Most mortgages require a down payment, but the amount varies widely — and some programs let you buy with as little as 3 percent down or even zero down
Yes, nearly all mortgages require a down payment. A down payment is the money you put toward the house price upfront; the lender then finances the rest through a loan you repay over time. The amount you need depends on the type of mortgage, the lender, and sometimes your credit history and income.
The most common down payment is 20 percent of the home's price. But that is not a requirement — it is a threshold where lenders stop requiring you to buy mortgage insurance, which is an extra monthly cost that protects the lender if you stop paying. Below 20 percent, you pay this insurance on top of your regular mortgage payment.
If you do not have 20 percent saved, you have real options. Conventional mortgages backed by Fannie Mae or Freddie Mac can go as low as 3 percent down. Federal Housing Administration (FHA) loans often require 3.5 percent. Some state and local programs, plus some lenders, offer 5 percent or even zero-down mortgages for first-time buyers or people in certain income ranges.
Key Takeaways
- A down payment is required by nearly all lenders, but it can be as low as 3 percent of the home price with a conventional mortgage or 3.5 percent with an FHA loan.
- Putting down less than 20 percent means you will pay mortgage insurance each month until you reach 20 percent equity in the home.
- First-time buyer programs, state housing programs, and some lenders offer down payments as low as 5 percent or zero percent.
- Your credit score, debt-to-income ratio, and savings history affect which down payment options are available to you.
- The lower your down payment, the higher your monthly payment and total interest cost, because you are borrowing more.
What happens when you put down less than 20 percent
When your down payment is below 20 percent, lenders require you to pay private mortgage insurance (PMI) or, with FHA loans, mortgage insurance premium (MIP). This is an insurance policy that protects the lender, not you. It costs between 0.5 and 1.5 percent of your loan amount per year, added to your monthly mortgage payment.
The insurance stays on your loan until you have paid down the principal to 80 percent of the original home value (or 78 percent with FHA loans). If you put down 5 percent, that could take 10 to 15 years. If you put down 10 percent, it might take 7 to 10 years. You can sometimes remove it faster by refinancing or by paying down the loan ahead of schedule.
This matters because it increases your monthly cost. On a $300,000 home with 5 percent down, mortgage insurance might add $150 to $250 per month. Over time, that adds up — but it also lets you buy a home sooner rather than waiting years to save 20 percent.
Down payment options by mortgage type
Different mortgage programs have different minimum down payments. The type you choose depends on your situation: whether you are a first-time buyer, your credit score, your income, and where the home is located. Understanding your options helps you see what is actually within reach.
| Mortgage Type | Minimum Down Payment | Mortgage Insurance Required | Who It Suits |
|---|---|---|---|
| Conventional (Fannie Mae/Freddie Mac) | 3 percent | Yes, below 20 percent | Borrowers with decent credit and stable income |
| FHA Loan | 3.5 percent | Yes, always | First-time buyers or those with lower credit scores |
| VA Loan (if may be able to access) | Zero percent | No | Active military, veterans, and surviving spouses |
| USDA Loan (if may be able to access) | Zero percent | No | Rural home buyers meeting income limits |
| State/Local First-Time Buyer Programs | 0–5 percent (varies) | Varies by program | First-time buyers in specific areas or income ranges |
VA loans and USDA loans are the only widely available mortgages that require zero down. VA loans are for military members and veterans. USDA loans are for rural properties and have income limits that vary by county. If you do not fit either category, a conventional mortgage at 3 percent or an FHA loan at 3.5 percent are your lowest common options.
How to figure out what down payment you can afford
Your down payment is limited by two things: how much you have saved, and how much a lender will let you borrow. Lenders use your debt-to-income ratio — the percentage of your monthly income that goes to debt payments — to decide how large a mortgage you can carry. Most lenders want this ratio below 43 percent.
Start by adding up your monthly debt: car loans, student loans, credit cards, child support, and any other regular payments. Divide that by your gross monthly income (before taxes). If the result is 43 percent or higher, a lender may not approve you for a mortgage, or may approve you for a smaller one, regardless of your down payment.
If your ratio is lower, the next step is to see what you can save. A 3 percent down payment on a $300,000 home is $9,000. A 5 percent down payment is $15,000. Many people find that saving 5 to 10 percent is more realistic than waiting for 20 percent, especially when mortgage insurance costs less than rent in their area.
Down payment information and first-time buyer programs
Many states, cities, and nonprofits offer down payment help for first-time buyers or people in certain income ranges. These programs work in different ways: some give you a grant (money you do not repay), some offer a low-interest loan, and some combine both.
Common sources include state housing finance agencies, local community development corporations, and programs run through your employer or union. Some programs are tied to the location of the home (rural areas, neighborhoods targeted for revitalization) or your job (teachers, healthcare workers, first responders). A few programs let you borrow down payment money from a family member with no interest, which some conventional lenders allow.
To find programs in your area, start with your state's housing finance agency website or contact your local housing authority. They can tell you what is available based on your income, location, and whether you are a first-time buyer.
The real cost of a smaller down payment
A smaller down payment means a larger loan, which means higher monthly payments and more interest paid over the life of the loan. On a $300,000 home at 7 percent interest over 30 years, the difference is significant: 5 percent down costs roughly $1,995 per month (plus insurance), while 20 percent down costs roughly $1,680 per month (no insurance).
That $315 difference per month adds up to $113,400 over 30 years. But that math only works if you stay in the home for 30 years. If you plan to move or refinance in 7 to 10 years, the insurance cost may not matter as much. And if you are paying rent now, a $1,995 mortgage payment might still be cheaper than your current rent.
The key is to run the numbers for your situation. A mortgage calculator can show you the monthly payment for different down payment amounts. Compare that to what you are paying now in rent, and decide whether buying sooner with a smaller down payment makes sense for you.
Frequently Asked Questions
Can I use a gift from family for my down payment?
Yes. Most lenders allow down payment gifts from family members, but they require a signed letter stating it is a gift, not a loan you have to repay. Some lenders limit how much of your down payment can be a gift — typically you must contribute at least 3 to 5 percent of your own money. Ask your lender about their gift policy before accepting money.
What if I have bad credit — do I still need a down payment?
Yes, but your options narrow. FHA loans are more forgiving of lower credit scores than conventional mortgages, and they accept down payments as low as 3.5 percent. However, a lower credit score may mean a higher interest rate, which increases your monthly payment. Some lenders specialize in mortgages for people rebuilding credit, though they often require larger down payments (10 percent or more).
Is it better to wait and save 20 percent, or buy now with less down?
It depends on your situation. If home prices are rising faster than you can save, or if you are paying high rent, buying sooner with a smaller down payment may cost less overall. If you can save 20 percent in a year or two, waiting might avoid mortgage insurance costs. A mortgage professional can run the numbers for your specific area and timeline.
Can I remove mortgage insurance once I reach 20 percent equity?
With conventional mortgages, yes — you can request removal once you reach 20 percent equity, though some lenders require you to ask. With FHA loans, mortgage insurance stays for the life of the loan if you put down less than 10 percent. If you put down 10 percent or more on an FHA loan, insurance drops after 11 years. Refinancing to a conventional loan is another option once your equity is high enough.
Do I need to show proof of savings for my down payment?
Yes. Lenders require bank statements, usually from the past two months, showing the money is in your account. They want to verify you actually have the funds and that you did not borrow the money (which would increase your debt). If you received a gift, you will need the gift letter plus the donor's bank statement showing the money left their account.