New construction loans typically require 10 to 20 percent down, though some programs go as low as 5 percent or as high as 25 percent depending on the lender, loan type, and your credit profile.
The down payment you need depends on three things: the loan program you choose, your credit score, and whether you are buying from a builder or financing the construction itself. A conventional loan from a bank usually wants 10 to 20 percent. An FHA loan (backed by the Federal Housing Administration) can go as low as 3.5 percent. VA loans (for military members and veterans) often require zero down. Construction-to-permanent loans, which finance the building phase and then convert to a mortgage, often sit at 10 to 20 percent.
The builder's financing incentives also matter. Some builders offer down payment assistance or cover closing costs to move inventory, which can lower your actual out-of-pocket cost even if the loan itself requires 20 percent on paper. Ask the builder's sales agent directly what they are offering in the current market—these deals change month to month and are not advertised uniformly.
Key Takeaways
- Conventional new construction loans require 10 to 20 percent down; FHA loans can be as low as 3.5 percent; VA loans often require nothing down.
- Your credit score affects the down payment amount—a score below 620 may disqualify you from some programs or push your down payment requirement higher.
- Construction-to-permanent loans (which finance building and convert to a mortgage) typically require 10 to 20 percent down and lock in your rate before construction starts.
- Builders frequently offer down payment assistance or closing cost coverage as incentives, which can reduce your actual cash outlay even if the loan requires a higher percentage on paper.
- The down payment you make does not include closing costs, inspections, or appraisals—budget an additional 2 to 5 percent of the home price for those expenses.
How down payment requirements differ by loan type
Conventional loans are mortgages from banks, credit unions, or mortgage companies that are not backed by a government agency. They usually require 10 to 20 percent down on new construction. The exact amount depends on your credit score, debt-to-income ratio, and the lender's internal rules. A score of 740 or higher often qualifies you for 10 percent down; below 680, you may need 15 to 20 percent or be turned down entirely.
FHA loans are backed by the Federal Housing Administration and allow down payments as low as 3.5 percent. You pay mortgage insurance (called FHA mortgage insurance premium, or MIP) for the life of the loan if your down payment is below 10 percent. FHA loans have stricter rules about the condition of the home and the builder's track record, so not all new construction qualifies. The builder must be FHA-approved, and the home must meet FHA minimum property standards.
VA loans are available to active-duty military, veterans, and surviving spouses. Most VA loans require zero down payment. You pay a funding fee (typically 1.5 to 3.6 percent of the loan amount) instead of a down payment, and you do not pay mortgage insurance. VA loans are limited to the purchase price of the home; you cannot borrow extra for closing costs, so you will need to cover those separately.
USDA loans are for rural properties and also allow zero down payment if you meet income limits. Like VA loans, you pay a funding fee instead of a down payment and do not pay mortgage insurance. USDA loans are slower to process than conventional or FHA loans because the property must be verified as rural and meet USDA standards.
Construction-to-permanent loans and their down payment structure
A construction-to-permanent loan (also called a construction loan or construction-to-end loan) finances the building phase and automatically converts to a standard mortgage when the home is complete. During construction, you typically pay only interest on the amount drawn so far—the builder draws funds in stages as work progresses. Once construction is done, the loan converts to a 15- or 30-year mortgage.
Down payment requirements for construction-to-permanent loans usually range from 10 to 20 percent, calculated on the final appraised value of the completed home. You pay this down payment upfront, before construction begins. The lender will appraise the land and the builder's plans to estimate the final value, then calculate your down payment based on that estimate. If the final appraised value comes in lower than expected, you may owe more at closing; if it comes in higher, you may owe less.
One advantage of construction-to-permanent loans is that your interest rate is locked in before construction starts, so you know your monthly payment will not change when the loan converts. However, these loans are more complex than standard mortgages, and not all lenders offer them. You will need to shop around and expect a longer approval process—typically 30 to 45 days.
What affects the down payment amount you are quoted
Credit score is the single biggest factor. Lenders use your score to assess risk. A score of 740 or higher usually qualifies you for the lowest down payment the program allows. A score between 680 and 739 may require 5 to 10 percent more down. A score below 680 may disqualify you from conventional loans or push your down payment to 20 percent or higher. FHA loans are more flexible and accept scores as low as 580, but you will pay a higher mortgage insurance premium.
Debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes to debt payments. Most lenders want your DTI at or below 43 percent. If your DTI is higher, some lenders will require a larger down payment to offset the risk. A larger down payment means you borrow less, which lowers your monthly payment and improves your DTI.
Savings and reserves matter to lenders. If you have savings equal to several months of mortgage payments after you close, lenders see you as lower risk and may accept a smaller down payment. Conversely, if you are borrowing the down payment or have no reserves, some lenders will require you to put more down.
