The typical down payment is 10 to 20 percent of the home's purchase price, but you can put down as little as 3 percent with certain loan types.
A down payment is the cash you hand over at closing, and the lender finances the rest through a mortgage. The percentage you put down depends on the loan program you use, your credit score, and how much cash you have available. A buyer purchasing a $300,000 home with a 10 percent down payment would pay $30,000 upfront; with 20 percent, that rises to $60,000.
The reason down payment size matters: the less you put down, the more you borrow, and the more interest you pay over the life of the loan. A smaller down payment also triggers mortgage insurance, an extra monthly cost that protects the lender if you stop paying. That insurance disappears once you've built enough equity, but it adds thousands to your total cost in the early years.
Key Takeaways
- Conventional loans typically require 10 to 20 percent down, while FHA loans allow 3.5 percent and VA loans allow zero percent if you're a may have access to veteran.
- Down payments below 20 percent trigger private mortgage insurance (PMI), which adds $100 to $300+ monthly depending on the loan size and your credit score.
- The down payment amount you choose affects your monthly payment, total interest paid, and how quickly you build home equity.
- Lenders verify down payment funds come from your own savings or a gift; they do not accept borrowed money as a down payment.
Down payment ranges by loan type
The loan program you choose sets the floor for how little you can put down. Conventional loans (the most common type, sold to Fannie Mae or Freddie Mac) typically require 10 to 20 percent down, though some lenders will go as low as 3 percent if your credit score is strong. FHA loans, backed by the Federal Housing Administration, allow 3.5 percent down and are popular with first-time buyers and those with lower credit scores. VA loans, available to military members and veterans, often require zero down payment. USDA loans, for rural properties, also allow zero down for may have access to borrowers.
Each program has different rules about credit score minimums, debt-to-income limits, and property requirements. An FHA loan might accept a 580 credit score with 10 percent down, but a conventional loan at 3 percent down might require a 680 or higher. Your lender will tell you what down payment options are available to you based on your financial profile.
How mortgage insurance changes the math
When you put down less than 20 percent on a conventional loan, the lender requires private mortgage insurance (PMI). This is not homeowners insurance—it protects the lender, not you. PMI typically costs 0.5 to 1.5 percent of the loan amount per year, paid monthly as part of your mortgage payment. On a $270,000 loan (10 percent down on a $300,000 home), PMI might add $135 to $405 per month.
FHA loans use a similar product called mortgage insurance premium (MIP), which works the same way but is often slightly higher than PMI. The insurance stays on your loan until you reach 20 percent equity (for conventional loans) or until the loan is paid off (for FHA loans), though you can sometimes remove it sooner by refinancing or making a large lump-sum payment toward principal.
The trade-off is real: putting down 10 percent instead of 20 percent saves you $30,000 in cash today, but costs you an extra $100 to $300+ monthly for years. Over a 30-year loan, that adds up to $36,000 to $108,000 in extra insurance payments. Whether that trade-off makes sense depends on whether you have the cash available and what you could do with it instead.
What lenders require as proof of funds
Before closing, your lender will ask for bank statements, investment account statements, or other documentation showing where your down payment money came from. They are looking for two things: that the money is yours (not borrowed), and that it has been in your account long enough to be considered stable. Most lenders want to see 60 days of bank history, though this varies.
If someone is giving you money as a gift, the lender will require a signed gift letter stating the money is a gift, not a loan you have to repay. The gift giver does not have to be a family member, but the letter must be signed and dated. After the gift arrives in your account, you typically need to let it sit for 30 to 60 days before closing so the lender can verify it is truly yours.
Lenders do not accept borrowed money—from credit cards, personal loans, or lines of credit—as a down payment. If your bank statements show a large deposit right before you apply, the lender will ask where it came from. Be honest and provide documentation; if you cannot explain it, the lender may delay your closing or deny your loan.
How down payment size affects your monthly payment
A larger down payment lowers the amount you borrow, which lowers your monthly mortgage payment. On a $300,000 home at 7 percent interest over 30 years, the difference is substantial:
| Down Payment | Loan Amount | Monthly Payment (Principal + Interest) | Plus PMI (Estimate) | Total Monthly |
|---|---|---|---|---|
| 3% | $291,000 | $1,938 | $145 | $2,083 |
| 10% | $270,000 | $1,797 | $135 | $1,932 |
| 20% | $240,000 | $1,596 | $0 | $1,596 |
These numbers are estimates and do not include property taxes, homeowners insurance, or HOA fees, which also affect your total monthly housing cost. Interest rates also vary by credit score and loan type, so your actual payment may differ. The point is that the down payment choice ripples through your budget for decades.
Strategies for saving or sourcing a down payment
If you do not have 20 percent saved, you have several paths forward. The most straightforward is to put down what you have—even 3 to 5 percent—and accept the PMI cost for now. As your home builds equity and your financial situation improves, you can refinance to remove the insurance or make extra principal payments to reach 20 percent equity faster.
Some buyers use gifts from family members, which lenders allow as long as the gift is documented. Others tap retirement accounts like a 401(k) or IRA; some plans allow loans against your balance, and some allow penalty-free withdrawals for first-time home buyers (though rules vary by plan and age). A financial advisor can walk you through whether this makes sense for your situation.
Down payment assistance programs exist in many states and cities, though they vary widely in what they cover and who qualifies. These are typically run by local housing authorities or nonprofits, not by the federal government. Your real estate agent or lender can point you toward programs in your area, or you can search your city or county website.
Frequently Asked Questions
Can I put down less than 3 percent?
Most lenders will not go below 3 percent on a conventional loan. Some credit unions or portfolio lenders (who keep loans in-house rather than selling them) may offer lower down payments, but they are rare. FHA loans at 3.5 percent are usually the lowest-down-payment option available to most buyers.
Does a bigger down payment hurt my credit score?
Saving and depositing money does not hurt your credit. However, applying for multiple mortgages in a short time or taking on new debt right before closing can lower your score. Once you close, your credit may dip slightly because you now have a large new loan, but it typically recovers within a few months as you make on-time payments.
What if I put down 20 percent but my credit score is low?
A larger down payment helps offset a lower credit score, and some lenders will approve you with a higher down payment even if your score is below their normal minimum. However, you may pay a higher interest rate. Ask your lender what rate you may have access to for at different down payment levels so you can compare the total cost.
Can I borrow money for my down payment?
No. Lenders require that down payment funds come from your own savings, gifts, or retirement accounts—not from loans. If you borrow money and deposit it into your account, the lender will see the deposit and ask where it came from. If you admit it is a loan, they will likely deny your mortgage or require you to pay it back before closing.
How long does it take to save a down payment?
That depends entirely on your income and expenses. Someone saving $500 monthly would reach a $30,000 down payment in five years; someone saving $1,000 monthly would reach it in two and a half years. Starting with a smaller down payment and PMI might let you buy sooner and build equity while you continue saving.