Most mortgages require a down payment, but the amount varies widely
You do not have to put down 20 percent to buy a house. That number is a myth that stops many people from even looking. Most lenders will accept down payments between 3 and 10 percent of the home's purchase price. Some programs go lower—FHA loans, for example, allow 3.5 percent down. A handful of lenders offer 0 percent down mortgages, though these come with trade-offs like higher interest rates or stricter income requirements.
The down payment you actually need depends on three things: the type of loan you're getting, your credit score, and the lender's own rules. A conventional loan from a bank might want 5 percent down and a 680 credit score. An FHA loan through the same bank might accept 3.5 percent down with a 580 score. A VA loan (if you're military or a veteran) or a USDA loan (if you're buying in a rural area) may ask for nothing down at all.
The catch is that a smaller down payment usually means a higher monthly payment. You'll pay more in interest over the life of the loan, and you'll likely pay for mortgage insurance—an extra monthly fee that protects the lender if you stop paying. That insurance disappears once you've paid down enough of the loan, but it can add hundreds of dollars a month in the meantime.
Key Takeaways
- Down payments typically range from 3 to 20 percent of the home price, depending on the loan type and your financial profile.
- FHA loans allow 3.5 percent down; VA and USDA loans may require nothing down if you meet their other requirements.
- Putting down less than 20 percent usually triggers mortgage insurance, which adds to your monthly payment until you reach 20 percent equity.
- Your credit score, debt-to-income ratio, and savings for closing costs matter as much as the down payment itself.
- Some lenders offer down payment help programs or grants, especially for first-time buyers or lower-income households.
How down payment size affects your monthly costs
A smaller down payment lowers the cash you need upfront, but it raises what you pay every month. On a $300,000 house with a 30-year mortgage at 7 percent interest, putting down 3 percent ($9,000) instead of 20 percent ($60,000) saves you $51,000 in cash right now. But your monthly payment jumps from roughly $1,260 to $1,580—an extra $320 a month. Over 30 years, that's nearly $115,000 more in total payments.
Mortgage insurance is the main reason. If you put down less than 20 percent on a conventional loan, the lender requires you to carry private mortgage insurance (PMI). On that $300,000 house with 3 percent down, PMI might run $150 to $200 a month. You pay it until you've built up 20 percent equity in the home—which could take 10 to 15 years, depending on how fast home values rise and how quickly you pay down the principal.
FHA loans use a similar system called mortgage insurance premium (MIP), but the rules are different. You pay an upfront MIP when you close (usually rolled into the loan), plus an annual MIP that stays on the loan for the full 30 years if you put down less than 10 percent. That's a permanent cost, not a temporary one.
Loan types and their down payment minimums
The type of loan you get determines what down payment is even possible. Here's what each major category requires:
| Loan Type | Minimum Down Payment | Who Can Use It | Key Trade-off |
|---|---|---|---|
| Conventional (bank or mortgage company) | 3–20 percent | Anyone with decent credit and income | PMI required below 20 percent; higher credit score needed |
| FHA (Federal Housing Administration) | 3.5 percent | First-time and repeat buyers; lower credit scores accepted | Mortgage insurance premium stays for life if down payment under 10 percent |
| VA (Veterans Affairs) | 0 percent | Military members, veterans, surviving spouses | Only available to those who meet military service requirements |
| USDA (U.S. Department of Agriculture) | 0 percent | Buyers in rural areas; income limits explore | Property must be in may be able to access rural area; income cannot exceed limits |
Conventional loans are the most common but also the most flexible. Lenders compete on rates and terms, so shopping around matters. FHA loans are popular with first-time buyers because they accept lower credit scores (as low as 580) and allow smaller down payments, but the permanent mortgage insurance on low-down loans is a real cost to weigh.
VA and USDA loans are powerful tools if you may have access to. A VA loan with 0 percent down and no mortgage insurance can save you tens of thousands over the life of the loan. But you must have served in the military or be a surviving spouse. USDA loans work the same way for rural properties, but the property has to be in a USDA-may be able to access area and your income has to fall below the county limit.
What lenders actually look at beyond the down payment
Lenders care about your down payment, but they care more about whether you can actually pay the mortgage. A 3 percent down payment with a 750 credit score and stable income is less risky to them than a 20 percent down payment with a 580 score and spotty employment history.
