The minimum down payment is usually 3 to 20 percent of the home's price, depending on the loan type and your financial situation
The amount you put down when you buy a house determines how much you have to borrow. A down payment is money you pay upfront; the rest comes from a mortgage loan. The minimum varies by loan program. Conventional loans (the most common type, not backed by government) typically require 3 to 20 percent down. FHA loans (backed by the Federal Housing Administration) allow as little as 3.5 percent. VA loans (for military members and veterans) often require zero down. USDA loans (for rural properties) also allow zero down in some cases.
The lower your down payment, the higher your monthly mortgage payment and the more interest you pay over the life of the loan. You also pay mortgage insurance if you put down less than 20 percent on a conventional loan—this is an extra monthly fee that protects the lender if you stop paying. On an FHA loan, mortgage insurance is required regardless of down payment size. Understanding this trade-off helps you decide what you can actually afford each month, not just what down payment amount is technically possible.
Key Takeaways
- Conventional loans usually require 3 to 20 percent down; FHA loans allow 3.5 percent; VA and USDA loans may allow zero down.
- Putting down less than 20 percent on a conventional loan means paying mortgage insurance on top of your regular payment.
- Your down payment size affects your monthly cost more than the purchase price alone—a smaller down payment means a larger loan and higher payments.
- Lenders check your credit score, debt-to-income ratio, and savings history, not just whether you have a minimum down payment amount.
How down payment size changes your monthly payment
The down payment you choose directly affects how much you borrow and therefore how much you pay each month. On a $300,000 house, a 3 percent down payment ($9,000) means borrowing $291,000. A 20 percent down payment ($60,000) means borrowing $240,000. That $51,000 difference in the loan amount translates to roughly $300 to $350 more per month in principal and interest alone, depending on interest rates and loan length.
Add mortgage insurance to the smaller down payment scenario, and the gap widens further. On a conventional loan with 5 percent down, mortgage insurance typically costs 0.5 to 1.5 percent of the loan amount per year, paid monthly. That can add $100 to $300 per month depending on the loan size. Over 30 years, a smaller down payment costs tens of thousands of dollars more in total interest and insurance.
However, putting down 20 percent is not always the right choice. If you have $60,000 saved but keeping $30,000 in emergency reserves matters more to you than avoiding mortgage insurance, a 10 percent down payment might make more sense for your situation. The math works differently for each person.
What lenders actually look at beyond the down payment amount
Lenders do not approve or deny you based on down payment size alone. They examine your credit score, your debt-to-income ratio (how much you owe monthly compared to how much you earn), your employment history, and your savings. A 20 percent down payment does not override a credit score below 620 or a debt-to-income ratio above 50 percent.
Most conventional lenders want a credit score of at least 620, though 640 or higher improves your interest rate. Your debt-to-income ratio—the total of all monthly debt payments (car loans, credit cards, student loans, the new mortgage) divided by your gross monthly income—usually cannot exceed 43 to 50 percent. If you earn $5,000 per month and already owe $1,500 in car and credit card payments, your new mortgage payment cannot exceed roughly $1,650 to $1,850.
Lenders also verify that you have held your job for at least two years and that your savings are documented and real. They want to see bank statements, not just your word that you have money. If you received a large gift for your down payment, many lenders require a signed letter from the gift-giver stating it does not need to be repaid.
Down payment requirements by loan type
Different loan programs have different minimums because they carry different risk levels for the lender.
| Loan Type | Minimum Down Payment | Mortgage Insurance Required | Who Can Use It |
|---|---|---|---|
| Conventional | 3 to 5 percent (some lenders require 10 percent) | Yes, if down payment is below 20 percent | Anyone with sufficient credit and income |
| FHA | 3.5 percent | Yes, always required | First-time buyers and repeat buyers; credit score 580 or higher |
| VA | Zero percent | No mortgage insurance | Military members, veterans, surviving spouses |
| USDA | Zero percent | Yes, a may provide fee instead of traditional insurance | Rural property buyers meeting income limits |
Conventional loans are the most common and offer the best rates if you have good credit and a solid down payment. FHA loans are designed for buyers with lower credit scores or smaller down payments; the trade-off is that mortgage insurance stays on the loan for the full 30 years, not just until you reach 20 percent equity. VA and USDA loans have no down payment requirement but have strict may be able to access rules and geographic or military service limits.
