conventional loans are usually off the table and FHA is your best option.
Your debt-to-income ratio is your total monthly debt payments divided by your gross monthly income. If you earn $5,000 per month and pay $1,500 in car loans, credit cards, and student loans, your ratio is 30 percent. The new mortgage payment counts toward this too. Paying down debt before you apply for a mortgage can lower your ratio and improve your options.
Frequently Asked Questions
Can I put down less than 3 percent?
Yes, if you may have access to for a VA or USDA loan. Otherwise, 3 percent is the standard minimum for conventional and FHA loans. Some lenders have special first-time buyer programs that go lower, but they are rare. Ask your lender what their minimum is.
What is PMI and when does it go away?
PMI (private mortgage insurance) is the monthly fee you pay when you put down less than 20 percent on a conventional loan. It protects the lender if you stop paying. PMI goes away when you reach 20 percent equity through payments or home appreciation, or when you refinance. On an FHA loan, mortgage insurance is different and often stays for the life of the loan.
Can I use a gift from family for my down payment?
Yes. The lender will ask you to sign a gift letter from the family member stating the money is a gift and does not need to be repaid. The lender needs proof the money came from the family member's account, not from a loan. Ask your lender for their gift letter template before you ask your family member.
Do I have to put down 20 percent to avoid mortgage insurance?
Yes, on a conventional loan. On an FHA loan, you cannot avoid mortgage insurance no matter how much you put down. On VA and USDA loans, there is no mortgage insurance at any down payment level. If avoiding mortgage insurance is important to you, a VA or USDA loan is the way to go.
What if I have bad credit but want to buy a house?
FHA loans are designed for people with lower credit scores. You can get an FHA loan with a score as low as 580, though some lenders want 620. You will pay higher interest and mortgage insurance, but you can still buy. Work on paying down debt and making on-time payments for a few months before you apply, as this can improve your score and lower your costs.