Most mortgages require a down payment, but the amount varies widely—and some loans let you put down as little as 3 percent
Yes, nearly all mortgage lenders require a down payment before they will fund a home purchase. The amount you need depends on the type of loan, your credit score, and the lender's own rules. Conventional loans typically ask for 5 to 20 percent of the home's price. Federal Housing Administration (FHA) loans allow down payments as low as 3.5 percent. VA loans and USDA loans, available to military members and rural buyers, sometimes require zero down.
The down payment is the cash you bring to closing. The lender covers the rest through the mortgage itself. A larger down payment means a smaller loan, lower monthly payments, and no requirement to pay mortgage insurance—an extra monthly fee that protects the lender if you stop paying.
Key Takeaways
- Conventional mortgages usually require 5 to 20 percent down, though some lenders accept 3 percent with a higher credit score and mortgage insurance.
- FHA loans let you put down as little as 3.5 percent, making them an option if you have limited savings but a steady income.
- VA loans (for military members) and USDA loans (for rural properties) may require zero down, though you still pay closing costs.
- Putting down less than 20 percent triggers mortgage insurance, which adds $100 to $300+ per month depending on the loan size and your down payment amount.
- Down payment assistance programs exist through nonprofits, state housing agencies, and some employers, though they vary by location and income.
How much down payment different loan types require
The type of mortgage you choose determines the minimum down payment. Conventional loans, which are not backed by a government agency, typically start at 3 to 5 percent for borrowers with good credit and stable income. Some lenders go lower, but expect to pay mortgage insurance and face stricter income and debt requirements.
FHA loans, insured by the Federal Housing Administration, allow 3.5 percent down for borrowers with a credit score of 580 or higher. This is the most common path for first-time buyers with limited savings. The tradeoff is that FHA loans charge mortgage insurance for the life of the loan—you cannot remove it even after you build equity.
VA loans, available to military members and some veterans, often require zero down. USDA loans, for properties in designated rural areas, also frequently require zero down. Both still require you to pay closing costs (typically 2 to 5 percent of the home price), so you need some cash on hand even if the down payment itself is waived.
What happens if you put down less than 20 percent
When your down payment is below 20 percent, the lender requires you to pay private mortgage insurance (PMI) on a conventional loan, or mortgage insurance premium (MIP) on an FHA loan. This insurance protects the lender, not you—it covers their loss if you default.
PMI typically costs 0.5 to 1.5 percent of the loan amount per year, split into monthly payments. On a $300,000 loan with 10 percent down, PMI might add $125 to $375 per month. On an FHA loan, the upfront mortgage insurance premium is 1.75 percent of the loan amount (rolled into your mortgage), plus an annual premium of 0.55 to 0.8 percent depending on your down payment and loan term.
With a conventional loan, you can request to remove PMI once you reach 20 percent equity in the home—either through payments or home appreciation. With an FHA loan, mortgage insurance stays for the life of the loan if you put down less than 10 percent. If you put down 10 percent or more on an FHA loan, you can remove it after 11 years.
Down payment assistance programs and where to find them
Many states, cities, and nonprofits offer down payment assistance to buyers who meet income and credit requirements. These programs may grant you money (which does not need to be repaid), offer a second loan at favorable terms, or provide a forgivable loan that disappears if you stay in the home for a set period.
State housing finance agencies administer most programs. You can find yours by searching "[your state] down payment assistance" or visiting the National Council of State Housing Agencies website. Some programs are tied to your employer—ask your HR department whether your company offers homebuying support. Nonprofits like NeighborWorks America and local community development organizations also run assistance programs, often with lower income limits and more flexible credit requirements than government programs.
Assistance programs vary by location, income, credit score, and property type. Some require you to complete a homebuying course. Others limit the purchase price or the area where you can buy. A few programs combine a grant with a second mortgage, meaning you receive money upfront but owe a loan on top of your primary mortgage. Ask each program what happens if you sell the home early—some require repayment if you move within five to ten years.
