Down payments range from 3% to 20% of the home's purchase price, depending on the loan type and your financial situation
A down payment is the cash you hand over at closing to reduce the amount you borrow. On a $300,000 house, a 5% down payment is $15,000. A 20% down payment is $60,000. The exact percentage you'll need depends on which loan program you use, your credit score, and whether you're a first-time buyer.
The lower your down payment, the higher your monthly mortgage payment and the more interest you'll pay over the life of the loan. You'll also pay private mortgage insurance (PMI) if you put down less than 20%, which adds to your monthly bill until you've built enough equity. That insurance protects the lender, not you.
Key Takeaways
- Conventional loans typically require 5% to 20% down; FHA loans allow 3.5% down; VA loans may require 0% down if you're a may have access to veteran.
- Private mortgage insurance (PMI) is mandatory on loans with less than 20% down and costs roughly 0.5% to 1.5% of your loan amount per year, split into monthly payments.
- Your down payment sits in escrow until closing and is separate from closing costs, which typically run 2% to 5% of the purchase price.
- Some programs and lenders offer down payment assistance, but you must research your state and local options—they are not automatic.
How down payment size affects your monthly payment
The larger your down payment, the smaller the loan you need to borrow. A smaller loan means a smaller monthly mortgage payment. On that $300,000 house with a 30-year mortgage at 7% interest, the difference is real: a 5% down payment ($15,000) leaves you borrowing $285,000, while a 20% down payment ($60,000) leaves you borrowing $240,000. The monthly payment difference is roughly $300 per month before taxes and insurance.
But the down payment also determines whether you pay PMI. With less than 20% down, you pay PMI on top of your principal, interest, taxes, and insurance. On a $285,000 loan, PMI might run $150 to $400 per month depending on your credit score and the lender. That money disappears—it doesn't build equity. You can request PMI removal once you've paid down the loan to 80% of the home's original value, but the timeline depends on your payment schedule and whether the home's value has changed.
Down payment requirements by loan type
| Loan Type | Minimum Down Payment | Who It's For |
|---|---|---|
| Conventional (Fannie Mae/Freddie Mac) | 3% to 5% | Borrowers with good credit (usually 620+) and stable income |
| FHA (Federal Housing Administration) | 3.5% | First-time buyers and those with lower credit scores (580+) |
| VA (Veterans Affairs) | 0% | Active-duty military, veterans, and surviving spouses |
| USDA (Rural Development) | 0% | Borrowers buying in may be able to access rural areas |
| Jumbo | 10% to 20% | Loans above the conforming limit (varies by county, typically $766,550 in 2024) |
FHA loans are common for first-time buyers because the 3.5% minimum is lower than conventional loans. However, FHA charges mortgage insurance premiums (MIP) instead of PMI—an upfront fee at closing plus an annual fee rolled into your payment. That insurance stays on the loan for the full 30 years if you put down less than 10%, which makes FHA more expensive over time than a conventional loan with 20% down.
VA and USDA loans require no down payment at all, but you must meet specific requirements. VA loans are only for military-connected borrowers. USDA loans are only for properties in designated rural areas and for borrowers whose income falls below the area median. Both programs have their own insurance or may provide fees, so zero down does not mean zero extra cost.
Down payment versus closing costs
Your down payment and closing costs are separate. Closing costs are the fees charged by the lender, title company, appraiser, and other parties involved in the sale. They typically run 2% to 5% of the purchase price—on a $300,000 house, that's $6,000 to $15,000. These costs cover the loan origination fee, appraisal, title search, title insurance, property survey, homeowners insurance, property taxes, and attorney fees.
You pay closing costs at closing, just like the down payment, but they go to different parties. The down payment reduces your loan balance. Closing costs pay the people and companies that process the sale. Some lenders allow you to roll closing costs into the loan (called a "no-cost" or "low-cost" mortgage), but this increases your monthly payment and the total interest you pay.
Where down payment money comes from
Most buyers save the down payment from their own income and savings. Some receive gifts from family members. If you use a gift, the lender will require a signed letter from the gift-giver stating it is a gift, not a loan, and that they expect no repayment. The lender will also verify the funds came from a legitimate source—they are checking for fraud and money laundering.
Some employers, nonprofits, and state programs offer down payment assistance. These programs vary widely by location and employer. Some are grants (assistance programs you don't repay), some are forgivable loans (you repay only if you sell the house within a certain time), and some are second mortgages (you repay them like a loan). You must research what's available in your state and through your employer—there is no single national program.
Retirement accounts like a 401(k) or traditional IRA allow first-time buyers to withdraw up to $10,000 lifetime for a down payment without the usual early-withdrawal penalty, though you will owe income tax on the withdrawal. A Roth IRA lets you withdraw contributions (not earnings) anytime without penalty. These options reduce your retirement savings, so weigh the trade-off carefully.
How to calculate what you can afford
Lenders use debt-to-income ratio to decide how much you can borrow. Most want your total monthly debt payments (mortgage, car loans, credit cards, student loans) to be no more than 43% of your gross monthly income. If you earn $5,000 per month, your total debt payments should not exceed $2,150.
Your down payment affects this calculation because a larger down payment means a smaller loan and a smaller monthly payment. If you can only afford $1,500 per month in total debt, a larger down payment gets you into a home sooner. But a larger down payment also means saving longer before you buy. The trade-off is yours to make based on your timeline and savings rate.
Use a mortgage calculator to see how different down payment amounts change your monthly payment. Enter the home price, interest rate, loan term, and down payment percentage. The calculator will show you the principal and interest payment, and you can add estimates for property taxes, insurance, and PMI to see the full monthly cost.
Frequently Asked Questions
Can I put down less than 3%?
Some lenders offer 1% to 3% down programs, but they are less common and usually require excellent credit and a low debt-to-income ratio. You will pay higher interest rates and higher PMI to offset the lender's risk. Ask your lender what options they have.
What happens if I can't save a full down payment?
You have several options: look into FHA loans (3.5% down), explore down payment assistance programs in your state, ask family for a gift, or delay buying until you've saved more. Some employers and nonprofits also offer down payment help—check with your HR department or local housing authority.
Can I borrow my down payment from someone?
Lenders typically do not allow you to borrow the down payment because it increases your debt and risk. If a family member gives you money, it must be a true gift with a signed letter stating no repayment is expected. If it's a loan, the lender will count it as debt and reduce how much they'll lend you.
Does a bigger down payment always mean a better deal?
Not always. If you have high-yield savings earning 4% to 5% and a mortgage rate of 6% to 7%, keeping cash in savings and putting down 5% to 10% may make financial sense. However, a larger down payment eliminates PMI, which saves money over time. Run the numbers for your situation.
When do I pay the down payment?
You pay the down payment at closing, the final step in buying the home. Before closing, you typically submit an earnest money deposit (usually 1% to 3% of the purchase price) to show the seller you're serious. That earnest money is held in escrow and applied to your down payment at closing.