When a larger down payment saves you money versus when it does not
A larger down payment always lowers your monthly payment and total interest paid. But it does not always make financial sense. If you have $100,000 saved and put $80,000 down on a $400,000 house, you have only $20,000 left for emergencies, home repairs, and life surprises. A job loss, medical bill, or roof leak could force you into high-interest debt or default on your mortgage.
Financial advisors often suggest keeping three to six months of living expenses in savings before buying a house. If your monthly expenses are $4,000, that means $12,000 to $24,000 set aside. If you have $100,000 total and need to keep $20,000 in reserves, you can realistically put down $80,000, not $100,000. The remaining $20,000 stays untouched for emergencies.
Interest rates also matter. If mortgage rates are very low (below 3 percent), the cost of borrowing is cheap, and a smaller down payment makes sense—you keep more cash on hand and pay relatively little extra in interest. If rates are high (above 6 percent), a larger down payment reduces the amount you borrow at that expensive rate, saving you more money over time.
How to figure out what down payment amount works for your budget
Start by calculating your maximum affordable monthly payment. Use an online mortgage calculator or talk to a lender. Enter different down payment amounts and see how the payment changes. A $300,000 house with 5 percent down might be $1,800 per month; with 20 percent down, it might be $1,400. Decide which payment fits your budget without stretching.
Next, check your debt-to-income ratio. Add up all your monthly debt payments—car loan, credit cards, student loans, child support, anything you owe. Divide that total by your gross monthly income (before taxes). If the result is above 43 percent, you may not may have access to for a larger loan, regardless of down payment size. If it is below 43 percent, you have room to borrow more.
Finally, make sure your down payment does not drain your savings. After the down payment and closing costs (typically 2 to 5 percent of the purchase price), you should have at least three months of living expenses left in the bank. If you do not, consider a smaller down payment and mortgage insurance instead of risking financial hardship.
Frequently Asked Questions
Can I use a gift for my down payment?
Yes. Most lenders allow down payment gifts from family members. You will need a signed letter from the gift-giver stating the amount, the date, and that repayment is not expected. The lender will verify the money came from the gift-giver's account and is now in yours. Some lenders require the gift to cover only part of the down payment; you must contribute some of your own funds.
What if I only have 2 percent saved for a down payment?
Most conventional lenders require at least 3 percent. Some credit unions or portfolio lenders (banks that keep loans in-house rather than selling them) may go lower, but rates will be higher and mortgage insurance will be steeper. An FHA loan at 3.5 percent down is usually a better option. You could also wait and save more, or explore first-time buyer programs in your state or city that may offer down payment help.
Does a bigger down payment mean a lower interest rate?
Usually yes, but not always by much. A lender might offer 6.5 percent for 5 percent down and 6.3 percent for 20 percent down—a small difference. Your credit score, loan type, and current market rates matter more than down payment size. Shop with multiple lenders to compare; the difference between lenders is often larger than the difference between down payment amounts.
What happens if I put down 19 percent instead of 20 percent?
You will pay mortgage insurance on a conventional loan. The insurance cost is usually small—roughly $100 to $200 per month on a $300,000 loan—but it adds up. Many buyers aim for 20 percent specifically to avoid it. However, if waiting six months to save an extra 1 percent means paying rent in the meantime, the mortgage insurance might cost less than the rent you would pay.
Can I remove mortgage insurance once I reach 20 percent equity?
On a conventional loan, yes—once you have paid down the loan to 80 percent of the original purchase price, you can request removal. On an FHA loan, mortgage insurance stays for the full loan term if you put down less than 10 percent. If you put down 10 percent or more on an FHA loan, insurance drops after 11 years. Check your loan documents for the exact rules.