The down payment you need depends on the loan type, not a fixed rule
There is no single down payment amount required for every first-time buyer. The amount you put down depends on which loan program you use, your credit score, and the purchase price of the home. Conventional loans typically require 3% to 20% down. FHA loans (backed by the Federal Housing Administration) allow as little as 3.5% down. VA loans (for military members and veterans) and USDA loans (for rural properties) can require 0% down. The lower your down payment, the higher your monthly mortgage payment and the more interest you pay over the life of the loan.
Your down payment is the cash you bring to closing. If you buy a $300,000 house with a 5% down payment, you pay $15,000 upfront and borrow $285,000. The lender will also require you to pay closing costs (typically 2% to 5% of the purchase price), which are separate from your down payment. Many first-time buyers can cover closing costs through seller concessions or lender credits, but you should plan to have cash on hand for both.
Key Takeaways
- FHA loans allow down payments as low as 3.5%, while conventional loans usually start at 3% but may require more depending on your credit score and debt.
- A smaller down payment means a larger loan, higher monthly payments, and mortgage insurance costs that add hundreds of dollars per year.
- VA and USDA loans can require zero down payment if you meet the program requirements, but not all properties or sellers may have access to.
- Closing costs are separate from your down payment and typically run 2% to 5% of the purchase price; ask your lender for a Loan Estimate to see the exact amount.
- Saving for a larger down payment (10% to 20%) reduces your monthly payment, eliminates or lowers mortgage insurance, and strengthens your offer in a competitive market.
Conventional loans and the credit score connection
Conventional loans are mortgages not backed by a government agency. They typically require a minimum down payment of 3%, but your credit score and debt-to-income ratio determine whether you can actually get that rate. If your credit score is 740 or higher and your debt-to-income ratio is below 43%, most lenders will offer 3% down. If your score is between 620 and 680, you may need to put down 10% or more, or you may not be approved at all.
When you put down less than 20% on a conventional loan, you pay private mortgage insurance (PMI). PMI protects the lender if you stop paying; it does not protect you. PMI typically costs 0.5% to 1.5% of your loan amount per year, added to your monthly payment. On a $285,000 loan, that is roughly $120 to $360 per month. You can remove PMI once you have paid down the loan to 80% of the home's value, but that takes years.
FHA loans for borrowers with lower credit or savings
FHA loans allow down payments as low as 3.5% and accept credit scores as low as 580. If your score is between 580 and 619, you must put down 10%. FHA loans are popular with first-time buyers because the credit and down payment requirements are more flexible than conventional loans. However, FHA loans require mortgage insurance for the life of the loan if your down payment is less than 10%, and for at least 11 years if your down payment is 10% or more. This mortgage insurance is called FHA mortgage insurance premium (MIP) and costs roughly 0.55% to 0.85% of your loan amount per year.
FHA loans also have limits on how much you can borrow, which vary by county. In 2024, the limit ranges from about $440,000 to $766,550 depending on where the property is located. If you are buying in a high-cost area, an FHA loan may not cover the full purchase price. You can find the FHA loan limit for your county on the HUD website.
VA and USDA loans with zero down payment
If you are a military member, veteran, or surviving spouse, you may may have access to for a VA loan, which requires zero down payment. VA loans do not require mortgage insurance, which saves you hundreds of dollars per month compared to FHA or conventional loans with a low down payment. You will pay a VA funding fee (typically 1.25% to 3.6% of the loan amount), which can be rolled into your mortgage. VA loans have no credit score minimum, though most lenders require a score of at least 620.
USDA loans are for buyers in rural areas with household incomes at or below 115% of the area median income. Like VA loans, USDA loans require zero down payment and do not require mortgage insurance. You will pay a USDA may provide fee (1% of the loan amount, typically rolled into the mortgage) and an annual fee. USDA loans have stricter property and location requirements than other programs, so not every rural home qualifies.
