Down payment amounts vary by loan type, not by a fixed rule
There is no single down payment amount required for every home purchase. The amount you need depends on the type of loan you are getting, the lender's rules, and sometimes your credit score. Conventional loans often require 3% to 20% of the home's purchase price. FHA loans (backed by the Federal Housing Administration) typically require 3.5%. VA loans (for military members and veterans) often require 0% down. USDA loans (for rural properties) also often require 0% down.
The lower your down payment, the higher your monthly mortgage payment will be, because you are borrowing more money. You will also pay private mortgage insurance (PMI) if your down payment is less than 20% on a conventional loan—an extra monthly cost that protects the lender if you stop paying. Understanding what each loan type requires helps you figure out what you can actually afford to put down.
Key Takeaways
- Conventional loans require 3% to 20% down; FHA loans require 3.5%; VA and USDA loans often require 0% down.
- Putting down less than 20% on a conventional loan means paying PMI, which adds to your monthly mortgage cost.
- Your credit score, debt-to-income ratio, and savings history affect whether a lender will accept a lower down payment.
- The down payment is separate from closing costs, which typically run 2% to 5% of the home price and are due at closing.
- Saving a larger down payment reduces your loan amount, monthly payment, and total interest paid over the life of the loan.
Conventional loans: 3% to 20% down, depending on your profile
A conventional loan is a mortgage not backed by a government agency. Most conventional loans require a minimum down payment of 3%, though some lenders require 5% or more. If you put down less than 20%, you will pay PMI on top of your regular mortgage payment. PMI typically costs 0.5% to 1% of your loan amount per year, split into monthly payments.
Lenders decide whether to accept a 3% down payment based on your credit score, income, and debt-to-income ratio (how much you already owe compared to what you earn). A score of 620 or higher usually qualifies you for a conventional loan, but scores of 740 and above get better interest rates and may may have access to for lower down payments. If your credit is lower or your debt is high, a lender may require 10% or 15% down instead of 3%.
Putting down 20% or more eliminates PMI entirely and gives you the best interest rates. However, if you have the cash for 20% down but could invest it elsewhere, putting down 5% or 10% and keeping the rest in savings may make financial sense—especially if mortgage rates are low.
FHA loans: 3.5% down, designed for first-time buyers
FHA loans are backed by the Federal Housing Administration and are designed for buyers with lower credit scores or smaller down payments. The minimum down payment is 3.5% of the purchase price. You do not need to be a first-time buyer to use an FHA loan, but most FHA borrowers are.
FHA loans require mortgage insurance, but it works differently than PMI on conventional loans. You pay an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount at closing, and then an annual mortgage insurance premium (MIP) split into monthly payments. The annual MIP typically ranges from 0.55% to 0.80% of your loan amount per year, depending on your down payment and loan term.
FHA loans accept credit scores as low as 580 (though some lenders require 620). The trade-off is that you pay mortgage insurance for the life of the loan if your down payment is less than 10%. If you put down 10% or more on an FHA loan, you can remove the mortgage insurance after 11 years of payments.
VA and USDA loans: 0% down for may be able to access borrowers
VA loans are available to active-duty military members, veterans, and surviving spouses. They require 0% down payment. You do not pay PMI or mortgage insurance. Instead, you pay a one-time VA funding fee (typically 1.4% to 3.6% of the loan amount), which can be rolled into your loan balance so you do not pay it upfront.
USDA loans are for rural properties and are available to borrowers with low to moderate income who cannot get conventional financing. They also require 0% down and do not charge PMI. You pay an upfront may provide fee (1% of the loan amount) and an annual fee (0.35% of the loan balance), both of which can be rolled into the loan.
Both VA and USDA loans have income limits or property location requirements, but if you meet them, the 0% down payment option makes homeownership possible without years of saving. VA loans have no income limit; USDA loans do, and the limit varies by county.
