The range is 3 to 20 percent of the purchase price, depending on the loan type and your situation

A down payment is the money you give the seller at closing — it comes out of your own pocket, not from the loan. The amount varies widely. Federal Housing Administration (FHA) loans let you put down as little as 3.5 percent. Conventional loans typically ask for 5 to 20 percent. Veterans Affairs (VA) loans often require zero down. The exact number depends on which lender you use, what kind of loan you may have access to for, and how much cash you have available.

The purchase price is what the number is based on. On a $300,000 house, 10 percent is $30,000. On a $500,000 house, 10 percent is $50,000. The lower your down payment, the larger your monthly mortgage payment will be, because you are borrowing more money. The higher your down payment, the less you borrow and the lower your monthly cost — but you also tie up more cash upfront.

Key Takeaways

  • FHA loans allow down payments as low as 3.5 percent; conventional loans typically start at 5 percent; VA loans often require nothing down.
  • Putting down less than 20 percent usually means paying mortgage insurance (PMI on conventional loans, MIP on FHA loans), which adds to your monthly bill.
  • Your credit score, debt-to-income ratio, and savings history affect which down payment amounts a lender will accept.
  • The down payment is separate from closing costs, which typically run 2 to 5 percent of the purchase price and are due at the same time.

How down payment size affects your monthly payment and total cost

A smaller down payment means a larger loan amount. On a $300,000 house at a 7 percent interest rate over 30 years, putting down 3 percent ($9,000) results in a monthly mortgage payment around $1,980. Putting down 20 percent ($60,000) results in a monthly payment around $1,595. The difference is roughly $385 per month — $4,620 per year.

But the trade-off is not just monthly payment. When you put down less than 20 percent on a conventional loan, your lender requires you to pay mortgage insurance (called PMI, or private mortgage insurance). This is an extra monthly fee — typically 0.5 to 1.5 percent of the loan amount per year — that protects the lender if you stop paying. On an FHA loan, the insurance is called MIP (mortgage insurance premium) and works similarly. This insurance stays on your bill until you have paid down the loan enough or refinance.

Over the life of the loan, a smaller down payment can cost you tens of thousands more in interest and insurance combined. But if you do not have $60,000 saved, a 3 or 5 percent down payment may be the only way to buy now rather than wait years to save.

What lenders look at when deciding what down payment to accept

Lenders do not just look at how much you can put down. They also check your credit score, your debt-to-income ratio (how much you already owe compared to what you earn), and your employment history. A borrower with a 750 credit score and stable income may get approved for a 3 percent down FHA loan. A borrower with a 620 credit score and recent job changes may be asked to put down 10 or 15 percent, or may not be approved at all.

Lenders also want to see that you have savings beyond the down payment. If you are putting down 5 percent on a $300,000 house, that is $15,000. But you also need cash for closing costs (typically $6,000 to $15,000 on that same house) and ideally a small emergency fund. Some lenders ask to see bank statements going back two or three months to confirm the money is yours and has been there a while — not borrowed from a friend the week before you applied.

The type of property matters too. A single-family home is easier to finance than a multi-unit building or a property that needs major repairs. A home in a strong real estate market is easier to finance than one in a declining area.

Down payment assistance programs and where to find them

If you cannot save a large down payment on your own, several programs exist to help. State housing finance agencies offer down payment assistance in most states — usually grants or low-interest loans that cover part or all of your down payment. The money comes from state or federal funds set aside for first-time homebuyers or low-to-moderate income households. You will need to meet income limits and sometimes complete a homebuyer education course.

Employer programs are another source. Some large employers offer down payment help as an employee benefit — typically $5,000 to $25,000 depending on the company and your tenure. Ask your human resources department whether your employer has a homebuying program.

Nonprofit organizations in your area may also offer down payment grants. The National Council of State Housing Agencies maintains a directory of state programs. Local community development corporations often know about grants and low-interest loans specific to your city or county.

The difference between down payment and closing costs

These are two separate amounts due at closing, and many first-time buyers confuse them. Your down payment is the portion of the purchase price you are paying in cash. Your closing costs are fees paid to the lender, title company, appraiser, inspector, and others involved in the transaction. Closing costs typically run 2 to 5 percent of the purchase price — on a $300,000 house, that is $6,000 to $15,000.

Closing costs include the loan origination fee, appraisal fee, title search and insurance, property survey, homeowners insurance, property taxes, and attorney fees (in some states). These are not optional — they are required to complete the purchase. Some lenders allow you to roll closing costs into the loan amount, which means you borrow the money instead of paying it upfront. This increases your total loan amount and your monthly payment.

When a larger down payment saves you money and when it does not

A larger down payment saves you money if you plan to stay in the house for many years. The interest you avoid by borrowing less compounds over time. On a $300,000 loan, the difference between 5 percent and 20 percent down can save you $100,000 or more in interest over 30 years. You also avoid mortgage insurance, which is another $100 to $300 per month depending on the loan size.

A larger down payment may not be worth it if you have high-interest debt elsewhere — credit cards, car loans, or personal loans. Paying off a credit card at 18 percent interest is usually smarter than putting extra cash toward a down payment when mortgage rates are 6 or 7 percent. Similarly, if you have a low emergency fund, keeping cash liquid is safer than locking it into a house.

Some borrowers also benefit from putting down less if they can invest the difference. If you have $60,000 saved and mortgage rates are 6 percent, but you could invest that money in a diversified portfolio earning 8 percent historically, the math might favor a smaller down payment — though this depends on your risk tolerance and investment skill.

How down payment size affects your offer in a competitive market

In a market where multiple offers are common, sellers often prefer buyers with larger down payments. A larger down payment signals financial stability and reduces the risk that the sale will fall through because the buyer cannot get financing. In a hot market, offering 15 or 20 percent down instead of 5 percent can make your offer more attractive, especially if the price is otherwise similar to competing offers.

However, a larger down payment does not may provide your offer will be accepted. The sale price, contingencies (like inspection and appraisal), and closing timeline matter too. A buyer offering 10 percent down with a fast closing and no inspection contingency may beat a buyer offering 20 percent down with multiple contingencies and a slow timeline.

Frequently Asked Questions

Can I borrow money for my down payment?

Most lenders do not allow you to borrow the down payment from another lender or credit card. They want to see that the money is yours and has been in your account for at least two months. Some lenders allow a gift from a family member, but you will need a signed letter stating it is a gift, not a loan, and that the family member does not expect repayment. Borrowed money typically disqualifies you.

What happens if I put down less than 3 percent?

Conventional loans generally do not go below 3 percent down. FHA loans go as low as 3.5 percent. Some state and local programs allow 1 or 2 percent down, but these are rare and usually limited to first-time buyers in specific income ranges. If you cannot save 3 percent, ask your lender about down payment assistance programs in your state.

Can I increase my down payment after I am approved?

Yes. If you save more money between approval and closing, you can put down more without reapplying. This reduces your loan amount and your monthly payment. Tell your lender as soon as you know the new amount so they can recalculate your loan and update your closing documents.

Does a larger down payment affect my interest rate?

Sometimes. A larger down payment can lower your interest rate slightly because the lender sees less risk. The difference is usually 0.25 to 0.5 percent, 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 the actual impact.

What if the house appraises for less than the purchase price?

If the appraisal comes in low, your down payment percentage increases automatically. If you agreed to pay $300,000 but the house appraises for $280,000, and you planned to put down 10 percent ($30,000), you are now putting down 10.7 percent. Some lenders require you to make up the difference in cash; others allow you to renegotiate the price with the seller or walk away from the deal.