How down payment size affects your monthly payment and total cost
The larger your down payment, the smaller your loan and the lower your monthly payment. Here is how the math works on a $300,000 home with a 7% interest rate and a 30-year mortgage:
| Down Payment | Loan Amount | Monthly Payment (Principal + Interest) | Monthly Mortgage Insurance | Total Monthly Cost |
|---|---|---|---|---|
| 3% ($9,000) | $291,000 | $1,937 | $145–$365 | $2,082–$2,302 |
| 5% ($15,000) | $285,000 | $1,897 | $120–$300 | $2,017–$2,197 |
| 10% ($30,000) | $270,000 | $1,796 | $90–$225 | $1,886–$2,021 |
| 20% ($60,000) | $240,000 | $1,596 | $0 | $1,596 |
Over 30 years, the difference between a 3% down payment and a 20% down payment is more than $175,000 in total payments. A larger down payment also strengthens your offer when you are competing with other buyers, because sellers see less risk in a buyer who has more skin in the game.
Saving for down payment and closing costs together
Your total cash needed at closing is your down payment plus closing costs. Closing costs typically run 2% to 5% of the purchase price. On a $300,000 home, that is $6,000 to $15,000. Your lender must provide a Loan Estimate within three business days of your application; this document shows your exact down payment, closing costs, and monthly payment before you commit.
Some buyers use down payment assistance programs run by nonprofits, state housing agencies, or employers. These programs may offer grants (money you do not repay) or forgivable loans (loans that are forgiven if you stay in the home for a set period). Search your state housing finance agency website or contact your local housing authority to learn what programs exist in your area. Your lender can also tell you which programs they work with.
If you are short on cash, you can ask the seller to cover some of your closing costs as part of the purchase agreement. Conventional loans allow seller concessions up to 3% of the purchase price; FHA allows up to 6%. This does not reduce your down payment, but it reduces the cash you need to bring to closing.
When a larger down payment makes sense
Putting down more than the minimum makes sense if you have the cash and are not sacrificing your emergency fund. A larger down payment lowers your monthly payment, removes mortgage insurance, and reduces the total interest you pay. It also gives you more negotiating power in a competitive market and may may have access to you for a better interest rate.
However, do not drain your savings to make a large down payment. You need cash reserves for home repairs, property taxes, homeowners insurance, and emergencies. Most lenders want to see that you have at least two months of mortgage payments in reserve after closing. If saving for a 20% down payment means you will have no emergency fund, a 5% or 10% down payment with mortgage insurance is the smarter choice.
Frequently Asked Questions
Can I use a gift for my down payment?
Yes. Most lenders allow down payment gifts from family members, but they require a signed gift letter stating the money is a gift and does not need to be repaid. The gift giver does not need to be on the loan. Some programs limit how much of your down payment can be a gift; FHA allows 100%, while some conventional loans require at least 5% to come from your own funds.
What if I do not have enough for a down payment right now?
FHA loans allow down payments as low as 3.5%, and VA and USDA loans allow zero down. If you do not meet those programs' requirements, you can save over time, look for down payment assistance programs in your state, or ask your employer whether they offer homebuying support. Some employers provide down payment grants or matching programs for first-time buyers.
Does a larger down payment lower my interest rate?
Sometimes. Lenders may offer a slightly lower interest rate to borrowers with larger down payments because the loan is less risky. The difference is usually 0.25% to 0.5%, which translates to $50 to $150 per month on a $300,000 loan. Ask your lender for rate quotes at different down payment levels to see whether the savings justify the extra cash upfront.
What happens if I put down less than 3%?
Conventional loans do not go below 3% down. If you cannot save 3%, your options are FHA (3.5% minimum), VA (0% if may be able to access), or USDA (0% if may be able to access). Some lenders offer portfolio loans or bank-specific programs with lower down payments, but these are rare and usually require a higher credit score and interest rate.
Can I remove mortgage insurance after I pay down my loan?
On conventional loans, yes. Once your loan balance reaches 80% of the home's original purchase price, you can request PMI removal. On FHA loans, mortgage insurance stays for the life of the loan if your down payment was less than 10%, or for at least 11 years if your down payment was 10% or more. You cannot remove FHA mortgage insurance early.