The range most lenders expect

A typical down payment on a home runs between 3 and 20 percent of the purchase price. The most common amount is 20 percent, but that is not what most first-time buyers actually put down — the median is closer to 6 to 10 percent. What you pay depends on the loan type, your credit score, the lender's rules, and how much cash you have available.

If you are buying a $300,000 house, a 20 percent down payment is $60,000. A 10 percent down payment is $30,000. A 5 percent down payment is $15,000. A 3 percent down payment is $9,000. The lower your down payment, the lower your upfront cost — but the higher your monthly mortgage payment and the more you pay in interest over the life of the loan.

The reason 20 percent became the benchmark is that it lets you avoid private mortgage insurance (PMI), a monthly fee lenders charge when you put down less than 20 percent. PMI protects the lender if you stop paying, not you. It typically costs 0.5 to 1.5 percent of your loan amount per year, added to your monthly payment. On a $270,000 loan (90 percent of a $300,000 purchase), PMI might add $100 to $300 per month.

Key Takeaways

  • Down payments range from 3 to 20 percent of the home price, with 20 percent being the threshold to avoid private mortgage insurance.
  • Most first-time buyers put down 6 to 10 percent, not 20 percent, because they do not have that much cash on hand.
  • Putting down less than 20 percent means paying PMI monthly until you reach 20 percent equity or refinance.
  • Your credit score, loan type, and lender rules all affect what down payment percentage you can use.
  • A lower down payment means lower upfront cost but higher monthly payments and more total interest paid over time.

How down payment size changes by loan type

Conventional loans (the most common type) typically require 3 to 20 percent down. Most lenders will approve you with 5 to 10 percent if your credit score is 620 or higher and your debt-to-income ratio is acceptable. Going below 5 percent becomes harder and more expensive because PMI rates climb.

FHA loans (backed by the Federal Housing Administration) allow as little as 3.5 percent down, and they accept lower credit scores — often 580 or above. The trade-off is that FHA loans charge mortgage insurance premiums that are typically higher than conventional PMI and harder to remove. You pay an upfront premium at closing (1.75 percent of the loan) and a monthly premium for the life of the loan if you put down less than 10 percent.

VA loans (for military members, veterans, and surviving spouses) often require zero down payment. There is no PMI, but you pay a one-time funding fee (1.4 to 3.6 percent of the loan amount) unless you are exempt due to disability.

USDA loans (for rural properties) also allow zero down payment for borrowers who meet income limits. Like VA loans, they charge a funding fee instead of PMI.

What affects how much you can put down

Your credit score is the biggest factor. Lenders with credit scores of 740 and above get the best rates and the most flexibility on down payment size. Scores between 620 and 680 may require 10 percent or more down. Below 620, conventional loans become very difficult; FHA loans are usually the only option.

Your debt-to-income ratio (DTI) is what you owe each month divided by your gross monthly income. Most lenders want this below 43 percent. If your DTI is high, a larger down payment can help you may have access to because it lowers the loan amount and therefore the monthly payment. If your DTI is low, you have more flexibility.

The property type and location matter too. Investment properties, condos in certain buildings, and homes in rural areas sometimes require higher down payments. A primary residence in a standard neighborhood usually has the most lenient rules.

Your savings and cash reserves are what actually limit you. Even if a lender approves you for 3 percent down, you need that cash available. Some lenders also want to see that you have reserves left after closing — typically 2 to 6 months of mortgage payments in the bank — especially if you are putting down less than 10 percent.

The real cost of a smaller down payment

Putting down 3 percent instead of 20 percent on a $300,000 home saves you $51,000 upfront. But it costs you more over time. On a 30-year mortgage at 7 percent interest, the difference in total interest paid is roughly $80,000 to $100,000 (the exact amount depends on your rate and loan terms). Add PMI — which might total $40,000 to $60,000 over 10 years — and the real cost of that smaller down payment is substantial.

However, if you are renting and paying $2,000 per month, waiting five years to save a 20 percent down payment means paying $120,000 in rent with nothing to show for it. Buying sooner with a smaller down payment and building equity immediately can make financial sense, especially if home prices are rising in your area.

The math is personal. A financial advisor or mortgage calculator can show you the trade-off for your specific situation: the monthly payment difference, the PMI cost, and how long it takes to reach 20 percent equity (at which point you can remove PMI).

When you can remove PMI

If you have a conventional loan with PMI, you can request removal once you reach 20 percent equity in the home. This happens either when your loan balance drops to 80 percent of the original purchase price (through regular payments) or when the home value rises enough that you have 20 percent equity. On a $300,000 home with a $270,000 loan, you need the balance to drop to $240,000 or the home to be worth $300,000 and your balance to be $240,000.

The timeline depends on your interest rate and how quickly you pay down the principal. On a 30-year loan, it typically takes 8 to 12 years to reach 20 percent equity if you make regular payments. You can speed this up by making extra principal payments or refinancing once your equity is higher.

FHA loans are different — if you put down less than 10 percent, the mortgage insurance premium stays for the life of the loan. You can only remove it by refinancing into a conventional loan once you have enough equity and your credit score has improved.

Down payment assistance programs

If you do not have enough cash saved, some programs help cover part or all of the down payment. These come from state housing finance agencies, nonprofits, employers, and local governments. They vary widely by location and income level, so what is available to you depends on where you live and what you earn.

Common types include forgivable loans (you do not repay them if you stay in the home for a set period), grants (assistance programs you do not repay), and matched savings programs (the program matches what you save). Some are limited to first-time buyers; others are open to anyone. Some have income caps; others do not.

Your mortgage lender or a local housing authority can point you toward programs in your area. The National Council of State Housing Agencies maintains a database, and HUD.gov has a list of HUD-approved housing counselors who know local programs.

Frequently Asked Questions

Is 20 percent down required to get a mortgage?

No. Most lenders approve loans with 3 to 10 percent down. Twenty percent is the threshold to avoid PMI, but it is not required. You can buy with less, though you will pay PMI monthly until you reach 20 percent equity.

What is the minimum down payment most lenders accept?

Conventional loans typically go as low as 3 percent. FHA loans go to 3.5 percent. VA and USDA loans allow zero down. The minimum you can use depends on your credit score, income, and the lender's rules.

Can I use a gift for my down payment?

Yes, most lenders allow down payment gifts from family members. You will need a signed gift letter stating the money is a gift, not a loan, and that you do not have to repay it. The lender may ask for proof the gift was transferred to your account.

Does a bigger down payment always mean a better deal?

Not always. A bigger down payment lowers your monthly payment and total interest, but it also ties up cash you might use elsewhere. If you can invest that money and earn more than your mortgage interest rate, a smaller down payment may be smarter. Run the numbers for your situation.

What happens if I put down less than 3 percent?

Most conventional lenders will not go below 3 percent. FHA loans go to 3.5 percent. Below that, you would need a portfolio lender (a bank that holds loans in-house rather than selling them) or a non-traditional lender, and rates are usually much higher.