Most mortgages require a down payment, but the amount varies widely—and some loans let you put down as little as 3 percent

You do not need to put down 20 percent to buy a house. That number became standard advice decades ago, but it is not a requirement. Today, conventional mortgages backed by Fannie Mae or Freddie Mac allow down payments as low as 3 percent. Federal Housing Administration (FHA) loans go lower—as little as 3.5 percent. Some state and local programs offer even smaller down payments or none at all, though these are less common and come with specific income or location limits.

The real question is not whether you need a down payment, but what happens when you put down less than 20 percent. The answer: you will pay mortgage insurance on top of your monthly payment. That insurance protects the lender if you stop paying, and it adds hundreds of dollars per year to your cost. Understanding what down payment makes sense for your situation means knowing what that insurance costs, when you can remove it, and whether a smaller down payment now is worth the extra expense.

Key Takeaways

  • Conventional mortgages accept down payments as low as 3 percent; FHA loans go to 3.5 percent; some programs have no down payment requirement at all.
  • Any down payment below 20 percent triggers mortgage insurance, which you pay monthly until you reach 20 percent equity or refinance.
  • The cost of mortgage insurance varies by loan type, down payment size, and credit score—typically 0.5 to 1.86 percent of the loan amount per year.
  • Putting down less now means paying more over time, but it also means you can buy sooner if you do not have 20 percent saved.
  • Some down payment assistance programs exist through state housing agencies and nonprofits, though availability and rules vary by location.

How much down payment different loan types actually require

A conventional mortgage backed by Fannie Mae or Freddie Mac requires a minimum down payment of 3 percent. You can put down 5, 10, 15, or 20 percent—the choice is yours. The lower your down payment, the higher your interest rate and mortgage insurance cost tend to be, but the loan itself will still close.

An FHA loan, insured by the Federal Housing Administration, requires a minimum of 3.5 percent down. FHA loans are designed for buyers with lower credit scores or less savings, and they allow a wider range of credit histories than conventional loans. The tradeoff is that FHA mortgage insurance is mandatory for the life of the loan if you put down less than 10 percent—you cannot remove it later, even after you build equity.

VA loans, available to military members and veterans, often require zero down payment. USDA loans, for rural properties, also frequently require zero down. Both come with their own insurance or may provide fees, but the upfront down payment requirement is eliminated.

State and local programs vary. Some offer down payment grants (money you do not repay) or second mortgages that cover part or all of your down payment. These are usually limited to first-time buyers, specific income levels, or certain neighborhoods. Your state housing finance agency or local housing authority can tell you what exists in your area.

What mortgage insurance costs and how long you pay it

Mortgage insurance is the price of putting down less than 20 percent. On a conventional loan, it is called private mortgage insurance (PMI). On an FHA loan, it is called mortgage insurance premium (MIP). Both are added to your monthly payment.

The cost depends on three things: your down payment size, your credit score, and the loan type. On a conventional loan with a 5 percent down payment and a 700 credit score, mortgage insurance might run 0.5 to 0.86 percent of the loan amount per year. With a 3 percent down payment and a 650 credit score, it could reach 1.5 to 1.86 percent per year. On a $300,000 loan, that difference is $150 to $560 per month.

You stop paying PMI on a conventional loan once you reach 20 percent equity in the home—either by paying down the principal or by the home appreciating in value. You can also request removal once you hit that mark; the lender is required to remove it automatically at 22 percent equity. On an FHA loan with less than 10 percent down, you pay mortgage insurance for the entire life of the loan, even after you build equity. If you put down 10 percent or more on an FHA loan, you pay it for 11 years, then it stops.

Down payment size versus total cost over time

Putting down 3 percent instead of 20 percent means you borrow more money and pay mortgage insurance. Over a 30-year loan, the difference is substantial. On a $300,000 home with a 7 percent interest rate, putting down 3 percent instead of 20 percent adds roughly $100,000 to $150,000 in total interest and insurance costs—spread across 360 monthly payments.

