Down payment amounts vary by loan type, not by a fixed rule

There is no single down payment amount required for every first-time buyer. The amount you need depends on which loan program you use, your credit score, and the purchase price of the home. Conventional loans typically require 3% to 20% down. Federal Housing Administration (FHA) loans allow as little as 3.5% down. VA loans and USDA loans, if you meet their requirements, may require 0% down.

The lower your down payment, the more you borrow and the higher your monthly payment becomes. A smaller down payment also means you will pay private mortgage insurance (PMI) — an extra monthly cost that protects the lender if you stop paying. PMI typically costs 0.5% to 1.5% of your loan amount per year, though the exact rate depends on your credit score and how much you put down.

Your lender will tell you the exact down payment options available to you once you provide your income, credit report, and the home price. This conversation happens during the pre-approval process, before you make an offer on a house.

Key Takeaways

  • Conventional loans require 3% to 20% down; FHA loans require 3.5% down; VA and USDA loans may require nothing down if you meet program rules.
  • The lower your down payment, the more you borrow and the more you pay in interest over the life of the loan.
  • Down payments below 20% on conventional loans trigger PMI, which adds to your monthly payment until you reach 20% equity in the home.
  • Your credit score, debt-to-income ratio, and savings affect which down payment options your lender will offer you.
  • Pre-approval from a lender shows you the exact down payment amounts you can afford and what your monthly payment will be.

How down payment size affects your monthly payment

A larger down payment lowers the amount you borrow, which directly lowers your monthly mortgage payment. On a $300,000 home with a 30-year loan at 7% interest, putting 3% down means borrowing $291,000; putting 20% down means borrowing $240,000. The difference in monthly payment (before taxes and insurance) is roughly $430 per month.

The trade-off is immediate: money in your down payment is money you cannot use for closing costs, home repairs, or emergencies. Many first-time buyers choose a smaller down payment to preserve cash for these expenses, then pay PMI for a few years until they build equity.

Use a mortgage calculator to see how different down payment amounts change your monthly payment. Enter the home price, interest rate, and loan term to compare 3%, 5%, 10%, and 20% scenarios. This shows you what you can actually afford to pay each month, not just what a lender will approve.

Conventional loans: 3% to 20% down

A conventional loan is a mortgage not backed by a federal agency. Most conventional loans require a minimum down payment of 3%, though some lenders require 5% or more. Your credit score, debt-to-income ratio, and savings history determine which down payment options a lender will offer you.

If you put down less than 20%, you pay PMI. The PMI payment stays on your loan until you reach 20% equity in the home — either by paying down the principal or by the home's value increasing. Once you hit 20% equity, you can request PMI removal by contacting your lender; some lenders remove it automatically.

Conventional loans typically have stricter credit and income requirements than FHA loans. Most lenders want a credit score of 620 or higher, though scores of 740 and above get better interest rates. Your debt-to-income ratio (total monthly debt payments divided by gross monthly income) usually cannot exceed 43%.

FHA loans: 3.5% down with mortgage insurance for the life of the loan

An FHA loan is backed by the Federal Housing Administration and is designed for first-time buyers and people with lower credit scores. FHA loans require a minimum down payment of 3.5% and allow credit scores as low as 500, though most lenders prefer 580 or higher.

FHA loans require two forms of mortgage insurance: an upfront payment at closing (called the upfront mortgage insurance premium, or UFMIP) and a monthly payment (called the annual mortgage insurance premium, or AMIP). The upfront cost is typically 1.75% of the loan amount and is often rolled into your loan. The monthly cost varies but averages 0.5% to 0.8% of your loan amount per year.

Unlike conventional loans, FHA mortgage insurance does not go away when you reach 20% equity. If your down payment is less than 10%, you pay mortgage insurance for the entire 30-year loan. If you put down 10% or more, you pay it for at least 11 years. This makes FHA loans more expensive over time, but the low down payment requirement makes them accessible to buyers with limited savings.

