Down payment amounts vary by loan type, not by whether you are buying your first home

There is no single down payment requirement for first-time buyers. Instead, the amount depends on which loan program you use: conventional loans, FHA loans, VA loans, and USDA loans each have their own minimums. A conventional loan typically requires 3 to 20 percent down. An FHA loan requires 3.5 percent down. VA and USDA loans can require zero percent down if you meet their specific requirements.

The term "first-time buyer" matters mainly for tax deductions and down payment assistance programs, not for the down payment itself. Lenders care about your credit score, debt-to-income ratio, and savings history far more than whether this is your first purchase. A first-time buyer with a 620 credit score and a conventional loan will face different terms than a repeat buyer with the same score.

Your actual down payment will be the amount you can afford to save plus any down payment assistance you receive from your state, county, or nonprofit. The minimum your lender requires is a floor, not a target.

Key Takeaways

  • Conventional loans require 3 to 20 percent down; FHA loans require 3.5 percent; VA loans require zero percent if you have a Certificate of may be able to access; USDA loans require zero percent if you buy in a may have access to rural area.
  • Putting down less than 20 percent on a conventional loan means you will pay private mortgage insurance (PMI) until you reach 20 percent equity, which adds to your monthly payment.
  • Down payment assistance programs exist in most states and can cover part or all of your down payment, but they have income limits and may require you to take a homebuyer education course.
  • Your lender will verify your down payment came from your own savings or a gift, not from a loan, so borrowed money does not count.
  • Closing costs (typically 2 to 5 percent of the home price) are separate from your down payment and must be paid at signing.

Conventional loans: 3 to 20 percent down

A conventional loan is a mortgage not backed by a federal agency. Most conventional loans require a minimum down payment of 3 percent, though some lenders require 5 or 10 percent. The higher your down payment, the lower your interest rate will typically be and the smaller your monthly payment.

If you put down less than 20 percent, you must pay private mortgage insurance (PMI). This is an insurance policy that protects the lender if you stop paying. PMI typically costs 0.5 to 1.5 percent of your loan amount per year, added to your monthly mortgage payment. For a $300,000 loan with 5 percent down, PMI might add $150 to $400 per month. You can remove PMI once you reach 20 percent equity in the home, either through payments or home appreciation, though this usually takes 5 to 10 years.

Your credit score affects whether a lender will accept a 3 percent down payment. Most lenders require a score of at least 620 for a 3 percent down conventional loan, and 640 or higher for the best rates. If your score is below 620, you may need to put down more or use an FHA loan instead.

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

An FHA loan is backed by the Federal Housing Administration and is designed for buyers who cannot save a large down payment or have lower credit scores. The minimum down payment is 3.5 percent. FHA loans accept credit scores as low as 580, though 620 or higher gets better rates.

FHA loans require two forms of mortgage insurance: an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP). The UFMIP is typically 1.75 percent of your loan amount and is rolled into your loan balance. The MIP is added to your monthly payment and varies based on your down payment and loan term, but usually ranges from 0.4 to 0.9 percent per year. Unlike conventional PMI, FHA mortgage insurance does not go away when you reach 20 percent equity. You pay it for the life of the loan if you put down less than 10 percent.

FHA loans have limits on how much you can borrow, which vary by county. In most areas, the limit is around $420,000 to $970,000 depending on local home prices. Check your county's FHA loan limit before you start shopping.

VA loans: zero percent down if you have military service

If you are a current or former member of the military, a VA loan requires zero percent down. You must have a Certificate of may be able to access, which you can request from the Department of Veterans Affairs through their website or by mail. The certificate shows the lender that you meet the service requirements.

VA loans do not require PMI or mortgage insurance of any kind. Instead, you pay a one-time VA funding fee, which is typically 2.3 percent of the loan amount for first-time users. This fee can be rolled into your loan balance. Some veterans are exempt from the funding fee, including those with a service-connected disability rated at 10 percent or higher.

VA loans have no upper limit on how much you can borrow, and no minimum credit score requirement, though most lenders require 620 or higher. The VA guarantees a portion of the loan, which means the lender takes less risk and can offer better terms than conventional loans.

USDA loans: zero percent down in rural areas

USDA loans are backed by the U.S. Department of Agriculture and require zero percent down if you buy in a may have access to rural area. The USDA maintains a map showing which counties and towns are may be able to access. Most rural and some suburban areas may have access to, but urban areas do not.