That sounds like a reason to save longer and put down 20 percent. But it is not always the right choice. If you are renting now and paying $2,000 per month, and you can buy with 5 percent down for a total monthly payment of $2,200 (including insurance), you are building equity instead of paying rent. In five years, you will have paid down principal and possibly built home equity through appreciation. At that point, you can refinance to remove the mortgage insurance. The math often favors buying sooner with a smaller down payment rather than renting for two more years to save 20 percent.

The decision depends on your specific situation: how long you plan to stay in the home, whether home prices are rising in your area, your current rent, your interest rate, and your credit score. A mortgage lender or calculator can show you the exact monthly cost difference for your numbers.

Down payment assistance programs and where to find them

Several programs exist to help with down payments, though they are not available everywhere and have specific rules. State housing finance agencies run down payment assistance programs in most states. These typically offer grants or forgivable loans (you do not repay them if you stay in the home for a set period). Income limits and first-time buyer requirements apply.

Employer programs exist at some large companies. Google, Amazon, and others offer down payment grants to employees buying in certain areas. Ask your HR department whether your employer has one.

Nonprofit organizations like NeighborWorks and local community development corporations sometimes offer down payment help, usually paired with homebuyer education classes. These are often free or low-cost.

Seller concessions are another route: the seller agrees to pay some of your closing costs or down payment as part of the sale. This is negotiated during the offer process and is common in buyer-friendly markets. Conventional loans allow seller concessions up to 3 percent of the purchase price; FHA allows up to 6 percent.

To find what is available in your area, contact your state housing finance agency directly or search for "[your state] down payment assistance." Local housing authorities and 211 (a referral service) can also point you toward programs.

What happens if you cannot save a down payment right now

If you have stable income and decent credit but simply have not saved a down payment yet, a 3 to 5 percent conventional loan is usually the fastest path to homeownership. You will pay mortgage insurance, but you will also start building equity and stop paying rent to a landlord.

If your credit score is lower (below 620) or your income is irregular, an FHA loan may be easier to get approved for, even though the mortgage insurance lasts longer. Some lenders also offer "bank statement" or "asset-based" loans that do not require traditional employment history—useful if you are self-employed or have recent income changes.

If you have no down payment saved and no access to assistance programs, waiting to save is one option. But it is worth running the numbers: what you save in mortgage insurance by waiting might be less than what you lose by continuing to pay rent instead of building equity. A mortgage lender can show you both scenarios.

Frequently Asked Questions

Can I use a gift from family for my down payment?

Yes. Most lenders allow down payment gifts from family members. You will need a signed gift letter stating the money is a gift, not a loan, and the lender will verify the funds came from the family member's account. The gift can cover your entire down payment or just part of it.

What if I put down less than 3 percent?

Conventional loans do not go below 3 percent. If you have less than 3 percent saved, your options are an FHA loan (3.5 percent minimum), a VA or USDA loan (zero down if you may have access to), or a down payment assistance program. Some lenders offer "bank statement" loans with lower down payments for self-employed buyers, but these are less common and carry higher interest rates.

Can I remove mortgage insurance before I reach 20 percent equity?

On a conventional loan, you can request PMI removal once you reach 20 percent equity. On an FHA loan with less than 10 percent down, you cannot remove it—you pay for the life of the loan. If you put down 10 percent or more on an FHA loan, you pay MIP for 11 years, then it stops automatically.

Is it better to put down 20 percent or buy sooner with less?

It depends on your rent, local home prices, how long you plan to stay, and your interest rate. If home prices are rising and your rent is high, buying sooner with 5 percent down often costs less over five years than renting and saving for 20 percent. A mortgage calculator can show you the exact numbers for your situation.

Do I need perfect credit to get a mortgage with a low down payment?

No. Conventional loans with 3 to 5 percent down are available with credit scores in the 620 to 680 range, though your interest rate will be higher. FHA loans accept credit scores as low as 500 to 580 with a 10 percent down payment, or 580 and above with 3.5 percent down. The lower your score, the higher your rate, but the loan is still possible.