The down payment amount depends on your loan type and credit profile, not a single rule

There is no single "recommended" down payment that works for everyone. A conventional loan from a bank might ask for 20 percent of the home price, but an FHA loan can close with 3.5 percent down, and a VA loan (if you may have access to) requires zero down. The amount you put down affects your monthly payment, how much interest you pay over time, and whether you'll owe mortgage insurance on top of your loan.

The real question is not what you should put down, but what you can afford to put down while keeping enough cash for closing costs, inspections, and emergencies after you buy. A larger down payment lowers your monthly bill and saves you money on interest, but it also means less money in your pocket right now.

Key Takeaways

  • Conventional loans typically require 3 to 20 percent down, with 20 percent eliminating mortgage insurance but not required to get approved.
  • FHA loans allow down payments as low as 3.5 percent and are designed for first-time buyers with lower credit scores.
  • VA loans (for military members and veterans) and USDA loans (for rural properties) may require zero down payment.
  • Putting down less than 20 percent on a conventional loan means you'll pay mortgage insurance (PMI) until you reach 20 percent equity.
  • Your down payment is separate from closing costs, which typically run 2 to 5 percent of the home price and come due at signing.

How down payment size changes your monthly payment and total cost

A larger down payment directly lowers the amount you borrow. On a $300,000 home at a 7 percent interest rate over 30 years, putting down 10 percent ($30,000) means borrowing $270,000. Putting down 20 percent ($60,000) means borrowing $240,000. The difference in monthly payment is roughly $150 to $200 depending on your exact rate.

Over 30 years, that $30,000 difference in principal saves you tens of thousands in interest. But that calculation only matters if you have $30,000 sitting unused. If putting down 20 percent means draining your savings and having no emergency fund, a smaller down payment with mortgage insurance is often the smarter move. You can always pay extra toward principal later when your income rises or you have more cash on hand.

Conventional loans: the 20 percent benchmark and what happens below it

Conventional loans are mortgages sold to Fannie Mae or Freddie Mac, the government-sponsored enterprises that buy loans from banks. These loans do not require a specific down payment, but the amount you put down determines whether you pay mortgage insurance (PMI).

If you put down 20 percent or more, you avoid PMI entirely. If you put down less than 20 percent, the lender adds PMI to your monthly payment—typically 0.5 to 1.5 percent of the loan amount per year, divided into 12 monthly payments. On a $240,000 loan, PMI might add $100 to $300 per month. You stop paying PMI once you reach 20 percent equity in the home (either through payments or home appreciation), though you may need to request removal formally.

Conventional loans with down payments below 10 percent are harder to find and may come with higher interest rates. Most lenders will approve 5 to 10 percent down if your credit score is 680 or above and your debt-to-income ratio is reasonable. Some lenders offer 3 percent down conventional loans, but these are less common and usually require a higher credit score (740+).

FHA loans: designed for lower down payments and lower credit scores

An FHA loan is insured by the Federal Housing Administration and allows down payments as low as 3.5 percent. These loans are popular with first-time buyers because they accept credit scores as low as 580 (conventional loans usually want 620 or higher) and are more forgiving of past financial trouble.

The tradeoff is that FHA loans require mortgage insurance for the life of the loan if you put down less than 10 percent. If you put down 10 percent or more, mortgage insurance drops off after 11 years. The insurance premium is built into your monthly payment and typically costs 0.55 to 0.8 percent of the loan amount per year. On a $240,000 FHA loan, expect $110 to $160 per month for insurance alone.

FHA loans also cap the price of the home you can buy (limits vary by county) and require a home inspection and appraisal before closing. The inspection is to protect you; the appraisal is to protect the lender.

VA and USDA loans: zero down payment options for specific borrowers

If you are a military member, veteran, or surviving spouse, a VA loan requires no down payment and no mortgage insurance. You pay a one-time funding fee (typically 1.4 to 3.6 percent of the loan amount) rolled into your mortgage, but no monthly insurance premium. VA loans are available through most lenders and have no income limits or credit score minimums, though most lenders still want a score of 620 or above.

A USDA loan is for rural properties and is available to borrowers with low to moderate income who cannot get conventional financing. USDA loans also require zero down payment and no mortgage insurance, though you pay a may provide fee (similar to VA funding fee) rolled into the loan. USDA loans have income limits that vary by county and property location.

Both VA and USDA loans move slower than conventional loans because they involve additional government review. Closing typically takes 45 to 60 days instead of 30 to 45 days.

Down payment versus closing costs: two separate expenses

Your down payment is not the only money due at closing. Closing costs typically run 2 to 5 percent of the home price and cover the lender's fees, title insurance, appraisal, inspection, property taxes, homeowners insurance, and attorney fees. On a $300,000 home, closing costs might be $6,000 to $15,000.

Some of these costs can be rolled into your loan (the lender will tell you which ones), but most buyers pay them out of pocket at signing. Budget for both your down payment and closing costs before you start house hunting. If you have $40,000 saved and the home costs $300,000, putting 10 percent down ($30,000) leaves only $10,000 for closing costs—likely not enough. A 5 percent down payment ($15,000) leaves $25,000 for closing, which is more realistic.

How to decide what down payment makes sense for your situation

Start by calculating what you can afford to put down without emptying your savings. Most financial advisors suggest keeping three to six months of living expenses in an emergency fund after you buy. If your monthly expenses are $4,000, that means $12,000 to $24,000 should stay in the bank.

Next, add up closing costs. Call a lender and ask for a Loan Estimate, which shows all fees and closing costs for your specific loan type and amount. Subtract that from your down payment budget. What remains is what you can safely put down.

Then compare the monthly payment and total interest cost across different down payment amounts. A mortgage calculator (available free from most lenders) will show you the difference between 5 percent, 10 percent, and 20 percent down. If the difference in monthly payment is $200 and you can afford it, a larger down payment may make sense. If it stretches your budget, a smaller down payment with mortgage insurance is fine—you can pay extra principal later.

Frequently Asked Questions

Is 20 percent down required to get a mortgage?

No. Most lenders approve mortgages with 3 to 10 percent down. Twenty percent eliminates mortgage insurance, which saves money over time, but it is not required. FHA loans go as low as 3.5 percent, and VA and USDA loans require zero down.

What happens if I put down less than 20 percent?

You will pay mortgage insurance (PMI on conventional loans, MIP on FHA loans) as part of your monthly payment. This insurance protects the lender if you default. On conventional loans, PMI stops once you reach 20 percent equity. On FHA loans with less than 10 percent down, it continues for the life of the loan.

Can I borrow money for my down payment?

Most lenders require that your down payment come from your own savings or a gift from a family member. Borrowing from a credit card, personal loan, or family member with a written repayment plan usually disqualifies you because it increases your debt-to-income ratio. Ask your lender about their specific rules before you borrow.

Should I put down as much as possible to save on interest?

Not necessarily. If putting down 20 percent leaves you with no emergency fund, a smaller down payment with mortgage insurance is safer. You can always pay extra toward principal once you have stable income and savings. The monthly payment matters more than the total interest if it means you can afford to stay in the home.

Do I need to put down the same amount on a second home or investment property?

No. Investment properties and second homes typically require larger down payments—often 15 to 25 percent—and have higher interest rates than primary residences. Ask your lender what they require for the type of property you are buying.