Closing costs are separate from your down payment
Your down payment is only one part of the cash you need at closing. Closing costs—fees for the loan, appraisal, title search, inspection, and insurance—typically run 2 to 5 percent of the home price. On a $300,000 home, that is $6,000 to $15,000 on top of your down payment.
Some lenders allow you to roll closing costs into the mortgage, which means you pay them over time instead of upfront. Others let the seller pay part of your closing costs as a negotiation point. Down payment assistance programs sometimes cover closing costs as well, though not always. Ask your lender and real estate agent what is negotiable before you commit to a purchase price.
How to decide whether to put down more than the minimum
Putting down more than the minimum saves you money on interest and mortgage insurance over the life of the loan. A 20 percent down payment eliminates PMI entirely on a conventional loan, which can save $100 to $300+ per month. Over 30 years, that adds up to tens of thousands of dollars.
However, a larger down payment means less cash in your pocket for emergencies, home repairs, or other financial goals. If you have high-interest debt (credit cards, personal loans), paying that off first often makes more financial sense than putting extra money down. If your emergency fund is smaller than three to six months of expenses, consider keeping that money liquid rather than locking it into the home.
Interest rates also matter. If mortgage rates are low and your savings account earns a higher return than your mortgage interest rate, keeping cash invested may make sense. Conversely, if rates are high and you have the cash available, a larger down payment reduces the total interest you pay over time.
What to do if you do not have enough saved for a down payment
If you are short on savings, start with an FHA loan—3.5 percent down is the lowest barrier for most borrowers. Pair this with a down payment assistance program in your state or city. Many programs are designed specifically for people in this situation and do not require perfect credit or a high income.
You can also ask the seller to cover part of your closing costs as part of the purchase negotiation. On a conventional loan, sellers can typically pay up to 3 percent of the purchase price toward your closing costs. This does not reduce your down payment requirement, but it lowers the total cash you need to bring to closing.
If you are not ready to buy yet, set a timeline and start saving. Even putting down 5 percent instead of 3.5 percent reduces your mortgage insurance costs. In the meantime, work on building your credit score—a higher score qualifies you for better interest rates and lower down payment requirements, which saves money over the life of the loan.
Frequently Asked Questions
Can I borrow my down payment from someone else?
Most lenders allow a gift from a family member, but not a loan. If you borrow money, the lender sees it as additional debt and may deny your mortgage. If a family member gives you money as a gift, they typically must sign a gift letter stating it does not need to be repaid. Some lenders also require proof that the gift has been in your account for at least two months.
What if I have bad credit but want to buy a home?
FHA loans are more forgiving of lower credit scores than conventional loans—some lenders accept scores as low as 500 to 580. You will likely pay a higher interest rate and may need a larger down payment (5 to 10 percent instead of 3.5 percent). Working with a mortgage broker who specializes in lower-credit borrowers can help you find lenders willing to work with your situation.
Do I lose my down payment if the deal falls through?
Your down payment is held in escrow (a neutral account) until closing. If the sale falls through because the inspection reveals major problems or the appraisal comes in low, you typically get your money back. If you walk away for reasons not covered by your contract (like changing your mind), you may lose the down payment. Always have a real estate attorney review your purchase agreement before signing.
Can I use retirement savings for a down payment?
Some retirement accounts allow withdrawals for a first home purchase without the usual early-withdrawal penalty. A traditional IRA lets you withdraw up to $10,000 lifetime for a first home. A 401(k) may allow a loan against your balance. Consult a tax professional before withdrawing—you may owe income tax on the amount, which reduces what you actually receive.
What is the difference between a down payment and earnest money?
Earnest money is a deposit you make when you make an offer on a home—typically 1 to 3 percent of the purchase price. It shows the seller you are serious. This money is held in escrow and applied toward your down payment at closing. If the sale closes, your earnest money counts as part of your down payment. If the deal falls through for reasons covered by your contract, you get it back.