The range is 3 to 20 percent of the home's purchase price, and which end you land on depends on your loan type and credit profile

A down payment is the cash you hand over at closing, and it reduces the amount you need to borrow. On a $300,000 home, a 5 percent down payment is $15,000. A 20 percent down payment on the same home is $60,000. The difference is not just the upfront cost—it also changes your monthly payment, whether you pay mortgage insurance, and which loan programs you can use.

The most common range is 3 to 5 percent for first-time buyers using conventional loans or FHA loans. Jumbo loans (for homes above the conforming loan limit, which varies by county but is often around $766,000) often require 10 to 20 percent down. VA loans and USDA loans, if you meet their requirements, may allow 0 percent down. The lender, not you, sets the minimum for your specific situation based on the loan program, your credit score, and your debt-to-income ratio.

Key Takeaways

  • Down payments typically range from 3 to 20 percent of the purchase price, with 5 to 10 percent most common for conventional loans.
  • Putting down less than 20 percent usually means you will pay private mortgage insurance (PMI), which adds to your monthly payment until you reach 20 percent equity.
  • FHA loans allow down payments as low as 3.5 percent but charge mortgage insurance for the life of the loan, not just until you hit 20 percent equity.
  • VA and USDA loans may allow zero down if you meet military service or rural property requirements, but not all properties or borrowers may have access to.
  • The down payment amount you can afford should account for closing costs (typically 2 to 5 percent of the purchase price), which are separate from the down payment itself.

How down payment size affects your monthly payment and total cost

A larger down payment lowers the loan amount, which lowers your monthly principal and interest payment. On a $300,000 home at 7 percent interest over 30 years, the difference between 5 percent down ($14,250 borrowed) and 20 percent down ($240,000 borrowed) is roughly $420 per month in principal and interest alone.

But the real cost difference includes mortgage insurance. If you put down less than 20 percent on a conventional loan, you pay private mortgage insurance (PMI)—typically 0.5 to 1.5 percent of the loan amount per year, added to your monthly payment. On a $285,000 loan (5 percent down on a $300,000 home), PMI might run $120 to $360 per month. You stop paying PMI once you reach 20 percent equity in the home, either through payments or home appreciation, but that can take years.

FHA loans charge mortgage insurance premiums (MIP) instead. The upfront MIP is 1.75 percent of the loan amount, rolled into your loan. Annual MIP then runs 0.55 to 0.8 percent of the loan balance per year, depending on the loan term and down payment size. Unlike PMI, FHA mortgage insurance does not automatically drop off—you pay it for the life of the loan unless you refinance into a conventional loan later.

Down payment requirements by loan type

Conventional loans (not backed by a government agency) typically require 3 to 5 percent down for first-time buyers with decent credit. Some lenders offer 3 percent programs; others require 5 or more. You will pay PMI if you put down less than 20 percent. Credit score, debt-to-income ratio, and savings reserves all factor into whether a lender will approve you at the lower end.

FHA loans allow 3.5 percent down and are designed for buyers with lower credit scores or smaller savings. The tradeoff is mortgage insurance for the life of the loan. FHA loans also have limits on the maximum loan amount, which vary by county.

VA loans (for active-duty military, veterans, and some surviving spouses) allow zero down on homes up to the VA loan limit in your county. You do not pay PMI, but you do pay a VA funding fee (typically 1.4 to 3.6 percent of the loan amount), which can be rolled into the loan. VA loans have no prepayment penalty.

USDA loans (for rural properties) also allow zero down for borrowers who meet income and property location requirements. Like VA loans, they charge a may provide fee instead of PMI. USDA loans are slower to process than conventional or FHA loans because the property must meet USDA rural standards.

Jumbo loans (for homes above the conforming loan limit) usually require 10 to 20 percent down and have stricter credit and income requirements. Some jumbo lenders require 20 percent or more.

