The standard down payment is 20 percent of the home's purchase price, but most buyers put down less
A down payment is the cash you hand over at closing — the part of the purchase price you pay yourself rather than borrow. Twenty percent is the number you hear most often because it lets you avoid mortgage insurance and keeps your monthly payment lower. But "standard" does not mean required. Most first-time buyers put down between 3 and 10 percent. The lender sets the minimum based on the loan type and your credit score; the rest is your choice.
The down payment comes straight from your own money — savings, a gift from family, proceeds from selling another property. It does not come from the loan. The lender finances the rest, and you repay that over 15, 20, or 30 years with interest.
Key Takeaways
- Twenty percent down avoids mortgage insurance and is the most common target, but lenders allow as little as 3 percent for conventional loans and 0 percent for VA or USDA loans if you meet other requirements.
- Putting down less than 20 percent means you pay mortgage insurance (PMI on conventional loans, funding fees on government loans), which adds to your monthly cost.
- Your down payment amount affects your interest rate, monthly payment, and total loan cost — a larger down payment usually means a lower rate.
- Down payment money must come from your own savings, a family gift, or proceeds from selling property — not from borrowed funds.
How down payment size changes what you pay each month
The down payment directly shrinks the loan amount, which shrinks your monthly payment. On a $300,000 house, a 20 percent down payment ($60,000) means you borrow $240,000. A 5 percent down payment ($15,000) means you borrow $285,000 — a difference of $45,000 in borrowed money.
That $45,000 difference costs you roughly $240 to $300 more per month in principal and interest alone, depending on your interest rate and loan term. Add mortgage insurance on top of that, and the gap widens. A smaller down payment also often means a higher interest rate, because the lender sees you as higher risk.
The trade-off is simple: put down more cash now, pay less over time. Put down less cash now, keep more liquid savings but pay more over time. Which makes sense depends on your situation — whether you have other debts, whether you expect your income to rise, whether you have an emergency fund separate from your down payment savings.
Down payment minimums by loan type
| Loan Type | Minimum Down Payment | Mortgage Insurance Required |
|---|---|---|
| Conventional (standard bank loan) | 3 to 5 percent | Yes, if below 20 percent |
| FHA (Federal Housing Administration) | 3.5 percent | Yes, always |
| VA (Veterans Affairs) | 0 percent | No, but funding fee applies |
| USDA (rural properties) | 0 percent | No, but may provide fee applies |
A conventional loan is what most buyers use — a standard mortgage from a bank or lender. The minimum down payment is usually 3 to 5 percent, though some lenders require 10 percent. If you put down less than 20 percent, you pay PMI (private mortgage insurance), which protects the lender if you default. PMI typically costs 0.5 to 1.5 percent of your loan amount per year, added to your monthly payment. You can stop paying PMI once you reach 20 percent equity in the home.
An FHA loan is backed by the Federal Housing Administration and allows a 3.5 percent down payment. FHA loans always require mortgage insurance — you cannot avoid it even at 20 percent down. The insurance costs are usually lower than PMI on a conventional loan, but they stay for the life of the loan if you put down less than 10 percent.
A VA loan (for military members, veterans, and surviving spouses) requires zero down payment. Instead of mortgage insurance, you pay a one-time funding fee — typically 1.4 to 3.6 percent of the loan amount — which can be rolled into the loan itself. A USDA loan (for rural properties) also requires zero down and charges a may provide fee instead of insurance.
What happens if you cannot save 20 percent
Most buyers do not have 20 percent saved. If you have 5 to 10 percent, a conventional loan works fine — you pay PMI until you hit 20 percent equity, then it stops. If you have 3 to 5 percent, conventional still works, but PMI costs more. If you have less than 3 percent, FHA becomes the better option because the insurance is cheaper and the minimum down payment is lower.
Some employers, nonprofits, and state housing programs offer down payment help — grants or forgivable loans that do not have to be repaid. These are real money, not loans you owe back. The catch is that they usually come with income limits or are tied to buying in a specific area. Your lender or a local housing counselor can tell you what exists in your state.
Family gifts are another common source. The lender will ask where the money came from; you will need a letter from the family member stating it is a gift, not a loan. The gift does not have to be repaid, and it counts toward your down payment just like your own savings.
