The minimum down payment for a $400,000 house is typically 3 to 5 percent if you use an FHA or conventional loan with mortgage insurance
On a $400,000 purchase, 3 percent means $12,000 down and 5 percent means $20,000. Both are real numbers that first-time buyers can reach. The catch is that putting down less than 20 percent ($80,000) means you pay mortgage insurance — an extra monthly fee that protects the lender if you stop paying. That insurance stays on your loan until you build enough equity, which typically takes years.
The loan type you choose determines your minimum. FHA loans, backed by the Federal Housing Administration, allow 3.5 percent down ($14,000 on a $400,000 house) and are designed for first-time buyers. Conventional loans from banks and mortgage companies often start at 3 percent, though some lenders require 5 percent. VA loans, if you are military or a veteran, can go to zero down. USDA loans in rural areas can also be zero down.
Your credit score, debt-to-income ratio, and savings history all affect whether a lender will accept you at the minimum. A lender will not hand you a $388,000 loan just because you have $12,000. They want to see that you can handle the monthly payment, that you have not missed payments before, and often that you have reserves — money left over after closing costs.
Key Takeaways
- The minimum down payment on a $400,000 house is $12,000 to $14,000 (3 to 3.5 percent) with an FHA or conventional loan, but you will pay mortgage insurance on top of your monthly payment.
- Putting down 20 percent ($80,000) eliminates mortgage insurance but is not required — most first-time buyers put down 5 to 10 percent.
- Your credit score, income, and existing debt determine whether a lender will approve you at the minimum down payment.
- Closing costs (typically 2 to 5 percent of the purchase price, or $8,000 to $20,000) are separate from your down payment and must come from your own money or a gift.
How much mortgage insurance costs and when it stops
Mortgage insurance is not a one-time fee — it is a monthly charge added to your payment. On a $400,000 house with 3 percent down, mortgage insurance typically runs $200 to $400 per month, depending on your credit score and the loan type. Over a year, that is $2,400 to $4,800 on top of your principal and interest.
For FHA loans, mortgage insurance has two parts: an upfront fee (1.75 percent of the loan amount, or about $6,500 on a $388,000 loan) that gets rolled into your loan, and an annual fee (0.55 to 0.80 percent per year) split into monthly payments. You cannot remove FHA mortgage insurance until you refinance or pay off the loan.
For conventional loans, mortgage insurance (called PMI) drops off automatically once you reach 20 percent equity in the home — meaning you have paid down the loan or the home has appreciated enough that you owe 80 percent or less of its value. On a $400,000 house, that could take 5 to 10 years depending on your payment and market conditions. You can also request removal once you hit 20 percent equity, though the lender can require an appraisal to confirm the home's current value.
Down payment gifts and where the money can come from
If you do not have $12,000 to $20,000 saved, a gift from a family member can count toward your down payment. Lenders allow gifts from parents, grandparents, siblings, or other relatives. The lender will ask for a signed gift letter stating that the money is a gift, not a loan you have to repay.
The gift must come from the giver's own account — not from a line of credit, another loan, or borrowed money. The lender will trace the funds by asking for bank statements showing where the money came from. If you receive a $10,000 gift, the lender wants to see it sit in your account for at least two months before closing (this is called "seasoning"), though some lenders allow less time if you can document the source clearly.
Gifts can cover your entire down payment, but not your closing costs. Closing costs must come from your own funds or from the seller (through a credit at closing). This is a hard rule for most loan types.
Closing costs are separate from your down payment
Closing costs are the fees you pay to finalize the loan and transfer the property. They include the appraisal, title search, title insurance, loan origination fee, attorney fees, and property taxes. On a $400,000 house, closing costs typically range from $8,000 to $20,000 — roughly 2 to 5 percent of the purchase price.
You must have closing costs in addition to your down payment. If you are putting down $12,000 and closing costs are $12,000, you need $24,000 total before you can close. Some lenders offer to roll closing costs into the loan (meaning you borrow the money instead of paying it upfront), but this increases your loan amount and your monthly payment.
The seller can sometimes pay part of your closing costs as a concession during negotiation. On a $400,000 house, the seller might cover 2 to 3 percent of the purchase price in closing costs if the market favors buyers. This is negotiated as part of the offer, not may provide.
