The down payment amount depends on the loan type and your financial situation
There is no single down payment amount that works for everyone. The percentage you need to put down ranges from 0% to 20% or more, depending on which loan program you may have access to for, your credit score, and what the lender requires. A conventional loan typically asks for 5% to 20% down. An FHA loan (Federal Housing Administration) often accepts 3.5% down. VA loans (for military members and veterans) and USDA loans (for rural properties) can require 0% down. The lender will tell you the minimum for your specific situation once you submit an application.
The down payment is the cash you bring to closing. If you buy a $300,000 house with a 10% down payment, you pay $30,000 upfront and borrow the remaining $270,000. The larger your down payment, the smaller your monthly mortgage payment and the less interest you pay over the life of the loan. But a larger down payment also means you need more cash available right now, which is why many buyers put down less than 20%.
Key Takeaways
- FHA loans accept down payments as low as 3.5%, while conventional loans typically require 5% to 20%, and VA or USDA loans may require 0%.
- A smaller down payment means a higher monthly mortgage payment and the addition of mortgage insurance (PMI) until you reach 20% equity in the home.
- Your credit score, debt-to-income ratio, and savings affect which down payment options are actually available to you.
- Closing costs (typically 2% to 5% of the home price) are separate from your down payment and must be paid at signing.
How down payment size affects your monthly payment and total cost
A smaller down payment lowers the amount you need to have on hand, but it raises your monthly mortgage payment. On a $300,000 home at 7% interest over 30 years, putting 3% down ($9,000) instead of 20% down ($60,000) increases your monthly payment by roughly $200 to $250. You also pay more interest overall because you are borrowing more money.
When you put down less than 20%, lenders require you to carry mortgage insurance (called PMI on conventional loans, or MIP on FHA loans). This insurance protects the lender if you stop paying. On a conventional loan with 10% down, PMI typically costs 0.5% to 1% of the loan amount per year, added to your monthly payment. On an FHA loan, the mortgage insurance is usually permanent if you put down less than 10%, or it drops off after 11 years if you put down 10% or more. That insurance cost is real money that does not build equity in your home.
Down payment requirements by loan type
| Loan Type | Minimum Down Payment | Who Qualifies | Mortgage Insurance Required |
|---|---|---|---|
| FHA Loan | 3.5% | Most buyers; credit score typically 580 or higher | Yes (MIP), usually permanent or 11+ years |
| Conventional Loan | 3% to 5% (some lenders accept lower with compensating factors) | Buyers with credit score 620 or higher; stronger income and debt ratios | Yes (PMI) until 20% equity reached |
| VA Loan | 0% | Military members, veterans, surviving spouses | No |
| USDA Loan | 0% | Buyers in may be able to access rural areas; income limits apply | Yes (may provide fee), but no PMI |
What lenders look at when deciding your down payment
Lenders do not just look at how much you can put down; they look at whether you can afford the monthly payment and whether you are a safe bet to repay the loan. Your credit score affects which programs you may have access to for and what interest rate you get. A score of 620 or higher usually opens conventional loan options; below that, FHA becomes more likely. Your debt-to-income ratio (the percentage of your monthly income that goes to debt payments) matters more than your down payment size. If you already owe $2,000 a month on car loans and credit cards, and you earn $5,000 a month, a lender may reject you even with a 20% down payment because your ratio is too high.
Lenders also want to see that you have reserves — cash left over after closing. If you put every dollar you have into the down payment and closing costs, some lenders will not approve you. They want proof that you can cover a month or two of payments if you lose income. The amount required varies by lender and loan type, but it is common to need 2 to 6 months of mortgage payments in the bank after closing.
Closing costs are separate from your down payment
Many buyers confuse down payment with total cash needed at closing. They are different. Your down payment is one part; closing costs are another. Closing costs include the loan origination fee, appraisal, title search, title insurance, property taxes, homeowners insurance, and other fees. They typically run 2% to 5% of the home price. On a $300,000 home, closing costs might be $6,000 to $15,000.
Some of these costs can be rolled into the loan (you borrow the money instead of paying it upfront), but not all. Lenders require you to pay property taxes and homeowners insurance upfront. You also cannot borrow the down payment itself. So if you are buying a $300,000 home with 5% down and closing costs of 3%, you need $15,000 down plus $9,000 in closing costs — $24,000 total in cash before you can close.
Strategies for saving a down payment
If you do not have 20% saved, you have options. The most straightforward is to put down what you have and accept mortgage insurance for now. Once you reach 20% equity (through a combination of payments and home appreciation), you can request to remove PMI on a conventional loan. On an FHA loan, you may be stuck with insurance longer, so factor that into your decision.
Some buyers receive a gift from a family member to cover part or all of the down payment. Lenders allow this on most loan types, but they require a signed gift letter stating that the money is a gift, not a loan you have to repay. The gift giver does not have to be a relative, but the lender will verify the source of the funds to prevent fraud.
First-time homebuyer programs in your state or city may offer down payment assistance, grants, or favorable loan terms. These vary widely by location. Your real estate agent or a mortgage broker can point you toward local programs. Some employers also offer down payment assistance as part of their benefits package.
What happens if you put down less than 3%
Most conventional lenders will not accept a down payment below 3%. If you have less than 3% saved, your options narrow to FHA (3.5% minimum), VA (0% if you may have access to), or USDA (0% if you may have access to). Some lenders offer "bank portfolio" loans that stay on the lender's books instead of being sold to investors, and these sometimes accept lower down payments, but they are harder to find and often come with higher interest rates or stricter requirements.
If you cannot reach 3% to 5%, waiting and saving longer is often the smarter move than stretching to may have access to for a loan you cannot comfortably afford. A lower down payment means higher monthly payments and mortgage insurance costs that add up over years. The math usually favors saving a bit longer.
Frequently Asked Questions
Can I borrow money for my down payment?
No. Lenders require that your down payment come from your own funds or a gift. They do not allow you to borrow the down payment from another lender or credit card. They will ask where the money came from and may require bank statements to verify. A gift from a family member is allowed if documented with a gift letter.
What if I put down more than 20%?
Putting down more than 20% lowers your monthly payment and eliminates mortgage insurance entirely. It also reduces the amount you borrow, so you pay less interest over time. The tradeoff is that you have less cash available for emergencies or other investments. Whether it makes sense depends on your overall financial situation.
Do I have to put down 20% to avoid mortgage insurance?
Yes. On a conventional loan, mortgage insurance (PMI) is required until you reach 20% equity in the home. Once you hit that mark through a combination of payments and home value increases, you can request PMI removal. On an FHA loan, mortgage insurance is harder to remove and may be permanent depending on your down payment size.
Can I use my retirement account for a down payment?
Some retirement accounts allow withdrawals for a first-time home purchase. A traditional or Roth IRA lets you withdraw up to $10,000 lifetime for a first-time purchase without the early withdrawal penalty (though you may owe income tax). A 401(k) may allow a loan against your balance. Check with your plan administrator about the rules and tax consequences before withdrawing.
What if the appraisal comes in lower than the purchase price?
If the home appraises for less than you agreed to pay, your down payment percentage goes up. If you agreed to pay $300,000 with 10% down ($30,000) but it appraises at $280,000, you still owe $30,000 down, which is now 10.7% of the appraised value. You can renegotiate the price, walk away, or cover the difference yourself.