The typical down payment is 20 percent of the home's purchase price, but most buyers put down less
A normal down payment ranges from 3 percent to 20 percent of what you're paying for the house. Twenty percent is the figure lenders prefer because it lets you avoid mortgage insurance, but the median down payment for first-time buyers is closer to 6 to 10 percent. What you actually put down depends on your loan type, your credit score, how much cash you have saved, and what the lender requires.
The down payment is the money you bring to closing. The rest of the purchase price becomes your mortgage — the loan you repay over 15, 20, or 30 years. A larger down payment means a smaller loan, lower monthly payments, and no private mortgage insurance (PMI). A smaller down payment means you borrow more, pay more interest over time, and usually pay PMI until you've built enough equity in the home.
Key Takeaways
- Twenty percent down is the traditional benchmark because it eliminates mortgage insurance, but most buyers put down 5 to 10 percent instead.
- Down payments below 20 percent trigger private mortgage insurance (PMI), which adds $100 to $300+ per month to your payment depending on the loan size and your credit score.
- FHA loans allow down payments as low as 3.5 percent, VA loans may require zero down, and conventional loans typically start at 3 percent, but each has different insurance costs and rules.
- Your down payment amount affects your interest rate: larger down payments often may have access to for better rates because lenders see less risk.
How down payment size changes by loan type
The loan program you choose sets the floor for how little you can put down. Conventional loans (sold to Fannie Mae or Freddie Mac) typically require 3 to 5 percent down for first-time buyers with good credit, though some lenders go as low as 3 percent. If you put down less than 20 percent on a conventional loan, you pay PMI until you reach 20 percent equity or refinance.
FHA loans (insured by the Federal Housing Administration) allow 3.5 percent down and are designed for buyers with lower credit scores or smaller savings. FHA loans charge mortgage insurance upfront (1.75 percent of the loan amount, added to what you borrow) and an annual insurance premium (0.55 percent of the loan balance per year) for the life of the loan if you put down less than 10 percent. This makes FHA loans more expensive over time even though the initial down payment is smaller.
VA loans (for military members, veterans, and surviving spouses) often require zero down payment. You pay a funding fee instead of PMI, which ranges from 1.4 to 3.6 percent depending on whether you've used your VA benefit before and how much you're putting down. USDA loans (for rural properties) also allow zero down but charge an upfront may provide fee and annual insurance.
What happens to your monthly payment when you put down less
A smaller down payment increases your loan amount, which raises your monthly mortgage payment. On a $300,000 house at a 7 percent interest rate over 30 years: putting 20 percent down ($60,000) means borrowing $240,000 and paying roughly $1,596 per month in principal and interest. Putting 5 percent down ($15,000) means borrowing $285,000 and paying roughly $1,897 per month — about $300 more — before PMI.
PMI itself adds another layer. On that $285,000 loan, PMI might run $150 to $250 per month depending on your credit score and the lender. So your total payment jumps from $1,596 to roughly $2,050 to $2,150 per month. You pay PMI until you've paid the loan down to 80 percent of the home's original value or until you refinance and have 20 percent equity.
The math changes if interest rates are low or if you expect your home to gain value quickly. Sometimes putting down 5 percent and investing the other $45,000 in the stock market makes more financial sense than putting down 20 percent, especially if your investment returns beat your mortgage interest rate. But this requires discipline and comfort with risk.
How your credit score and income affect the down payment you can make
Lenders use your credit score to decide whether to accept a low down payment and what interest rate to offer. A score above 740 on most conventional loans qualifies you for the lowest rates and the smallest down payments (3 to 5 percent). A score between 620 and 680 may limit you to 10 to 15 percent down on a conventional loan, or push you toward an FHA loan with its 3.5 percent minimum but higher insurance costs.
Your debt-to-income ratio (DTI) — the percentage of your gross monthly income that goes to debt payments — also matters. Most lenders want your DTI below 43 percent, including your new mortgage payment. If you have student loans, car payments, or credit card debt, a larger down payment reduces your monthly mortgage payment and helps you stay under that threshold. A smaller down payment might disqualify you entirely if your other debts are high.
Some lenders offer down payment assistance programs through nonprofits, state housing agencies, or employer benefits. These programs may grant you $5,000 to $50,000 toward your down payment, though they often come with income limits or restrictions on the type of property you can buy. Checking with your state housing finance agency or your employer's benefits office can uncover options specific to your situation.
The trade-off between down payment size and interest rate
A larger down payment usually earns you a lower interest rate because the lender's risk drops. The difference is often 0.25 to 0.5 percentage points. On a $240,000 loan, a 0.5 percent rate difference costs roughly $120 per month. Over 30 years, that's $43,200 in extra interest — money that might have been worth putting down upfront.
However, this calculation assumes you stay in the home for the full loan term. If you plan to move or refinance in 5 to 10 years, the rate difference may not justify tying up extra cash now. You also need to consider your emergency fund: lenders want to see that you have 2 to 6 months of expenses saved after closing. Putting every dollar into the down payment and leaving yourself vulnerable to job loss or a major repair is a costly mistake.
Minimum down payments by scenario
| Loan Type | Minimum Down Payment | Insurance or Fees | Best For |
|---|---|---|---|
| Conventional (Fannie Mae/Freddie Mac) | 3–5% | PMI until 20% equity | Buyers with good credit and stable income |
| FHA | 3.5% | Upfront (1.75%) + annual (0.55%+) | First-time buyers, lower credit scores |
| VA | 0% | Funding fee (1.4–3.6%) | Military, veterans, surviving spouses |
| USDA | 0% | may provide fee + annual insurance | Rural properties, moderate income |
| Jumbo (over $766,200 in most areas) | 10–20% | None if 20% down | High-price homes, strong finances |
Frequently Asked Questions
Can I use a gift from family for my down payment?
Yes. Most lenders allow down payment gifts from family members, but they require a signed letter stating the money is a gift, not a loan you have to repay. The gift giver cannot have any claim to the home. Some lenders limit gifts to a percentage of the down payment (often 20 to 50 percent), so you still need to contribute some of your own funds. Check with your lender about their specific rules before accepting money.
What if I can only put down 3 percent?
A 3 percent down payment is possible on conventional loans and FHA loans, but you'll pay PMI or mortgage insurance for years. Calculate the total cost: a smaller down payment means a larger loan, higher monthly payments, and insurance fees. Compare the monthly cost of a 3 percent down payment versus saving for 6 to 12 more months to reach 10 or 15 percent. Sometimes waiting costs less in the long run.
Does putting down more than 20 percent save money?
Putting down 25 or 30 percent eliminates PMI and may lower your interest rate slightly, but the benefit is small. The real question is whether that extra cash is better used in your down payment or kept as an emergency fund, invested, or used to pay off higher-interest debt. Most financial advisors suggest keeping 3 to 6 months of expenses in savings even after buying a home.
Can I put down less if I have excellent credit?
Excellent credit (750+) may may have access to you for a 3 percent conventional down payment and a lower interest rate, but it doesn't eliminate the minimum. Some lenders offer slightly better terms for top-tier credit, but the down payment floor is set by the loan program, not your score alone. Your score affects the rate and whether you're approved, not the minimum down payment amount.
What if I'm buying a second home or investment property?
Second homes and investment properties typically require larger down payments than primary residences: 10 to 25 percent depending on the lender and property type. Interest rates are also higher, and some loan programs don't cover investment properties at all. Talk to a lender about investment property rules before you make an offer.