You must meet income limits, which vary by county and family size. In most areas, your household income cannot exceed 115 percent of the area median income. USDA loans also require you to occupy the home as your primary residence.

USDA loans require a may provide fee (typically 2 percent of the loan amount) and an annual annual fee (0.3 to 0.5 percent per year). Both are rolled into your loan or added to your monthly payment. Like VA loans, USDA loans do not require PMI.

Down payment assistance programs in your state or county

Most states and many counties offer down payment assistance to first-time buyers. These programs can cover part or all of your down payment and closing costs. Some are grants (you do not repay them), and some are forgivable loans (you repay them only if you sell the home within a certain period).

Assistance amounts vary widely. Some programs cover up to $15,000 or more; others cover just a few thousand. Income limits apply to most programs, and many require you to complete a homebuyer education course before you can receive funds. A few programs limit which neighborhoods you can buy in or which lenders you can use.

To find programs in your area, contact your state housing finance agency or search the National Council of State Housing Agencies website. Your lender may also know about local programs. Some nonprofits offer down payment assistance as well, though these are less common and often have longer waitlists.

What counts as a down payment and what does not

Your down payment must come from your own savings, a gift from a family member, or a down payment assistance program. Borrowed money does not count. If you take out a personal loan or use a credit card to fund your down payment, the lender will see the new debt on your credit report and may deny your mortgage application or require a larger down payment.

Gifts from family members are allowed on all loan types, but you must document them. The lender will ask for a signed gift letter stating that the money is a gift and does not need to be repaid. Some lenders require the gift to come from a close relative (parent, sibling, grandparent) and may ask for bank statements showing the money moved from the gift-giver's account to yours.

Closing costs are separate from your down payment. Closing costs typically run 2 to 5 percent of the home price and cover the lender's fees, title insurance, appraisal, inspection, and other services. Some assistance programs cover closing costs in addition to the down payment; others do not. Ask your lender for a Loan Estimate, which lists all closing costs upfront.

How down payment size affects your monthly payment and total cost

A larger down payment lowers your monthly mortgage payment in two ways: you borrow less money, and you may may have access to for a lower interest rate. It also eliminates or reduces mortgage insurance.

For example, on a $300,000 home with a 30-year mortgage at 7 percent interest: a 3 percent down payment ($9,000) means you borrow $291,000 plus PMI of roughly $200 per month, for a total monthly payment around $2,100. A 20 percent down payment ($60,000) means you borrow $240,000 with no PMI, for a monthly payment around $1,600. The difference is $500 per month, or $180,000 over 30 years.

However, a smaller down payment lets you buy sooner and build equity in a home rather than renting. If home prices in your area are rising faster than you can save, a 3 percent down payment may cost less overall than waiting to save 20 percent. Run the numbers for your specific situation and timeline.

Frequently Asked Questions

Can I use a 401(k) or IRA withdrawal for my down payment?

Yes, but it has tax consequences. A traditional IRA withdrawal is taxed as income. A 401(k) withdrawal is also taxed and may have a 10 percent early withdrawal penalty unless you may have access to for an exception. Some plans allow loans instead of withdrawals, which you repay with interest. Consult a tax professional before withdrawing retirement funds.

What if I do not have enough saved for the minimum down payment?

Look for down payment assistance programs in your state or county first. If none are available or you do not meet income limits, consider an FHA loan (3.5 percent down) or a USDA loan if you buy in a rural area (zero percent down). You can also ask family for a gift or delay your purchase to save more.

Does my down payment affect my interest rate?

Yes. A larger down payment typically qualifies you for a lower interest rate because the lender's risk is lower. The difference is usually 0.25 to 0.5 percent, which adds up significantly over 30 years. Ask your lender for rate quotes at different down payment levels.

Can I borrow my down payment from a family member and repay them later?

No. The lender will see the new loan on your credit report and may deny your application or require a larger down payment. If a family member gives you money as a gift, it does not count as a loan and does not affect your debt-to-income ratio. You must provide a signed gift letter.

What happens if I put down less than 3 percent?

Most lenders do not offer conventional loans with less than 3 percent down. Your options are FHA (3.5 percent), VA (zero percent if may be able to access), or USDA (zero percent in rural areas). Some lenders offer portfolio loans with 1 to 2 percent down, but these are rare and have higher interest rates.