Why 20 percent became the standard
Twenty percent is the threshold where mortgage insurance disappears on a conventional loan. Lenders historically preferred 20 percent because it meant the buyer had real skin in the game — enough money at risk that they were unlikely to walk away. It also meant the lender's risk was lower, so interest rates were better.
That logic still holds, which is why 20 percent down gets you the lowest interest rate. But lending rules have loosened over decades, and lenders now routinely accept 3 to 5 percent down. The trade-off is that you pay insurance and often a slightly higher rate, but you can still buy a home.
The "standard" is really just the point where insurance stops. It is not a requirement, and treating it as one can keep you renting longer than necessary. If you have 5 or 10 percent saved and stable income, you can buy now and build equity instead of waiting years to hit 20 percent.
How your credit score affects the down payment you need
Lenders use your credit score to decide what down payment they will accept and what interest rate they will charge. A score above 740 on most conventional loans means you can put down as little as 3 percent. A score between 620 and 680 might require 10 percent down, and some lenders will not work with scores below 620 at all on a conventional loan.
FHA loans are more forgiving — they accept scores as low as 500 to 580, though the down payment and insurance costs are higher at lower scores. If your score is below 620, FHA or a credit union loan may be your only option, and you should expect to put down at least 3.5 percent.
Your score also affects your interest rate directly. A 20-point difference in your score can mean a 0.25 to 0.5 percent difference in your rate — which translates to $50 to $150 more per month on a $300,000 loan. If your score is borderline, spending a few months paying down debt or disputing errors on your credit report can save you thousands over the life of the loan.
Down payment assistance programs and where to find them
Many states, cities, and nonprofits run down payment help programs. These are grants or forgivable loans — money you do not have to pay back — aimed at first-time buyers or buyers in low-income areas. The rules vary wildly by location and program, so there is no single list, but a few places to start are your state housing finance agency, your city or county housing authority, and the National Council of State Housing Agencies website.
Some programs are tied to your income (you must earn below a certain amount), some to the property location (you must buy in a specific neighborhood or county), and some to your job (teachers, nurses, and other professions sometimes have their own programs). A few programs require you to take a homebuyer education course, which is free or low-cost and teaches you how mortgages work, how to budget for homeownership, and what to expect at closing.
Your lender can also point you toward programs — they work with these funds regularly and know which ones are currently open. A mortgage broker or a nonprofit housing counselor (often free through HUD) can search for programs you might not find on your own.
Frequently Asked Questions
Can I borrow money for my down payment?
No. Lenders require that down payment money come from your own savings, a family gift, or proceeds from selling property. If you borrow it — from a credit card, personal loan, or family member who expects repayment — the lender will find out and deny your mortgage. The lender runs a credit check and asks about your debts; a new loan will show up immediately.
What if I put down 15 percent instead of 20 percent?
You will pay PMI until you reach 20 percent equity. On a $300,000 house with a 15 percent down payment, that is about 5 years of PMI payments, depending on your loan term and how fast you pay down the principal. Once you hit 20 percent equity, you can request PMI removal in writing, and the lender must remove it.
Do I have to put down the same percentage as my friend or family member?
No. Your down payment is between you and your lender. It depends on your credit score, income, savings, and which loan type you choose. Someone with a 750 credit score might put down 3 percent; someone with a 640 score might need 10 percent. Both can buy the same house.
What if I have the money for 20 percent down but also have credit card debt?
Pay off the credit card debt first, then save for the down payment. Lenders look at your debt-to-income ratio — how much you owe compared to how much you earn. High credit card balances lower your ratio and can disqualify you or force you into a higher interest rate. A smaller down payment with no credit card debt is usually better than a larger down payment while carrying high-interest debt.
Can I use my 401k or IRA for a down payment?
You can withdraw from a traditional IRA penalty-free up to $10,000 in your lifetime for a first-time home purchase. A 401k has different rules — some plans allow loans against your balance, but you have to repay them. Withdrawing from retirement accounts early costs you decades of compound growth, so explore other options first. A family gift or down payment assistance program is usually cheaper in the long run.