VA loans and USDA loans: 0% down if you may have access to

A VA loan is available to active-duty military, veterans, and surviving spouses. VA loans require 0% down and do not require PMI. You pay a one-time VA funding fee (typically 1.4% to 3.6% of the loan amount) at closing, which can be rolled into your loan. VA loans have no credit score minimum, though most lenders require 620 or higher.

A USDA loan is available to buyers in rural areas who meet income limits. USDA loans also require 0% down and do not require PMI. You pay a one-time may provide fee at closing (typically 2% of the loan amount) and an annual fee (0.35% of the loan amount per year). USDA loans have no credit score minimum, though most lenders require 620 or higher.

Both programs have strict may be able to access rules. VA loans require a Certificate of may be able to access from the Department of Veterans Affairs. USDA loans require the property to be in a designated rural area and your household income to fall below the area's limit. Check the USDA website or ask a lender whether your address and income may have access to.

Saving for a down payment: what to set aside

Your down payment is only one cost at closing. You also pay closing costs, which typically range from 2% to 5% of the home price. Closing costs include appraisal fees, title insurance, attorney fees, and lender fees. On a $300,000 home, closing costs might be $6,000 to $15,000.

Plan to save for both your down payment and closing costs before you start house hunting. Some lenders allow you to roll closing costs into your loan, but this increases your monthly payment and the total interest you pay. Some down payment assistance programs cover closing costs, but availability varies by state and income.

After closing, set aside money for immediate repairs and maintenance. Most lenders require a home inspection before they approve your loan; if the inspection finds problems, you may need cash to fix them before closing. Budget an additional 1% to 2% of the home price for repairs in the first year.

How your credit score and debt affect down payment options

Your credit score determines which down payment options a lender will offer you. A score of 740 or higher typically qualifies you for the lowest interest rates and the smallest down payment requirements. A score between 620 and 680 may limit you to 5% or 10% down on conventional loans, or push you toward FHA loans with their higher insurance costs.

Your debt-to-income ratio also matters. This is your total monthly debt payments (car loans, credit cards, student loans, child support) divided by your gross monthly income. Most lenders cap this at 43%, though some allow up to 50% if you have a large down payment or high credit score. A high debt-to-income ratio may require you to put down more money to offset the lender's risk.

Before you start house hunting, check your credit report for errors and pay down high credit card balances. Even a small improvement in your credit score can lower your interest rate and expand your down payment options. You can request a free credit report once per year from annualcreditreport.com.

Frequently Asked Questions

Can I borrow my down payment from family or friends?

Most lenders allow down payment gifts from family members, but they require a signed letter stating the money is a gift, not a loan. Some lenders require the gift-giver to have a bank account and proof the money has been in their account for at least two months. Ask your lender for their gift letter requirements before accepting money from family.

What if I don't have enough saved for a down payment?

Down payment assistance programs exist in most states and counties, though may be able to access and amounts vary. Some programs offer grants (money you don't repay); others offer forgivable loans (loans that disappear if you stay in the home for a set time). Contact your local housing authority or search the HUD website for programs in your area.

Does a larger down payment always mean a better interest rate?

Usually, yes. Lenders offer lower interest rates to borrowers who put down 20% or more because the lender's risk is lower. However, the difference between 3% and 5% down may be only 0.1% to 0.2% in interest rate. Compare offers from multiple lenders to see the exact rate for your down payment amount.

What happens if the home's value drops after I buy it?

If you put down less than 20% and the home's value drops, you may owe more than the home is worth. You still pay your full mortgage payment and PMI, even if the home is underwater. This is why PMI protects the lender, not you — it covers the lender's loss if you stop paying and they have to sell the home.

Can I pay off PMI early?

Yes. Once you reach 20% equity in the home, you can request PMI removal from your lender. You can reach 20% equity faster by making extra principal payments, or by waiting for the home's value to increase. Some lenders remove PMI automatically once you hit 20% equity; others require you to request it in writing.