What happens if you cannot save 20 percent

Most buyers do not put down 20 percent. According to data from the National Association of Realtors, the median down payment for first-time buyers is around 6 to 7 percent. Putting down 3 to 5 percent is normal and does not disqualify you from homeownership—it just means you will pay PMI or MIP alongside your mortgage payment.

If your down payment is smaller, your monthly payment is higher because you are borrowing more and paying insurance. But you also build equity faster in percentage terms: on a $300,000 home with 3 percent down, you own 3 percent of the home immediately, whereas with 20 percent down you own 20 percent. Over time, as you pay down the loan and the home appreciates, your equity grows.

Some buyers put down a smaller amount now and plan to refinance later, once they have paid the loan down to 80 percent of the home's value (or once the home has appreciated enough). This strategy works if interest rates stay favorable and you can afford the higher payment in the meantime.

Closing costs are separate from your down payment

The down payment is not the only cash you need at closing. Closing costs—which include appraisal, title search, title insurance, attorney fees, recording fees, and lender fees—typically run 2 to 5 percent of the purchase price. On a $300,000 home, that is $6,000 to $15,000 on top of your down payment.

Some buyers roll closing costs into the loan (if the lender allows it), but that increases your loan amount and your monthly payment. Others negotiate with the seller to cover some closing costs, though this is more common in a buyer's market. The lender will tell you the exact closing costs in a Closing Disclosure document at least three business days before closing.

How to figure out what you can actually afford

Start with your savings. Subtract an emergency fund (lenders often want to see 2 to 6 months of mortgage payments in reserves after closing) and any other large expenses coming up. What is left is your down payment pool.

Then talk to a lender. They will run your credit, verify your income and debts, and tell you the maximum loan amount you may have access to for. They will also tell you the minimum down payment for that loan type. If your savings fall short, you have a few options: save longer, look at lower-priced homes, explore down payment assistance programs (some nonprofits and state housing agencies offer grants or forgivable loans), or consider an FHA or VA loan if you may have access to.

Do not drain your savings to hit a down payment target. A larger down payment looks good on paper, but if it leaves you with no emergency fund, you risk defaulting on the mortgage when an unexpected expense hits.

Frequently Asked Questions

Can I borrow my down payment from family or a friend?

Most lenders allow down payment gifts from family members, but they require a signed gift letter stating the money is a gift, not a loan you have to repay. Some lenders have restrictions on how much of your down payment can be a gift (some allow 100 percent, others require you to contribute at least 5 percent of your own funds). Ask your lender before accepting the gift.

What if I put down 10 percent instead of 5 percent—does it save me money?

Yes, in two ways. Your loan amount is smaller, so your monthly principal and interest payment drops. Your PMI also drops because it is calculated on the loan balance. On a $300,000 home, the difference between 5 and 10 percent down might save you $100 to $200 per month in combined principal, interest, and insurance. Whether that savings is worth the extra $15,000 upfront depends on your cash flow and other financial goals.

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

Yes, on conventional loans. FHA loans charge mortgage insurance regardless of down payment size. VA and USDA loans do not charge PMI but charge other fees instead. If avoiding mortgage insurance is your goal, a conventional loan with 20 percent down is the only path, or a VA/USDA loan if you may have access to.

What if the home appraises for less than the purchase price?

If the appraisal comes in low, your down payment percentage goes up because you are putting the same cash toward a lower-value home. For example, if you agreed to pay $300,000 with 5 percent down ($15,000), but the appraisal is $280,000, your down payment is now 5.4 percent of the appraised value. You may need to renegotiate the price, increase your down payment, or walk away depending on your contract terms.

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

You can withdraw from a traditional IRA penalty-free up to $10,000 in your lifetime for a first-time home purchase (defined as no home ownership in the past two years). You still owe income tax on the withdrawal. 401(k) withdrawals are generally subject to a 10 percent early withdrawal penalty plus income tax unless you may have access to for an exception. Consult a tax professional before withdrawing—the tax bill can be substantial.