Down payment versus closing costs: two separate expenses
Your down payment is only part of what you owe at closing. Closing costs are separate fees for the loan itself and typically run 2% to 5% of the home's purchase price. These include appraisal fees, title insurance, attorney fees, recording fees, and lender fees. On a $300,000 home, closing costs might be $6,000 to $15,000.
Some loans allow you to roll closing costs into your loan balance, but others require you to pay them in cash at closing. Ask your lender upfront which costs are required in cash and which can be financed. Some sellers will pay part of your closing costs as part of the purchase agreement, which can reduce what you owe at closing.
Budget for both the down payment and closing costs when you are saving. If you are putting down 3% and closing costs are 3%, you need 6% of the purchase price in cash before you can close on the home.
How down payment size affects your monthly payment and total cost
A larger down payment directly lowers your monthly mortgage payment because you are borrowing less money. On a $300,000 home at 7% interest over 30 years, the difference is significant:
| Down Payment | Loan Amount | Monthly Payment (Principal + Interest) | PMI (if applicable) |
|---|---|---|---|
| 3% ($9,000) | $291,000 | ~$1,938 | ~$145/month |
| 10% ($30,000) | $270,000 | ~$1,797 | ~$135/month |
| 20% ($60,000) | $240,000 | ~$1,596 | $0 |
Over 30 years, putting down 20% instead of 3% saves you roughly $100,000 in total interest and PMI payments. However, the money you use for a larger down payment cannot be invested or used for emergencies. If you have high-interest debt (credit cards, car loans), paying that down first often makes more financial sense than saving for a larger down payment.
What lenders look at when deciding your down payment
Lenders do not just look at how much you can put down; they look at whether you can afford the monthly payment and whether you are a safe bet to repay the loan. Your debt-to-income ratio (DTI) is the total of all your monthly debt payments divided by your gross monthly income. Most lenders want your DTI to be 43% or lower, though some FHA lenders accept up to 50%.
Your credit score affects both whether you may have access to and what down payment the lender will accept. A score of 740 or higher typically qualifies you for the best rates and lowest down payment requirements. A score between 620 and 680 may require a higher down payment or higher interest rate. Below 620, conventional loans are usually not available; FHA loans are your option.
Lenders also look at your savings history and employment. If you have been saving consistently and have been at your job for at least two years, lenders see you as lower risk. If you just received a large inheritance or gift for your down payment, the lender may require documentation that it is a gift and not a loan you have to repay.
Frequently Asked Questions
Can I borrow my down payment from someone else?
You can receive a gift for your down payment, but it must be a true gift with no expectation of repayment. The lender will require a signed gift letter from the person giving you the money, stating the amount and that it does not need to be repaid. You cannot borrow the down payment as a loan, because that increases your debt and your DTI ratio.
What happens if I put down less than 3%?
Conventional loans do not go below 3% down. If you cannot save 3%, your options are FHA loans (3.5% down), VA loans (0% down if you are may be able to access), or USDA loans (0% down if you are may be able to access and buying in a rural area). Some lenders offer "bank portfolio" loans with 1% or 2% down, but they are rare and have higher interest rates.
Can I remove PMI after I pay it for a while?
Yes, but the rules depend on your loan type. On a conventional loan, you can request PMI removal once you have paid the loan down to 80% of the home's original value (or 20% equity). On an FHA loan, you can remove PMI after 11 years if you put down 10% or more; if you put down less than 10%, you pay it for the life of the loan.
Should I put down as much as possible?
Not always. If you have high-interest debt, an emergency fund of less than three months of expenses, or investment opportunities with higher returns than your mortgage rate, putting down less and keeping cash in savings may be smarter. A financial advisor can help you decide based on your specific situation.
Do I need to show proof that I have saved the down payment?
Yes. Lenders require bank statements from the past 60 days showing that you have the down payment and closing costs available. If the money came from a gift, you need a gift letter. If it came from selling an asset, you may need documentation of the sale.