Start with the price and your lender's requirement
Your down payment is the cash you put toward the purchase price on day one. The amount you need depends on two things: the home's sale price and the minimum percentage your lender requires. Most conventional loans ask for 3% to 20% down, though some programs go lower. FHA loans, which are backed by the Federal Housing Administration, typically require 3.5% down. VA loans, available to military members and veterans, often require 0% down.
To find your minimum down payment, multiply the sale price by the lender's required percentage. If you are buying a $300,000 house and your lender requires 5% down, you owe $15,000 at closing. That $15,000 is your down payment. The remaining $285,000 is what you will borrow as a mortgage.
Your lender will tell you their minimum requirement when you get pre-approved. If you have not talked to a lender yet, you can call a few banks or credit unions and ask what they require for the type of loan you are considering. The percentage varies by loan type, credit score, and the lender's own rules.
Key Takeaways
- Down payment equals the sale price multiplied by your lender's required percentage, and most conventional loans require between 3% and 20%.
- FHA loans typically require 3.5% down, while VA loans often require nothing down if you are a military member or veteran.
- Putting down more than the minimum lowers your monthly payment and may eliminate the need for mortgage insurance.
- Your lender will tell you the exact minimum during pre-approval, and you can always put down more than required.
- Down payment is separate from closing costs, which typically run 2% to 5% of the sale price and are due at the same time.
How much you can actually afford to put down
Knowing the minimum is different from knowing what makes sense for your situation. You may have $50,000 saved but still choose to put down only $15,000 if you want to keep cash on hand for emergencies or other goals. There is no rule that says you must put down the maximum you can afford.
A useful starting point is to ask yourself: after the down payment, do I have three to six months of living expenses left in savings? If the answer is no, putting down less than the maximum is often the smarter move. A down payment that leaves you broke is a down payment that creates risk.
Also consider what happens to your monthly payment. A larger down payment means you borrow less, which lowers your monthly mortgage payment. Use a mortgage calculator to see the difference between putting down 5% versus 10% versus 20% on the house you are looking at. Sometimes the monthly savings are worth the larger upfront cost; sometimes they are not worth the hit to your savings.
Mortgage insurance and when it goes away
If you put down less than 20%, your lender will require you to pay mortgage insurance. This is an extra monthly fee added to your mortgage payment. It protects the lender if you stop paying, not you. On a $300,000 loan with 10% down, mortgage insurance might add $150 to $300 per month, depending on your credit score and the loan type.
Mortgage insurance does not last forever. Once you have paid down the loan to 80% of the home's original value, you can request to have it removed. This happens automatically on some loans after you reach that point; on others, you have to ask. The timeline depends on how fast you pay down the principal and whether your home value rises.
If you are on the edge between two down payment amounts, run the numbers: does putting down an extra $10,000 now to avoid mortgage insurance save you money over five or ten years? Sometimes yes, sometimes no. Your lender can show you the exact monthly cost of insurance for your situation.
Down payment sources and what lenders accept
Your down payment money has to come from somewhere, and lenders have rules about where. Most lenders accept savings accounts, checking accounts, and money market accounts. Some accept gifts from family members, though you will need a signed letter from the person saying it is a gift, not a loan you have to repay.
Lenders typically do not accept down payment money from credit cards, personal loans, or other borrowed funds. The reason is that borrowed money increases your debt-to-income ratio, which affects whether the lender thinks you can afford the mortgage. If you are thinking about borrowing to fund your down payment, talk to your lender first—some programs allow it under specific conditions, but most do not.
If you are using a gift, the lender will ask for a gift letter and proof that the money actually arrived in your account. This usually means a bank statement showing the deposit. The lender wants to confirm the money is real and that you are not hiding a loan you will have to repay.
Down payment versus closing costs
Down payment and closing costs are two separate amounts due at closing, and many people confuse them. Your down payment goes toward the purchase price. Closing costs cover everything else: the loan origination fee, appraisal, title search, title insurance, property taxes, homeowners insurance, and attorney fees if your state requires one.
Closing costs typically run 2% to 5% of the sale price. On a $300,000 house, that is $6,000 to $15,000 on top of your down payment. If you are putting 5% down ($15,000) on that same house, your total cash due at closing could be $21,000 to $30,000. This is why it is important to ask your lender for a Closing Disclosure at least three days before closing—it shows the exact breakdown of all costs.
Some lenders or sellers will cover part of the closing costs, which can lower the cash you need to bring. This is called a seller concession or lender credit. If you negotiate this into your offer, it reduces what you owe at closing, though it may affect your interest rate or the terms of the loan.
How down payment affects your interest rate
A larger down payment often means a lower interest rate. Lenders see less risk when you have more skin in the game, so they reward you with a better rate. The difference might be 0.25% to 0.5%, which sounds small but adds up over 30 years.
On a $285,000 loan (after a 5% down payment on a $300,000 house), the difference between a 6.5% rate and a 7% rate is roughly $100 per month. Over 30 years, that is $36,000. So if putting down 10% instead of 5% gets you a 0.5% better rate, you might save money even though you are putting more cash down upfront.
Your credit score, debt-to-income ratio, and the type of loan also affect your rate. A larger down payment is one lever, but not the only one. Ask your lender to show you rate quotes for different down payment amounts so you can see the actual impact.
Down payment assistance programs
Some employers, nonprofits, and government programs offer down payment help. These programs vary widely by location and income level. Some give you a grant (money you do not repay), some give you a forgivable loan (you repay it only if you sell the house within a certain time), and some give you a second mortgage at a low rate.
Your state housing finance agency or local housing authority can tell you what programs exist in your area. You can also search the HUD website for down payment assistance programs, though you will need to contact the programs directly to learn their rules. Some programs have income limits, some require you to take a homebuyer education course, and some are only for first-time buyers.
If you are a teacher, nurse, firefighter, or work in another public service job, your employer may have a down payment program. Military members and veterans have access to VA loans with 0% down. If you are a member of certain unions or professional organizations, they may offer down payment help too. It is worth asking before you assume you have to save the full amount yourself.
Frequently Asked Questions
Can I put down less than the minimum my lender requires?
No. The minimum is a hard requirement set by the lender or the loan program. You can put down more than the minimum, but not less. If a lender requires 3% down and you only have 2%, you will need to find a different lender or wait until you have saved more.
What happens if I put down 20% or more?
You avoid mortgage insurance entirely, which saves you money every month. You also borrow less, which lowers your monthly payment. Some lenders may offer you a slightly better interest rate as well. The tradeoff is that you have less cash left after closing.
Do I have to use my own money for the down payment?
Most of it, yes. Gifts from family are allowed if documented with a gift letter. Borrowed money from credit cards or personal loans is usually not allowed. Some employers and nonprofits offer down payment grants or forgivable loans, which count as your own money for the lender's purposes.
Can the seller pay my down payment?
No. The seller can contribute toward your closing costs through a concession, but they cannot pay your down payment directly. The down payment must come from you or from a gift or program designed to help buyers.
What if I do not have enough saved for the down payment?
Look for down payment assistance programs through your state housing finance agency, local nonprofits, or your employer. Consider an FHA loan, which requires only 3.5% down. You can also wait and save more, or look at less expensive homes that fit your current savings.