Comparing down payment amounts and their real cost
| Down Payment | Amount | Loan Amount | Mortgage Insurance (approx. monthly) | Total Cost Over 10 Years |
|---|---|---|---|---|
| 3% | $12,000 | $388,000 | $250–$350 | $30,000–$42,000 |
| 5% | $20,000 | $380,000 | $180–$280 | $21,600–$33,600 |
| 10% | $40,000 | $360,000 | $100–$180 | $12,000–$21,600 |
| 20% | $80,000 | $320,000 | $0 | $0 |
The table shows why putting down more than the minimum saves money over time. A 5 percent down payment costs $8,000 more upfront than 3 percent, but saves $9,000 to $12,000 in mortgage insurance over 10 years. A 10 percent down payment costs $20,000 more than 3 percent but saves $18,000 to $21,000 in insurance.
However, the math changes if you could invest that extra $8,000 or $20,000 instead of putting it toward the down payment. If you are confident you can earn more than the mortgage insurance costs, keeping cash in savings or investments might make sense. Most first-time buyers, though, benefit from putting down as much as they can without draining their emergency fund.
Loan programs that lower or eliminate down payment requirements
FHA loans allow 3.5 percent down and are the most common path for first-time buyers with limited savings. The tradeoff is that FHA mortgage insurance is permanent — you cannot remove it even after reaching 20 percent equity. You can only escape it by refinancing into a conventional loan later.
VA loans (for military members, veterans, and surviving spouses) require zero down payment and no mortgage insurance. If you are may be able to access, this is the strongest financial option. USDA loans in designated rural areas also allow zero down and no mortgage insurance for borrowers who meet income limits.
Conventional loans with 3 to 5 percent down are offered by banks and mortgage companies. Mortgage insurance drops off once you reach 20 percent equity, making this a good middle ground if you expect to stay in the home long enough to build equity.
Some states and cities offer down payment assistance programs for first-time buyers. These are grants or forgivable loans that help cover your down payment or closing costs. The programs vary widely by location — some cover up to $25,000, others much less. Your mortgage lender or local housing authority can point you toward programs in your area.
What lenders actually check before approving you at minimum down payment
Lenders do not approve every buyer who has 3 percent saved. They look at your debt-to-income ratio — the total of all your monthly debt payments (car loans, student loans, credit cards, the new mortgage) divided by your gross monthly income. Most lenders want this ratio below 43 percent. On a $400,000 house with 3 percent down, your monthly mortgage payment (principal, interest, taxes, insurance, and mortgage insurance) will be roughly $2,400 to $2,800. If your gross income is $5,000 per month, you are already at 50 percent before adding any other debt.
Your credit score matters. FHA loans accept scores as low as 580, but you will pay higher interest rates. Conventional loans typically require 620 or higher, and better rates start at 740 or above. A 50-point difference in your credit score can cost you $100 to $200 per month over the life of the loan.
Lenders also want to see reserves — money left in your account after closing. With 3 percent down, many lenders require two months of mortgage payments in reserves. On a $2,600 payment, that is $5,200 sitting in your account after you close. This shows you can handle a job loss or emergency without defaulting.
Your employment history and income stability matter. Lenders want to see two years of steady income. If you changed jobs recently, were self-employed, or had gaps in employment, you may need to provide more documentation or wait longer before applying.
Frequently Asked Questions
Can I borrow my down payment from someone other than a family member?
No. Lenders require that down payment money come from your own savings or as a gift from a family member. Borrowing from a friend, taking a personal loan, or using a credit card counts as new debt that lenders will see on your credit report, and it disqualifies you or lowers the amount you can borrow.
What happens if I put down less than 3 percent?
Most conventional lenders will not go below 3 percent. FHA loans go to 3.5 percent. Some lenders offer 2 percent down programs, but they are rare and typically require excellent credit and income. If you have less than 3 percent saved, look into down payment assistance programs in your state or city, or wait until you have saved more.
If I put down 3 percent now, can I remove mortgage insurance later without refinancing?
It depends on the loan type. With a conventional loan, yes — mortgage insurance drops off automatically at 20 percent equity or you can request removal. With an FHA loan, no — you cannot remove mortgage insurance unless you refinance into a conventional loan, which requires a new application and closing costs.
Do I need to show proof that I have saved the down payment before I make an offer?
Not before you make an offer, but yes before you get a mortgage pre-approval. Lenders will ask for bank statements showing your down payment funds. If you receive a gift, they will ask for the gift letter and the giver's bank statements. This happens during the pre-approval process, which comes before you make an offer.
What if the house appraises for less than $400,000?
If the appraisal comes in lower, your down payment percentage goes up. If the house appraises at $380,000 and you planned to put down 3 percent of $400,000 ($12,000), you now have 3.16 percent down on the actual purchase price. This usually does not change your mortgage insurance, but if the appraisal is much lower, the lender may require you to put down more cash or walk away from the deal.