Down payment amounts vary by loan type and lender, but typically range from 3% to 20% of the home's purchase price

A down payment is the cash you give the seller at closing. The rest of the purchase price comes from the loan itself. If you buy a $300,000 home with a 10% down payment, you pay $30,000 upfront and borrow $270,000. The percentage you put down depends on which mortgage program you use, your credit score, and what the lender requires.

The most common down payment amounts are 3%, 5%, 10%, 15%, and 20%. A 20% down payment has historically been the standard because it avoids mortgage insurance costs, but most first-time buyers put down less. Lenders today routinely accept 3% to 5% down, though your monthly payment and total interest will be higher than with a larger down payment.

Key Takeaways

  • FHA loans typically require 3.5% down, conventional loans start at 3%, and VA loans may require 0% down if you are a may have access to veteran.
  • Putting down less than 20% usually means paying mortgage insurance (PMI on conventional loans, MIP on FHA loans), which adds to your monthly payment.
  • Your down payment amount affects your interest rate: larger down payments often may have access to for lower rates because the lender's risk is smaller.
  • The down payment is separate from closing costs, which typically run 2% to 5% of the purchase price and are due at the same time.

Down payment requirements by loan type

FHA loans require a minimum 3.5% down payment and are backed by the Federal Housing Administration. They are designed for borrowers with lower credit scores or smaller savings. If you put down less than 10%, you pay mortgage insurance for the life of the loan. If you put down 10% or more, you pay it for 11 years.

Conventional loans (not backed by a government agency) start at 3% down with most major lenders. Some lenders go as low as 3%, others require 5%. Conventional loans with less than 20% down require private mortgage insurance (PMI), which you pay monthly until you reach 20% equity in the home or refinance.

VA loans are for active-duty service members, veterans, and surviving spouses. The Department of Veterans Affairs guarantees the loan, which means many lenders allow 0% down. You still pay a funding fee (usually 1.4% to 3.6% of the loan amount), which can be rolled into the loan itself.

USDA loans are for rural homebuyers who meet income limits. They also allow 0% down and do not require mortgage insurance, though you pay a may provide fee instead.

What happens when you put down less than 20%

When your down payment is below 20%, the lender requires mortgage insurance to protect themselves if you default. On a conventional loan, this is called PMI (private mortgage insurance). On an FHA loan, it is called MIP (mortgage insurance premium). On a VA loan, it is a funding fee. On a USDA loan, it is a may provide fee.

PMI typically costs 0.5% to 1.5% of your loan amount per year, paid monthly as part of your mortgage payment. On a $270,000 loan, that could be $135 to $405 per month. You can remove PMI once you reach 20% equity through a combination of down payment and principal paydown, or by refinancing. FHA mortgage insurance is harder to remove: if you put down less than 10%, you pay it for the life of the loan.

The trade-off is real: a smaller down payment means lower upfront cash but higher monthly payments and total interest paid over the life of the loan. A larger down payment means more cash now but lower monthly costs and less total interest.

Down payment assistance and gift money

If you do not have enough cash saved, some programs help cover part or all of the down payment. State and local housing agencies, nonprofits, and some employers offer down payment assistance grants or forgivable loans. These vary widely by location and income level.

You can also use a gift from a family member to cover part or all of your down payment. Most lenders allow this, but they require a signed gift letter stating the money is a gift, not a loan you have to repay. The gift giver does not need to be a relative in all cases—some lenders accept gifts from employers, nonprofits, or government agencies.

Down payment assistance programs and gifts do not change the loan approval process, but lenders do verify the source of funds. Be prepared to show bank statements proving the money came from where you say it did.

Down payment versus closing costs

The down payment and closing costs are two separate amounts due at closing. Your down payment goes toward the purchase price. Closing costs cover the lender's fees, title insurance, appraisal, inspection, property taxes, homeowners insurance, and other third-party charges.

Closing costs typically run 2% to 5% of the purchase price. On a $300,000 home, that is $6,000 to $15,000 in addition to your down payment. Some lenders allow you to roll closing costs into the loan, which increases your monthly payment. 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.

How down payment size affects your interest rate

Lenders offer lower interest rates to borrowers who put down more money because the loan is smaller relative to the home's value. A borrower with a 20% down payment typically gets a lower rate than one with a 3% down payment, all else equal. The difference can be 0.25% to 0.75% depending on the lender and market conditions.

This matters over time. On a $270,000 loan, a 0.5% difference in interest rate changes your monthly payment by roughly $135 and costs you tens of thousands more in total interest over 30 years. When you are deciding how much to put down, compare the monthly cost of PMI or a higher interest rate against the benefit of keeping cash in savings for emergencies or other goals.

Frequently Asked Questions

Can I put down less than 3%?

Some lenders offer 1% or 2% down programs, but they are rare and usually require excellent credit and income. Most mainstream lenders start at 3% for conventional loans and 3.5% for FHA loans. Ask your lender whether they have lower down payment options.

Do I have to put down 20% to avoid mortgage insurance?

Yes. With conventional loans, PMI stops once you reach 20% equity. With FHA loans, mortgage insurance is permanent if you put down less than 10%, and lasts 11 years if you put down 10% or more. VA and USDA loans do not have mortgage insurance at any down payment level.

What if I can only save 5% but want a lower interest rate?

You can put down 5% and still get a competitive rate, though it will be slightly higher than 20% down. Compare the monthly cost of PMI plus the higher rate against the cost of waiting to save more. Sometimes buying sooner with PMI is cheaper than renting while you save.

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

You can withdraw from a traditional IRA penalty-free up to $10,000 for a first-time home purchase. A 401(k) withdrawal is more complicated and usually involves a loan against your balance. Consult a tax professional before withdrawing, because you may owe income tax on the amount.

Does the down payment have to come from my own savings?

No. Gifts from family members are allowed, and some lenders accept gifts from employers or nonprofits. You need a signed gift letter and proof the money came from the stated source. Down payment assistance programs also exist in many states and counties.