The down payment you need depends on the loan type, not a single rule

There is no single down payment amount required to buy a house. The amount you put down depends on which loan program you use, your credit profile, and the property itself. Conventional loans typically ask for 3 to 20 percent of the purchase price. Federal Housing Administration (FHA) loans allow as little as 3.5 percent down. Veterans Affairs (VA) loans and United States Department of Agriculture (USDA) loans in rural areas often require zero down. The lender you choose, not the market, sets the floor.

The down payment you make affects how much you borrow, what your monthly payment will be, and whether you pay mortgage insurance on top of your loan. A larger down payment means a smaller loan, lower monthly payments, and no mortgage insurance. A smaller down payment means you borrow more, pay more each month, and almost certainly pay mortgage insurance until you reach 20 percent equity in the home.

Key Takeaways

  • Conventional loans typically require 3 to 20 percent down, with 20 percent eliminating mortgage insurance.
  • FHA loans allow down payments as low as 3.5 percent and accept lower credit scores, but add mortgage insurance to your monthly payment.
  • VA and USDA loans may require zero down if you meet the program requirements, but availability depends on your military service or property location.
  • The down payment you choose affects your monthly payment, total interest paid, and whether you pay mortgage insurance for years.
  • Saving more for a down payment before you buy reduces the total cost of borrowing, but you do not need 20 percent to get approved.

Conventional loans and the 20 percent benchmark

Conventional loans are mortgages not backed by a federal agency. They come from banks, credit unions, and mortgage companies. Most conventional lenders will approve a loan with 3 percent down, though some require 5 or 10 percent. The 20 percent figure is a threshold, not a requirement: if you put down 20 percent or more, the lender does not require you to carry private mortgage insurance (PMI).

PMI protects the lender if you stop paying. It is not insurance for you. When you put down less than 20 percent on a conventional loan, the lender adds PMI to your monthly payment—typically 0.5 to 1.5 percent of the loan amount per year, divided into monthly installments. On a $300,000 loan with 10 percent down, PMI might add $150 to $375 per month. You pay this until you reach 20 percent equity in the home, which takes years.

Your credit score affects whether a lender will accept a low down payment. Most conventional lenders want a credit score of 620 or higher to approve a loan with less than 10 percent down. If your score is below 620, you may need to save more for a larger down payment or look at FHA loans instead.

FHA loans for buyers with lower down payments or credit scores

The Federal Housing Administration does not lend money directly. Instead, it insures loans made by banks and mortgage companies, which means the government backs the loan if you default. This insurance allows lenders to accept lower down payments and lower credit scores than conventional loans do.

FHA loans allow down payments as low as 3.5 percent of the purchase price. The credit score requirement is typically 580 or higher, though some lenders accept scores as low as 500 if you put down 10 percent. FHA loans also have more flexible debt-to-income ratios, meaning you can carry more existing debt and still be approved.

The trade-off is mortgage insurance. FHA loans require both an upfront mortgage insurance premium (paid at closing or rolled into the loan) and an annual mortgage insurance premium added to your monthly payment. Unlike conventional PMI, FHA mortgage insurance does not disappear once you reach 20 percent equity. If you put down less than 10 percent, you pay it for the life of the loan. If you put down 10 percent or more, it drops off after 11 years.

VA and USDA loans with zero down

If you served in the military, a VA loan may let you buy a home with zero down. The Department of Veterans Affairs guarantees these loans, so lenders accept no down payment and no PMI. You pay a funding fee at closing (typically 1.4 to 3.6 percent of the loan amount, depending on your service branch and down payment), but no monthly mortgage insurance.

VA loans do not have a credit score minimum set by the VA itself, though individual lenders typically require 580 or higher. You must have a Certificate of may be able to access from the VA, which you can request through the VA website or through your lender. The loan amount is limited by county, and the property must be your primary residence.

USDA loans are for rural properties and are backed by the United States Department of Agriculture. They also allow zero down and no PMI. You pay a may provide fee at closing and an annual fee added to your mortgage payment. Income limits apply—you must earn no more than 115 percent of the median income for your county—and the property must be in a designated rural area.

How your down payment size affects your total cost

The down payment you choose ripples through every payment you make. On a $300,000 home at 7 percent interest over 30 years, putting down 3 percent ($9,000) means borrowing $291,000. Adding PMI of $200 per month, your total monthly payment is roughly $1,935. Putting down 20 percent ($60,000) means borrowing $240,000 with no PMI, and your monthly payment is roughly $1,596. The difference is $339 per month, or $4,068 per year.

Over 30 years, that $51,000 difference in down payment saves you roughly $122,000 in total payments and interest. However, that math assumes you keep the home for 30 years and that the money you did not put down earns nothing. In reality, if you invest the $51,000 difference at a modest return, the calculation shifts. The point is that a larger down payment costs you less in the long run, but you do not need to wait until you have 20 percent saved to buy.

The timing of your purchase also matters. If you buy now with 5 percent down and the home appreciates, you build equity faster. If you wait two years to save 20 percent and prices rise, you may need to save even more. There is no universal right answer—it depends on your local market, your job stability, and your financial goals.

What happens if you cannot save a large down payment

You do not need to wait until you have saved 20 percent. FHA loans at 3.5 percent down, conventional loans at 3 percent down, and VA or USDA loans at zero down are all real paths to homeownership. The cost is mortgage insurance or a funding fee, which adds to your monthly payment. Over time, as you build equity and your home appreciates, you can refinance to remove the insurance.

Some first-time buyer programs offer down payment help. These come from nonprofits, state housing agencies, and local governments. They may offer grants (money you do not repay), forgivable loans (loans that disappear if you stay in the home), or second mortgages at favorable terms. These programs vary by location and income level. Your lender or a local housing counselor can tell you what is available in your area.

Saving for a down payment while you rent is hard. If you are ready to buy and have saved 3 to 5 percent, you have enough to start. The mortgage insurance or funding fee you pay is real money, but it is the cost of buying sooner rather than waiting years to save more.

Frequently Asked Questions

Do I need 20 percent down to get approved for a mortgage?

No. Most lenders approve conventional loans with 3 to 10 percent down. FHA loans go as low as 3.5 percent. VA and USDA loans require zero down if you meet the program requirements. The 20 percent figure is the point at which you avoid mortgage insurance, not the minimum to be approved.

What is the difference between a down payment and a closing cost?

The down payment is the money you put toward the purchase price. Closing costs are separate fees for the loan itself—appraisal, title search, underwriting, attorney fees—and typically run 2 to 5 percent of the loan amount. You need to save for both.

Can I use a gift or loan from family for my down payment?

Most lenders allow gift money from family members. You typically need a signed letter stating it is a gift, not a loan. Borrowed money from family usually cannot be used because it increases your debt-to-income ratio. Ask your lender what documentation they need before you accept money from anyone.

If I put down 5 percent, when does the mortgage insurance go away?

On a conventional loan, PMI drops off once you reach 20 percent equity through a combination of payments and home appreciation. You can also request removal once you hit 20 percent. On an FHA loan with less than 10 percent down, mortgage insurance lasts the life of the loan. With 10 percent or more down on FHA, it drops after 11 years.

Should I wait to save 20 percent or buy now with a smaller down payment?

That depends on your local market, job stability, and how long you plan to stay. If prices are rising faster than you can save, buying now with PMI may cost less overall than waiting. If your income is unstable or you might move within five years, waiting may make sense. A mortgage lender or housing counselor can run the numbers for your situation.