Down payment amounts depend on the loan type and your financial situation

The down payment you need ranges from 0% to 20% of the home's purchase price, depending on which loan program you use. A conventional loan typically requires 5% to 20%. An FHA loan requires 3.5%. A VA loan (if you may have access to) requires 0%. A USDA loan (for rural properties) requires 0%. The lender will tell you the exact amount required before you commit, based on the loan type you choose and your credit profile.

The down payment is money you pay upfront; the lender finances the rest through the mortgage. A larger down payment means a smaller loan, lower monthly payments, and often a better interest rate. A smaller down payment means you borrow more, pay more interest over time, and may pay mortgage insurance on top of your regular payment.

Key Takeaways

  • Conventional loans require 5% to 20% down; FHA loans require 3.5%; VA and USDA loans require 0% if you meet program requirements.
  • Putting down less than 20% on a conventional loan triggers private mortgage insurance (PMI), which adds to your monthly payment until you reach 20% equity.
  • Your credit score, debt-to-income ratio, and savings history affect both the down payment amount the lender will accept and the interest rate you receive.
  • Down payment assistance programs exist through state housing agencies, nonprofits, and some employers, though they vary by location and income level.

Conventional loans: 5% to 20% down

A conventional loan is a mortgage not backed by a government agency. Most conventional loans require a down payment between 5% and 20%. On a $300,000 home, that means $15,000 to $60,000 out of pocket.

If you put down less than 20%, you will pay private mortgage insurance (PMI). PMI protects the lender if you stop paying; it does not protect you. The cost varies but typically runs 0.5% to 1.5% of the loan amount per year, added to your monthly payment. Once you reach 20% equity in the home (through a combination of down payment and payments over time), you can request PMI removal.

Conventional loans favor borrowers with credit scores of 620 or higher, though 740 and above get the best rates. Your debt-to-income ratio (total monthly debt payments divided by gross monthly income) usually cannot exceed 43% to 50%, depending on the lender.

FHA loans: 3.5% down with mortgage insurance built in

An FHA loan is backed by the Federal Housing Administration and requires only 3.5% down. On a $300,000 home, that is $10,500. FHA loans are designed for first-time buyers and people with lower credit scores (as low as 580).

FHA loans require two forms of mortgage insurance: an upfront premium (1.75% of the loan amount, usually rolled into the loan) and an annual premium (0.55% to 0.85% of the loan amount per year, added to your monthly payment). Unlike PMI on conventional loans, FHA mortgage insurance does not go away when you reach 20% equity—it stays for the life of the loan if you put down less than 10%.

FHA loans have lower credit score requirements and more flexible debt-to-income ratios than conventional loans, but the mortgage insurance cost is permanent for most borrowers. Your debt-to-income ratio typically cannot exceed 43% to 50%.

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

A VA loan requires 0% down if you are a current or former military member, National Guard member, or surviving spouse. The Department of Veterans Affairs guarantees the loan, so lenders accept no down payment. You will pay a one-time VA funding fee (1.4% to 3.6% of the loan amount, depending on your military branch and whether you have used a VA loan before), which can be rolled into the loan.

A USDA loan requires 0% down if you buy in a rural area and meet income limits. The USDA guarantees the loan. You will pay a one-time may provide fee (1% of the loan amount) and an annual fee (0.35% of the loan amount), both usually rolled into the loan. USDA loans are available to people with credit scores as low as 580 and have flexible debt-to-income ratios.

Both programs have no mortgage insurance requirement despite the 0% down payment. If you may have access to for either, the zero down payment is a significant advantage over conventional and FHA loans.

How your credit score and debt affect the down payment required

Lenders use your credit score and debt-to-income ratio to decide whether to approve you and what down payment to require. A higher credit score (740+) and lower debt-to-income ratio (under 36%) may allow you to put down as little as 3% on a conventional loan. A lower credit score (620–680) and higher debt-to-income ratio (40%+) may require 10% to 15% down, or may disqualify you from conventional loans altogether.

Your debt-to-income ratio includes all monthly debt: car loans, student loans, credit cards, child support, and the new mortgage payment. If you earn $5,000 per month and owe $1,500 in existing debt, your new mortgage payment cannot exceed $1,650 (43% of $5,000 minus $1,500) on most conventional loans. This calculation happens before you apply, so knowing your ratio helps you understand what price range you can afford.

If your credit score or debt ratio is weak, you have options: wait and pay down debt, dispute errors on your credit report, or explore FHA or USDA loans, which have more lenient requirements.

Down payment assistance programs and where to find them

Many states, cities, and nonprofits offer down payment assistance—grants or forgivable loans that reduce the amount you need to save. These programs vary widely by location and income level. Some cover 3% to 5% of the purchase price; others cover up to 15%.

To find programs in your area, start with your state housing finance agency (search "[your state] housing finance agency" online) or contact your city or county housing department. Nonprofit organizations like NeighborWorks and the National Council of La Raza also maintain lists of local programs. Some employers, credit unions, and mortgage lenders offer down payment assistance to their members or employees.

Most programs require you to complete a homebuyer education course (usually online, 6 to 8 hours) and meet income limits. Some programs require you to work with a specific lender or mortgage broker. Ask whether the assistance is a grant (you keep it) or a forgivable loan (you repay it if you sell within a certain period).

What happens after you choose a down payment amount

Once you decide on a down payment, you will need to show the lender proof of funds: bank statements, investment account statements, or gift letters if someone is giving you money. The lender will verify that the money is yours and has been in your account for at least 60 days (some lenders require longer). If you received a gift, the donor must sign a letter stating it is a gift, not a loan.

At closing (the final step before you own the home), you will bring a cashier's check or wire transfer for the down payment plus closing costs (typically 2% to 5% of the purchase price). The title company or attorney will hold this money and distribute it to the seller and lender according to the settlement statement.

After closing, your monthly mortgage payment begins. This payment includes principal (the amount borrowed), interest, property taxes, homeowners insurance, and mortgage insurance (if applicable). The lender will send you a payment schedule showing exactly what you owe each month.

Frequently Asked Questions

Can I borrow the down payment from someone else?

You can receive a gift from a family member, but you cannot borrow it as a loan. If you borrow money, the lender counts it as debt on your debt-to-income ratio, which may disqualify you or require a larger down payment. A gift must be documented with a signed letter from the donor stating it is a gift and will not be repaid.

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

Explore FHA loans (3.5% down), USDA loans (0% if you may have access to), VA loans (0% if you may have access to), or down payment assistance programs in your area. You can also delay your purchase and save more, or ask a family member for a gift. Some employers and credit unions offer down payment help to members.

Does a larger down payment always mean a better deal?

A larger down payment lowers your monthly payment and interest rate, but it ties up cash you might need for emergencies or home repairs. If you have high-interest debt (credit cards above 6%), paying that down first may save you more money than putting extra toward a down payment. Run the numbers with a mortgage calculator to compare scenarios.

Will PMI ever go away on an FHA loan?

If you put down 10% or more on an FHA loan, PMI drops after 11 years. If you put down less than 10%, PMI stays for the life of the loan. You can refinance into a conventional loan later if your credit improves and you have built equity, which would remove the insurance.

Can I use retirement savings for a down payment?

Some retirement accounts allow penalty-free withdrawals for first-time home purchases. A traditional IRA allows up to $10,000 lifetime; a Roth IRA allows withdrawals of contributions (not earnings) anytime. Consult a tax professional before withdrawing, as rules vary by account type and your age.