Down payment amounts vary by loan type, not by a fixed rule

There is no single required down payment for a house. The amount you put down depends on which loan program you use, your credit score, and the lender's own rules. Conventional loans often require 3 to 20 percent of the purchase price. FHA loans allow as little as 3.5 percent. VA loans and USDA loans may require zero percent down if you meet their conditions. A lender will tell you their minimum when you apply, but that minimum is not the same across all lenders.

The purchase price of the house determines the dollar amount. On a $300,000 house, a 5 percent down payment is $15,000. On a $500,000 house, the same 5 percent is $25,000. The lower your down payment percentage, the larger your monthly mortgage payment and the more interest you pay over the life of the loan, because you are borrowing more money.

Key Takeaways

  • Conventional loans typically require 3 to 20 percent down, with 20 percent avoiding mortgage insurance costs.
  • FHA loans allow down payments as low as 3.5 percent and accept lower credit scores than conventional loans.
  • VA loans and USDA loans may require zero percent down if you are a military member or meet rural property requirements.
  • Putting down less than 20 percent on a conventional loan means you will pay private mortgage insurance (PMI) on top of your regular payment.
  • Your lender will state their specific minimum down payment requirement when you begin the pre-approval process.

Conventional loans and the 20 percent benchmark

Conventional loans are mortgages not backed by a federal agency. Lenders set their own rules, but most require a minimum down payment between 3 and 5 percent. However, 20 percent is the threshold that matters financially: if you put down 20 percent or more, you avoid paying private mortgage insurance (PMI).

PMI is an extra monthly cost that protects the lender if you stop paying. On a $300,000 house with 10 percent down ($30,000), PMI might add $150 to $300 per month to your payment. That cost stays until you have paid down the loan enough that your remaining balance is 80 percent of the home's value. With a 3 percent down payment, PMI lasts much longer and costs significantly more over time.

Some lenders will approve a 3 percent down payment if your credit score is 620 or higher and your debt-to-income ratio is low. Others require 5 percent. Ask your lender directly what their minimum is and what PMI will cost you monthly before you commit.

FHA loans for buyers with lower credit or smaller savings

An FHA loan is a mortgage insured by the Federal Housing Administration. The minimum down payment is 3.5 percent of the purchase price. FHA loans accept credit scores as low as 580, whereas conventional loans often require 620 or higher. This makes FHA loans accessible to buyers who have had past credit problems or have not built a long credit history.

FHA loans require mortgage insurance premiums (MIP), which is similar to PMI but works differently. You pay an upfront MIP when you close (usually 1.75 percent of the loan amount, rolled into your mortgage) and an annual MIP added to your monthly payment. Unlike PMI on conventional loans, FHA MIP does not go away when you reach 80 percent equity. It stays for the life of the loan if you put down less than 10 percent.

FHA loans have limits on how much you can borrow, and these limits vary by county. Your lender can tell you the limit for your area. FHA also requires a home inspection and appraisal to ensure the property meets basic standards.

VA loans and USDA loans with zero down

If you are a current or former member of the military, a VA loan may allow you to buy a house with zero percent down. You must have a Certificate of may be able to access from the Department of Veterans Affairs, which you can request through the VA website or through your lender. VA loans have no PMI, though you will pay a one-time VA funding fee (usually 2.3 percent of the loan amount for first-time users, lower for subsequent loans).

VA loans have no maximum loan amount in most cases, and the VA does not set a minimum credit score, though individual lenders typically require 620 or higher. The loan is limited to the appraised value of the home, so you cannot borrow more than the property is worth.

USDA loans are for rural properties and are available to borrowers with low to moderate income. Like VA loans, USDA loans allow zero percent down. You must meet income limits (which vary by county) and the property must be in an may be able to access rural area. USDA loans require a may provide fee, similar to the VA funding fee, which can be rolled into the loan amount.

What happens when you put down less than 20 percent

Putting down less than 20 percent on a conventional loan triggers PMI, which increases your monthly payment. On a $300,000 house with 10 percent down, your mortgage payment might be $1,800 per month, but PMI could add $150 to $300, making the total $1,950 to $2,100. Over 30 years, that extra cost adds up to tens of thousands of dollars.

PMI does not build equity in your home the way your mortgage payment does. It is pure insurance cost. However, PMI can be removed once your loan balance drops to 80 percent of the home's original purchase price. If you pay extra toward principal or your home appreciates, you can reach that threshold faster and request PMI removal from your lender.

Some lenders offer lender-paid mortgage insurance (LPMI), where the lender pays the insurance cost upfront and charges you a higher interest rate instead. This can make sense if you plan to sell or refinance within a few years, but over a 30-year loan, the higher rate usually costs more than PMI.

How to figure out what you can afford to put down

Your down payment comes from your own savings. Lenders do not care where the money comes from as long as it is not borrowed. Some programs allow down payment gifts from family members, but the gift must be documented and the giver cannot expect repayment. Ask your lender about their gift policy before you accept money from relatives.

A larger down payment lowers your monthly payment and total interest cost, but it also means less money in your savings after closing. Most financial advisors suggest keeping three to six months of expenses in emergency savings even after buying a home. If putting down 20 percent would drain your savings completely, a smaller down payment with PMI might be the safer choice.

Use a mortgage calculator to see how different down payment amounts change your monthly payment and total interest. Plug in the purchase price, interest rate, and loan term (usually 30 years), then compare scenarios: 3 percent down versus 5 percent versus 10 percent. The difference in monthly payment will help you decide what you can actually afford.

Down payment assistance programs and grants

Some states, counties, and nonprofits offer down payment assistance through grants or low-interest loans. These programs vary widely by location. Some cover a percentage of your down payment; others provide a fixed dollar amount. Many have income limits or require you to take a homebuyer education course.

Your lender or a local housing counselor can tell you what programs exist in your area. The National Foundation for Credit Counseling (NFCC) and HUD-approved housing counselors offer free guidance on down payment options and can point you toward local programs. Search for "housing counselor near me" or call 211 to find free counseling in your area.

Frequently Asked Questions

Can I borrow my down payment from someone else?

No. Lenders require proof that your down payment comes from your own savings or a documented gift. If you borrow the money, you must disclose the loan, and it counts against your debt-to-income ratio, which may disqualify you or lower the amount you can borrow. A gift from a family member is allowed on most loans, but the giver must sign a gift letter stating they do not expect repayment.

What if I only have 2 percent saved for a down payment?

Most conventional lenders require at least 3 percent down. FHA loans allow 3.5 percent. If you have less, you have three options: save more before applying, look for a down payment assistance program in your area, or wait until you may have access to for a VA or USDA loan if you are may be able to access. Some credit unions and community banks have lower minimums, so it is worth asking.

Does a larger down payment mean a lower interest rate?

Sometimes. Lenders view larger down payments as lower risk, so they may offer a slightly lower interest rate. The difference is usually 0.25 to 0.5 percent. Ask your lender for rate quotes at different down payment levels to see if the savings justify putting down more money.

Can I remove PMI before I reach 80 percent equity?

Yes, if your home has appreciated significantly. You can request a new appraisal and ask your lender to remove PMI if your equity has reached 80 percent based on the new value. Some lenders allow this after two years of on-time payments. Check your loan documents or ask your lender about their PMI removal policy.

What is the difference between PMI and MIP?

PMI is private mortgage insurance on conventional loans and can be removed once you reach 80 percent equity. MIP is mortgage insurance premium on FHA loans and stays for the life of the loan if you put down less than 10 percent. Both protect the lender, but MIP is more expensive over time because it never goes away.