The builder's reputation and track record affect FHA and VA loans. If the builder is new or has complaints with the Better Business Bureau or state licensing board, FHA and VA may require additional inspections or appraisals, which can delay closing but do not change the down payment itself. Conventional lenders care less about builder reputation.
Builder incentives and how they reduce your actual cash outlay
Builders often offer down payment assistance or closing cost coverage to attract buyers, especially in a slower market. These incentives do not change the loan's down payment requirement on paper, but they reduce the amount of cash you actually have to bring to closing.
For example, if a builder offers $30,000 in closing cost coverage and your loan requires 15 percent down on a $400,000 home ($60,000), you still owe the $60,000 down payment to the lender. But the builder credits $30,000 toward your closing costs, so your actual out-of-pocket cost is $60,000 down plus $15,000 in closing costs (instead of $45,000), for a total of $75,000 instead of $105,000.
Builder incentives are negotiable and vary by market, season, and inventory levels. In a buyer's market (more homes for sale than buyers), builders offer larger incentives. In a seller's market (more buyers than homes), incentives shrink or disappear. Always ask the sales agent what incentives are available in writing before you commit. Some incentives come with strings—for example, you may have to use the builder's preferred lender or close by a certain date.
Be aware that some builder incentives are taxable income. If a builder credits you $30,000 toward closing costs, the IRS may treat that as income on your tax return. Ask your tax preparer or the builder's closing attorney whether the incentive is taxable in your situation.
Down payment versus closing costs and other expenses
Your down payment is separate from closing costs, inspections, appraisals, and other fees. Budget an additional 2 to 5 percent of the home price for these expenses on top of your down payment.
Closing costs typically include lender fees (origination, processing, underwriting), title insurance, property taxes, homeowners insurance, and attorney fees. On a $400,000 home, closing costs usually range from $8,000 to $20,000. Some lenders allow you to roll closing costs into the loan (called "no-cost" or "low-cost" closing), but this increases your loan amount and your monthly payment.
Appraisals for new construction cost $400 to $600. The lender orders the appraisal to confirm the home's value matches the purchase price. On new construction, the appraisal is based on comparable homes already built in the area, not on the builder's estimate.
Inspections are optional but strongly recommended. A professional home inspection costs $300 to $500 and happens after the home is substantially complete but before you close. This is your chance to catch construction defects before you own the home.
Homeowners insurance must be in place before closing. The lender requires proof of insurance. On a $400,000 home in an average-risk area, homeowners insurance runs $1,000 to $2,000 per year, so budget $250 to $500 for the first quarter's premium at closing.
How to calculate what you actually need to bring to closing
Use this formula to estimate your total cash need:
| Item | Calculation | Example (on $400,000 home) |
| Down payment | Purchase price × down payment % | $400,000 × 15% = $60,000 |
| Closing costs | 2–5% of purchase price | $400,000 × 3% = $12,000 |
| Appraisal | Flat fee | $500 |
| Inspection | Flat fee (optional) | $400 |
| First quarter homeowners insurance | Annual premium ÷ 4 | $1,500 ÷ 4 = $375 |
| Total cash to closing | $73,275 |
This is a rough estimate. Your actual costs will vary based on your location, the lender, and the home price. Ask your lender for a Loan Estimate within three business days of applying; it will show your exact down payment, closing costs, and monthly payment.
Frequently Asked Questions
Can I borrow the down payment from family or a friend?
Yes, but the lender needs to know about it. If the money is a gift, the giver must sign a gift letter stating it does not need to be repaid. If it is a loan, you must disclose it as a debt, which increases your debt-to-income ratio and may disqualify you or require a larger down payment. Most lenders prefer gifts over loans from family.
What if I have less than 10 percent saved?
FHA loans allow down payments as low as 3.5 percent. VA and USDA loans allow zero down if you meet may be able to access requirements. Some conventional lenders offer 5 to 7 percent down programs, but they charge higher interest rates and require mortgage insurance. Compare all three options with a lender before deciding.
Does the builder's price include the down payment?
No. The purchase price is what you and the builder agree to pay for the home. Your down payment is a percentage of that price that you bring to closing. The builder receives the rest from your lender. If the builder offers down payment assistance, they are crediting you money at closing, not reducing the purchase price.
What happens if the home appraises for less than the purchase price?
The lender will only lend based on the appraised value, not the purchase price. If you agreed to pay $400,000 but the home appraises for $380,000, the lender will lend only 85 percent of $380,000 (if your loan is 85 percent LTV). You will need to bring an extra $20,000 to closing or renegotiate the price with the builder. This is rare on new construction but can happen if the market drops during construction.
Can I put down more than 20 percent to avoid mortgage insurance?
Yes. Putting down 20 percent or more on a conventional loan eliminates private mortgage insurance (PMI). If you have the cash, a larger down payment lowers your monthly payment and total interest paid over the life of the loan. However, make sure you keep an emergency fund of three to six months of expenses; do not drain your savings just to avoid PMI.