The range is 3 to 20 percent of the purchase price, depending on the loan type and your financial situation
There is no single "typical" down payment for first-time buyers because lenders offer different programs with different minimums. A Federal Housing Administration (FHA) loan allows 3.5 percent down. A conventional loan with private mortgage insurance (PMI) can go as low as 3 percent. A VA loan (if you may have access to) requires zero down. A USDA loan (for rural properties) also requires zero down. The 20 percent figure you hear about is the threshold where you avoid PMI entirely on a conventional loan—not a requirement, and not what most first-time buyers actually put down.
What you put down affects your monthly payment, how much interest you pay over the life of the loan, and whether you pay mortgage insurance. A smaller down payment means a larger loan, higher monthly costs, and PMI added to your bill until you reach 20 percent equity. A larger down payment reduces all of those. The choice depends on how much cash you have saved, what interest rate you can lock in, and whether you have other uses for that money.
Key Takeaways
- FHA loans allow 3.5 percent down; conventional loans with PMI start at 3 percent; VA and USDA loans require zero down if you meet other requirements.
- Putting down less than 20 percent on a conventional loan means you will pay private mortgage insurance (PMI) as part of your monthly bill until you reach 20 percent equity.
- Your down payment amount changes your interest rate, monthly payment, and total interest paid over 15 or 30 years.
- First-time buyer programs in your state or city may offer down payment assistance, grants, or favorable loan terms that reduce what you need to save upfront.
How down payment size affects your monthly cost
A smaller down payment means you borrow more money, which raises your monthly mortgage payment. On a $300,000 home, putting down 3 percent ($9,000) instead of 10 percent ($30,000) means borrowing an extra $21,000. Over a 30-year loan at 7 percent interest, that difference adds roughly $140 to your monthly payment before PMI.
PMI itself varies by loan type and down payment size. On an FHA loan with 3.5 percent down, mortgage insurance runs roughly 0.55 percent of the loan amount per year, paid monthly. On a conventional loan with 5 percent down, PMI typically ranges from 0.5 to 1 percent per year, depending on your credit score and the lender. That insurance stays on your bill until you reach 20 percent equity (on conventional) or pay off the FHA loan entirely (on FHA).
The tradeoff is real: a larger down payment lowers your monthly bill and saves you tens of thousands in interest and insurance over time, but it also means keeping more money tied up in the house instead of in savings, investments, or other needs.
Down payment requirements by loan type
| Loan Type | Minimum Down Payment | Mortgage Insurance Required | Who Qualifies |
|---|---|---|---|
| FHA | 3.5% | Yes, for life of loan | First-time buyers, lower credit scores accepted |
| Conventional with PMI | 3% | Yes, until 20% equity | Good credit, stable income |
| Conventional without PMI | 20% | No | Good credit, larger savings |
| VA | 0% | No | Active duty, veterans, surviving spouses |
| USDA | 0% | Yes, may provide fee | Rural property, income limits apply |
What lenders look at beyond the down payment amount
Your down payment is only one part of the lending decision. Lenders also check your debt-to-income ratio (how much you owe monthly compared to your gross income), your credit score, your employment history, and your savings history. A larger down payment can sometimes offset a lower credit score or a higher debt-to-income ratio, but it does not may provide approval.
Lenders want to see that you have been saving consistently and that you can handle the monthly payment even if your income drops. They may ask for bank statements going back two or three months, proof of employment, and documentation of where the down payment money came from. If you received a gift, the lender needs a signed letter from the gift-giver stating it does not need to be repaid.
Down payment assistance programs for first-time buyers
Many states and cities offer programs that reduce the amount you need to save upfront. These take several forms: grants that do not need to be repaid, forgivable loans that become grants after you stay in the home for a set period, favorable interest rates, or matching programs where the government matches a portion of what you save.
Examples include the California Housing Finance Agency programs, New York State Housing Finance Agency loans, and city-level programs in places like Denver, Philadelphia, and Austin. may be able to access usually depends on your income (often capped at 80 to 120 percent of area median income), the purchase price of the home, and whether you are a first-time buyer. Some programs also require you to take a homebuyer education course.
The best way to find what is available in your area is to contact your city or county housing authority, or to search your state's housing finance agency website. A mortgage lender can also point you toward programs they work with regularly.
Saving for a down payment when you do not have much cash
If you have limited savings, a 3 percent down payment on a conventional loan or 3.5 percent on an FHA loan makes homeownership reachable without waiting years to save 20 percent. The trade-off is that you will pay PMI and a higher interest rate, which costs more over time. But for many first-time buyers, getting into a home sooner and building equity is worth that cost.
Some buyers combine strategies: they save what they can, look for down payment assistance in their area, ask family for a gift (if allowed by their lender), and then use a low-down-payment loan program. Others delay purchase until they can save more, which is also a valid choice depending on your local housing market and personal timeline.
A mortgage lender can run the numbers for you at different down payment levels and show you the exact monthly cost, total interest, and PMI for each scenario. That comparison often makes the decision clearer than any general rule.
Frequently Asked Questions
Can I use a gift from family toward my down payment?
Yes, most lenders allow gift money, but they require a signed letter from the gift-giver stating the money is a gift and does not need to be repaid. Some lenders limit how much of your down payment can be a gift (often requiring at least 5 to 10 percent to come from your own savings), and some programs do not allow gifts at all. Ask your lender before accepting money from family.
What happens if I put down less than 3 percent?
Conventional loans do not go below 3 percent. FHA loans go to 3.5 percent. If you have less than 3 percent saved, your options are VA or USDA loans (if you may have access to), waiting to save more, or looking for down payment assistance programs in your area.
Does a bigger down payment always mean a better interest rate?
Usually, yes—lenders offer lower rates to borrowers with larger down payments because they are taking on less risk. But the difference is typically 0.25 to 0.5 percent, so it is worth comparing offers from multiple lenders rather than assuming one lender's rate is better just because you put down more.
When can I stop paying PMI?
On a conventional loan, PMI drops off automatically once you reach 20 percent equity in the home (either through payments or home appreciation). You can also request removal once you hit 20 percent. On an FHA loan, PMI stays for the life of the loan if you put down less than 10 percent; if you put down 10 percent or more, it drops after 11 years.
Is 20 percent down required to buy a home?
No. Twenty percent is the threshold where you avoid PMI on a conventional loan, but it is not required. Most first-time buyers put down between 3 and 10 percent and pay PMI as part of their monthly bill. The 20 percent figure is a goal for later, not a barrier to entry now.