Your debt-to-income ratio (DTI) is often the deciding factor. This is the percentage of your gross monthly income that goes to debt payments—car loans, credit cards, student loans, and the new mortgage. Most lenders want your DTI below 43 percent. Some will go to 50 percent if your credit is strong and your down payment is large. If you earn $5,000 a month and already owe $1,500 in car and credit card payments, a new mortgage payment above $1,650 will push you over 43 percent and likely get denied, no matter how much you put down.
Your credit score determines the interest rate you'll be offered. A score of 740 might get you 6.5 percent; a score of 620 might get 7.5 percent. Over 30 years on a $300,000 loan, that one-point difference costs you roughly $60,000 in extra interest. Improving your credit before you explore—by paying down credit cards or fixing errors on your report—can save more money than scraping together a bigger down payment.
Savings for closing costs matter too. Down payment is only part of the cash you need. Closing costs (appraisal, title insurance, attorney fees, taxes) typically run 2 to 5 percent of the purchase price. On a $300,000 house, that's $6,000 to $15,000. Some lenders will roll closing costs into the loan, but that increases your monthly payment. Others require you to pay them in cash at closing.
Down payment help programs for buyers with limited savings
If you don't have enough cash saved, several programs exist to help. These are not loans you repay—they're grants or forgivable loans that reduce the amount you need to bring to closing.
State and local down payment information programs vary by location. Some states offer grants to first-time buyers; others offer forgivable loans that disappear if you stay in the home for a set number of years. Your state housing finance agency (search "[your state] housing finance agency" online) can tell you what's available. Some programs are income-based; others are open to anyone buying in a certain area or buying a home under a certain price.
Employer programs are less common but worth asking about. Some large employers—especially hospitals, universities, and government agencies—offer down payment help as a benefit. A few tech companies and financial firms do too. Ask your HR department if yours does.
Nonprofit organizations in your area may also offer grants or matched savings programs. These typically require you to complete a homebuyer education course and save a certain amount yourself; the organization then matches your savings. The National Council of State Housing Agencies (NCSHA) maintains a database of state programs, and NeighborWorks America can point you to local nonprofits.
Family gifts are another option. Most lenders allow you to count a gift from a relative toward your down payment, though they'll ask for a signed letter confirming it's a gift, not a loan you have to repay. The gift cannot come with strings attached—the lender needs to know you won't be expected to pay it back.
What happens if you can't save a down payment right now
If you're not ready to buy yet, the most practical path is usually to save and improve your credit at the same time. Even a 3 percent down payment requires cash, and most lenders want to see that you can manage money responsibly. Paying bills on time, keeping credit card balances low, and avoiding new debt all raise your score and make you a stronger candidate when you do explore.
If you're in a rush to buy, a 0 percent down loan (VA, USDA, or occasionally a conventional loan from a credit union) is real, but the trade-offs are steep. You'll pay a higher interest rate, and you'll carry mortgage insurance or a funding fee for years. Sometimes it's worth it; sometimes it's better to wait six months and save a few thousand dollars.
Renting while you save is not failure. It's a choice that keeps you from stretching too thin. A mortgage you can comfortably afford with a 10 percent down payment is better than one you strain to pay with 3 percent down and mortgage insurance eating your budget.
Frequently Asked Questions
Can I buy a house with no money down?
Yes, if you may have access to for a VA loan (military or veteran), a USDA loan (rural property), or occasionally a conventional loan from a credit union or portfolio lender. These are real options, not scams. The catch is that 0 percent down usually means a higher interest rate and additional fees to offset the lender's risk.
What's the difference between PMI and MIP?
PMI (private mortgage insurance) is used on conventional loans and goes away once you reach 20 percent equity. MIP (mortgage insurance premium) is used on FHA loans and, if your down payment is under 10 percent, stays for the full 30-year loan. MIP is permanent; PMI is temporary.
Does a bigger down payment always mean a lower interest rate?
Not always. Your credit score and the current market rate matter more than your down payment size. A buyer with a 750 credit score and 5 percent down might get a better rate than a buyer with a 620 score and 20 percent down. That said, a larger down payment does reduce the lender's risk, so it can help you get approved when you might otherwise be denied.
What if I put down 15 percent instead of 20 percent?
You'll still pay PMI on a conventional loan, but it will be lower than with a 5 percent down payment. The PMI amount scales with how much equity you have. At 15 percent down, you're closer to the 20 percent threshold, so you'll shed the insurance sooner—usually in 5 to 10 years instead of 10 to 15.
Can I use a gift from a friend for my down payment?
Most lenders require the gift to come from a family member, not a friend. They'll ask for a signed letter from the relative stating it's a gift with no repayment expected. Some lenders are stricter than others, so ask your lender upfront before you accept money from anyone.