Down payment amounts depend on the loan type and your financial situation
There is no single down payment amount that works for everyone. Most conventional loans require between 3% and 20% of the home's purchase price, but FHA loans can go as low as 3.5%, and VA loans may require 0% down if you are a may have access to veteran. The amount you put down affects your monthly payment, the interest rate you receive, and whether you pay mortgage insurance on top of your loan.
The down payment is the cash you bring to closing. If you buy a $300,000 house with a 10% down payment, you pay $30,000 upfront and borrow $270,000. The lender then holds a mortgage on the property until you pay back the loan. The larger your down payment, the smaller your loan and the less interest you pay over time—but you also need more cash available right now.
Key Takeaways
- Conventional loans typically require 3% to 20% down, while FHA loans allow 3.5% and VA loans may require nothing.
- Putting down less than 20% on a conventional loan means you will pay private mortgage insurance (PMI) until you reach 20% equity.
- Your down payment amount affects your interest rate, monthly payment, and total cost over the life of the loan.
- First-time buyers and those with lower credit scores often may have access to for loans with down payments below 10%.
- Down payment assistance programs exist through state housing agencies, nonprofits, and some employers, though they vary by location.
Conventional loans: 3% to 20% down
A conventional loan is a mortgage not backed by a government agency. Most conventional loans sold to Fannie Mae or Freddie Mac require a minimum down payment of 3%, though some lenders require 5% or more. If you put down less than 20%, you must pay private mortgage insurance (PMI), which protects the lender if you stop paying. PMI typically costs 0.5% to 1.5% of your loan amount per year, added to your monthly payment.
The advantage of a 3% down payment is that you need less cash upfront. The disadvantage is that your monthly payment includes PMI, and you owe more to the lender. Once you reach 20% equity in the home—either by paying down the loan or by the home appreciating in value—you can request that PMI be removed. Some lenders will remove it automatically once you hit 22% equity.
If you have a credit score above 740 and stable income, you have the best chance of approval with a low down payment. Lenders view you as lower risk and may offer you a better interest rate. If your score is lower or your income is variable, some lenders will still work with you but may require a larger down payment or charge a higher rate.
FHA loans: 3.5% down for first-time and repeat buyers
An FHA loan is backed by the Federal Housing Administration and is designed for buyers who cannot put down 20%. The minimum down payment is 3.5% of the purchase price. Like conventional loans, FHA loans require mortgage insurance, but it works differently: you pay an upfront mortgage insurance premium (UFMIP) at closing, usually 1.75% of the loan amount, plus an annual mortgage insurance premium (MIP) added to your monthly payment.
FHA loans allow lower credit scores—some lenders will work with scores as low as 580—and are open to both first-time and repeat buyers. You do not have to be a first-time buyer to use an FHA loan. The trade-off is that the total cost of the loan is higher because of the insurance premiums, and you cannot remove the insurance until you refinance into a conventional loan or pay off the mortgage.
FHA loans have limits on how much you can borrow, and these limits vary by county. In lower-cost areas, the limit might be around $420,000; in high-cost areas, it can exceed $1 million. Check your county's FHA loan limit before you start house hunting.
VA loans: 0% down for veterans and active-duty service members
If you are a veteran, active-duty service member, or surviving spouse of a service member, you may be able to get a VA loan with 0% down. VA loans are may provide by the Department of Veterans Affairs and do not require a down payment, PMI, or a minimum credit score (though most lenders set their own minimums, typically around 620). You do pay a VA funding fee at closing, which is usually 2.3% of the loan amount for first-time users, though it can be waived if you receive disability compensation.
To use a VA loan, you need a Certificate of may be able to access (COE) from the VA. You can request one through the VA website, by mail, or through your lender. The process takes a few days to a few weeks. VA loans are assumable, meaning if you sell the house, the buyer can take over your loan at the same interest rate—a valuable feature if rates rise.
