Most mortgages require a down payment, but the amount varies widely—and some loans let you put down less than you might think
You do not need to put down 20 percent to buy a house. That number is a myth that stops people from buying who could actually afford to. Most lenders will accept down payments between 3 and 5 percent, and some programs go lower. The catch: a smaller down payment usually means you pay more over the life of the loan through higher interest rates and a fee called mortgage insurance, which protects the lender if you stop paying.
Whether you need a down payment at all depends on the type of loan. Conventional mortgages almost always require one. Government-backed loans—FHA, VA, and USDA loans—have different rules. A VA loan, for example, requires zero down if you are a may have access to veteran. An FHA loan can go as low as 3.5 percent. A USDA loan in a rural area can also be zero down for borrowers who meet income limits.
Key Takeaways
- Conventional loans typically require 3 to 20 percent down, while FHA loans start at 3.5 percent and VA loans can be zero down for may be able to access veterans.
- Putting down less than 20 percent triggers mortgage insurance, which adds to your monthly payment but does not build equity in your home.
- Your credit score, debt-to-income ratio, and savings history matter as much as the down payment amount when a lender decides whether to approve you.
- Down payment information programs exist through nonprofits, state housing agencies, and some employers, though they vary by location and income.
How much down payment different loan types actually require
Conventional mortgages are loans not backed by the government. Most lenders want 5 to 20 percent down, though some will go as low as 3 percent. The lower your down payment, the higher your interest rate and the larger your mortgage insurance premium. If you put down less than 20 percent, you will pay private mortgage insurance (PMI) every month until you reach 20 percent equity in the home.
FHA loans are backed by the Federal Housing Administration and are designed for first-time buyers and people with lower credit scores. The minimum down payment is 3.5 percent of the purchase price. You will pay mortgage insurance no matter what, and it stays on the loan for the full 30 years if you put down less than 10 percent. If you put down 10 percent or more, the insurance drops off after 11 years.
VA loans are for active-duty military, veterans, and some surviving spouses. They require zero down payment and no mortgage insurance. You pay a one-time funding fee (usually 2 to 3 percent of the loan amount) instead, though some borrowers are exempt. This is one of the most generous loan programs available.
USDA loans are for rural and some suburban areas and are backed by the U.S. Department of Agriculture. They also require zero down payment and no mortgage insurance. You pay a may provide fee upfront and an annual fee, but the total cost is often lower than PMI on a conventional loan.
What happens when you put down less than 20 percent
When you put down less than 20 percent on a conventional loan, the lender requires you to carry mortgage insurance. This is not homeowners insurance—it is insurance that protects the lender, not you. On a $300,000 house with 5 percent down, PMI might add $150 to $300 per month to your payment. That money does not go toward your home's equity; it goes to an insurance company.
You can remove PMI once you reach 20 percent equity through a combination of your down payment and paying down the principal. On a $300,000 house, that means you need to build $60,000 in equity. Depending on your interest rate and loan term, this could take 8 to 12 years. You can request removal once you hit that mark, or in some cases the lender will remove it automatically.
FHA mortgage insurance works differently. If you put down 10 percent or more, it drops after 11 years. If you put down less than 10 percent, it stays for the full loan term—30 years on a standard mortgage. This is one reason some buyers choose a conventional loan with PMI instead of an FHA loan: PMI can be removed, but FHA insurance cannot.
What lenders actually look at beyond the down payment
Your down payment is one piece of the puzzle. Lenders also examine your credit score, your debt-to-income ratio, your employment history, and your savings. A person with a 750 credit score and 5 percent down might get approved faster and at a better rate than someone with a 620 score and 15 percent down.
Your debt-to-income ratio is the total of all your monthly debt payments divided by your gross monthly income. Most lenders want this below 43 percent, though some will go to 50 percent if your credit is strong and your down payment is larger. If you earn $5,000 a month and already owe $1,500 in car loans, credit cards, and student loans, a lender will factor that into whether they approve you and at what rate.
Lenders also want to see that you have savings beyond your down payment. If you are putting down your last dollar, that is a red flag. Most lenders want to see 2 to 6 months of mortgage payments in reserve, depending on the loan type and your situation.
Down payment information: where it comes from and how it works
If you do not have a down payment saved, several sources can help. Nonprofits like NeighborWorks and local community development organizations offer grants and low-interest loans in many areas. State housing agencies run their own programs—search "[your state] down payment information" to find yours. Some programs are income-based; others prioritize first-time buyers or people in certain professions like teachers or nurses.
Employer programs are less common but growing. Some large companies offer down payment help as an employee benefit. Ask your HR department whether yours does. Family loans are another route, though lenders require documentation that the money is a gift, not a loan you will have to repay.
Down payment information programs vary by location and change year to year as funding shifts. Some have income limits; others do not. Some require you to take a homebuyer education course. The best starting point is your state housing finance agency or a local nonprofit. They can tell you what is available in your area and what you need to provide.
The real cost of a smaller down payment
Putting down 3 percent instead of 20 percent on a $300,000 house means you borrow $291,000 instead of $240,000. Over 30 years at 7 percent interest, that extra $51,000 in borrowing costs you roughly $120,000 in additional interest and insurance. That is real money, and it is worth understanding before you decide.
That said, waiting five more years to save 20 percent might cost you more if home prices rise faster than you can save, or if you are paying rent in the meantime. A smaller down payment gets you into a home sooner, and you start building equity when ready. The math is different for everyone, and it depends on local market conditions, your income growth, and your personal timeline.
Frequently Asked Questions
Can I buy a house with no money down?
Yes, if you may have access to for a VA loan or USDA loan. VA loans require zero down for may be able to access veterans and active-duty service members. USDA loans also require zero down in rural and some suburban areas for borrowers who meet income limits. Conventional and FHA loans require a down payment, though FHA can be as low as 3.5 percent.
What if I have bad credit but want to buy a house?
FHA loans are designed for people with credit scores as low as 580, though you will pay a higher interest rate and mortgage insurance. Some lenders also work with scores in the 600 range on conventional loans if your down payment is larger and your debt-to-income ratio is low. A larger down payment can offset a lower credit score in a lender's eyes.
How long does it take to remove PMI from my loan?
You can request removal once you reach 20 percent equity in your home. On a 30-year loan, this typically takes 8 to 12 years, depending on your interest rate and how quickly you pay down principal. Some lenders remove it automatically; others require you to request it. Check your loan documents or call your lender to ask about their policy.
Is it better to put down 5 percent or save for 20 percent?
It depends on your situation. Putting down 5 percent gets you into a home sooner and you start building equity when ready, but you pay PMI for years. Saving for 20 percent takes longer but saves you tens of thousands in interest and insurance over the life of the loan. Consider your local market, how fast home prices are rising, and whether you can afford the higher monthly payment with PMI included.
Do I need a down payment for an FHA loan?
Yes. FHA loans require a minimum 3.5 percent down payment. You will also pay mortgage insurance for either 11 years (if you put down 10 percent or more) or the full 30-year loan term (if you put down less than 10 percent). This is lower than many conventional loans, but it is not zero down.