A conventional mortgage down payment is the money you put toward the house yourself, before the lender gives you the rest

When you buy a house with a conventional mortgage — the most common type of home loan — you don't borrow the entire purchase price. You pay part of it upfront with your own money. That upfront payment is your down payment. The lender then loans you the remaining amount, which you repay over time with interest.

For example, if a house costs $300,000 and you make a 20% down payment, you pay $60,000 yourself. The lender gives you a loan for the remaining $240,000. You then repay that $240,000 plus interest over 15, 20, or 30 years, depending on your loan term.

The down payment amount matters because it changes what you owe, how much interest you'll pay over the life of the loan, and whether you'll need to pay an extra monthly fee called mortgage insurance.

Key Takeaways

  • A conventional down payment is typically between 3% and 20% of the home's purchase price, though 20% is considered standard.
  • The larger your down payment, the smaller your monthly mortgage payment will be and the less total interest you'll pay over time.
  • If your down payment is less than 20%, you'll pay an additional monthly fee called private mortgage insurance (PMI) until you've paid down the loan enough.
  • Down payment money comes from your own savings — it's not borrowed from the lender, and you must show proof that you have it before closing.
  • The minimum down payment for a conventional loan is usually 3%, though some lenders require 5% or more.

How down payment size affects your monthly payment and total cost

The bigger your down payment, the less you borrow, which means a smaller monthly payment. It also means you pay less interest overall because interest is calculated on the amount you owe.

Using the $300,000 house example: with a 20% down payment ($60,000), you borrow $240,000. With a 10% down payment ($30,000), you borrow $270,000. That extra $30,000 you borrowed will cost you thousands in interest over 30 years. On a 30-year loan at 7% interest, the difference between borrowing $240,000 and $270,000 is roughly $60,000 in total interest paid.

However, a larger down payment also means you need more cash upfront. Many people face a real choice: put down 20% and have less money left for emergencies, or put down 5% and keep more cash on hand. Both are reasonable decisions depending on your situation.

What happens when your down payment is less than 20%

If you put down less than 20%, your lender will require you to pay private mortgage insurance, or PMI. This is a monthly fee added to your mortgage payment. It protects the lender if you stop paying the loan — it's not insurance for you.

PMI typically costs between 0.5% and 1.5% of your loan amount per year, paid monthly. On a $270,000 loan, that could be $112 to $337 per month. You'll pay PMI until you've paid down your loan balance to 80% of the home's original purchase price, or until you refinance.

This is why 20% down is often called the "standard" — it's the threshold where you avoid PMI. But many people buy homes with less down and accept the PMI cost because they don't have $60,000 sitting in savings.

Where down payment money comes from and how to prove you have it

Down payment money must come from your own savings or from a gift. It cannot be borrowed — if you borrow it, the lender will count that debt when calculating whether you can afford the monthly payment. Common sources include a savings account, money market account, or a gift from a family member.

Before closing on the house, your lender will ask for bank statements showing the money in your account. If the down payment is a gift, the person giving it must sign a gift letter stating it's a gift, not a loan you'll repay. The lender wants proof that the money is actually yours or truly given to you, not borrowed from somewhere else.

Some first-time homebuyers use funds from a retirement account like a 401(k) or IRA, though this comes with tax consequences and rules about how much you can withdraw. Others receive down payment help through state or local programs, though these are less common and vary by location.

Minimum down payments and what different percentages mean

Conventional loans typically allow down payments as low as 3%, though some lenders require 5% or more. The lower your down payment, the higher your interest rate may be, because the lender sees you as a higher risk.

Here's what different down payment amounts mean in practice:

  • 3% down: You borrow 97% of the purchase price. Your monthly payment is lower, but you pay PMI and may face a higher interest rate.
  • 5% to 10% down: A middle ground. Still lower than 20%, so you'll pay PMI, but you're borrowing less than with 3% down.
  • 15% down: Close to the 20% threshold. You'll still pay PMI, but it may be lower than with a smaller down payment.
  • 20% down: The standard. No PMI required, and you typically get the best interest rate available.
  • More than 20% down: Possible, though uncommon. You avoid PMI and may get favorable terms, but you're using more of your cash upfront.

How down payment affects your interest rate and loan terms

Lenders use your down payment size as one factor in deciding what interest rate to offer you. A larger down payment — especially 20% or more — signals that you're a lower-risk borrower, so you may receive a lower interest rate. A smaller down payment means higher risk in the lender's view, so your rate may be higher.

The difference might be 0.25% to 0.5% in interest rate, which sounds small but adds up significantly over 30 years. On a $240,000 loan, the difference between 6.5% and 7% interest is roughly $30,000 in total interest paid.

Your credit score, income, and debt also affect your rate, so a large down payment alone won't may provide the lowest rate. But it's one of the clearest ways to show a lender you're serious and financially stable.

Down payment versus closing costs — they're not the same thing

Many people confuse down payment with closing costs, but they're separate expenses. Your down payment is what you put toward the house price itself. Closing costs are fees for the loan process — things like the appraisal, title search, attorney fees, and lender fees. These typically run 2% to 5% of the loan amount.

If you're buying a $300,000 house with 5% down, you need $15,000 for the down payment plus another $5,000 to $15,000 for closing costs. Some lenders allow you to roll closing costs into the loan, but that means you're borrowing more and paying interest on those fees.

Frequently Asked Questions

Can I use a gift for my down payment?

Yes. The person giving you the money must sign a gift letter stating it's a gift, not a loan. Your lender will ask to see this letter and recent bank statements from both you and the gift-giver to confirm the money exists and has been transferred.

What if I don't have 20% saved?

You can put down 3%, 5%, 10%, or any amount between. You'll pay PMI if it's less than 20%, and your interest rate may be slightly higher, but you can still buy a home. Many people do this because saving 20% takes years.

Can I borrow my down payment?

No. If you borrow the down payment, the lender will count that loan as debt when deciding if you can afford the mortgage. This usually disqualifies you or forces you to borrow less for the house itself.

When can I stop paying PMI?

You can stop paying PMI once your loan balance drops to 80% of the home's original purchase price. This happens through regular monthly payments. You can also refinance the loan once you've built enough equity, though refinancing has its own costs and fees.

Does a larger down payment mean a lower interest rate?

Usually, yes. A 20% down payment typically qualifies you for better rates than a 5% down payment. However, your credit score, income, and debt also affect your rate, so a large down payment alone doesn't may provide the lowest available rate.