USDA loans: 0% down in rural areas
If you are buying in a rural area and your income is below the area median, you may be able to get a USDA loan with 0% down. USDA loans are backed by the U.S. Department of Agriculture and are designed to help people buy homes in areas where conventional lending is limited. Like VA loans, USDA loans do not require PMI, but you do pay a may provide fee, usually around 2% of the loan amount.
USDA loans have income limits that vary by county and family size. A family of four in one county might may have access to at $90,000 annual income but not in a neighboring county. Check the USDA's property may be able to access map to see if your address qualifies, then contact a USDA-approved lender to learn your income limit.
How down payment size affects your monthly payment and total cost
A larger down payment lowers your monthly mortgage payment because you are borrowing less money. It also lowers your total interest paid over the life of the loan. On a $300,000 house at 7% interest over 30 years, the difference is significant:
| Down Payment | Loan Amount | Monthly Payment (Principal + Interest) | Total Interest Paid |
|---|---|---|---|
| 3% ($9,000) | $291,000 | ~$1,938 + PMI | ~$408,000 |
| 10% ($30,000) | $270,000 | ~$1,797 + PMI | ~$377,000 |
| 20% ($60,000) | $240,000 | ~$1,597 | ~$335,000 |
The monthly payment shown includes only principal and interest. With a 3% or 10% down payment, you also pay PMI, which can add $150 to $400 per month depending on the loan size and your credit score. Property taxes, homeowners insurance, and HOA fees (if applicable) are separate and added on top.
A 20% down payment eliminates PMI entirely, which is why many financial advisors recommend saving for it. However, if saving for 20% means waiting five more years to buy, and home prices are rising faster than you can save, a smaller down payment may make financial sense for your situation.
Down payment assistance and grants
Many state housing finance agencies, nonprofits, and some employers offer down payment assistance. These programs may provide grants (money you do not repay), forgivable loans (loans that disappear if you stay in the home for a set period), or second mortgages with favorable terms. The programs vary widely by state and sometimes by city.
To find programs in your area, contact your state housing finance agency or search the National Council of State Housing Agencies website. Some programs are limited to first-time buyers, some to low-income households, and some to specific professions like teachers or healthcare workers. A few programs have no income limit but require you to complete a homebuyer education course.
Down payment assistance does not change the fact that you need to may have access to for the mortgage itself. The lender still checks your credit, income, and debt-to-income ratio. Assistance only helps you cover the down payment; it does not lower the lender's standards for approval.
Frequently Asked Questions
Can I borrow the down payment from family or a friend?
Yes, but the lender needs to know about it. Most lenders require a gift letter stating that the money is a gift, not a loan you have to repay. If it is a loan, you must disclose it as a debt, which increases your debt-to-income ratio and may lower the amount you can borrow. The gift letter must be signed by the person giving you the money and state that they do not expect repayment.
What if I do not have enough for the down payment yet?
You can save longer, look for down payment assistance programs in your area, or consider an FHA or USDA loan that requires less down. Some employers offer down payment help as part of their benefits package. You can also explore whether a co-borrower (spouse, parent, or other family member) can help you may have access to for a larger loan.
Does a larger down payment get me a better interest rate?
Usually yes, but not always. Lenders price interest rates based on the loan-to-value ratio (how much you are borrowing compared to the home's value), your credit score, and current market rates. A 20% down payment typically gets a better rate than 3% down, but the difference may be only 0.25% to 0.5%. Ask your lender for rate quotes at different down payment levels to see the actual difference.
What happens if the home appraises for less than the purchase price?
If the appraisal comes in low, you have a few options: renegotiate the price with the seller, increase your down payment to make up the difference, or walk away if your offer included an appraisal contingency. If you increase your down payment, you will need more cash at closing. If you walk away, you may lose your earnest money deposit depending on your contract terms.
Can I put down more than 20% to avoid PMI?
Yes. Putting down 25%, 30%, or more eliminates PMI and lowers your monthly payment further. The trade-off is that you have less cash available for other needs like emergencies, home repairs, or investments. There is no tax or financial benefit to putting down more than 20%, so the decision depends on your personal situation and how much cash you have on hand.