The down payment amount you choose depends on the loan type, your savings, and what you can afford to borrow
There is no single answer because different loan programs accept different down payments. A down payment is the money you give the seller at closing — the rest of the house price comes from a loan (called a mortgage) that you repay over time. You might put down 3 percent of the price, 20 percent, or anything in between, depending on which lender and loan program you use.
The lower your down payment, the more you borrow and the more interest you pay over the life of the loan. The higher your down payment, the less you borrow, but the more cash you need upfront. Most first-time buyers put down between 3 and 10 percent because that balance lets them buy without draining their savings entirely.
Key Takeaways
- Conventional loans typically require 3 to 20 percent down, while FHA loans allow as little as 3.5 percent and VA loans may require zero down if you are a may have access to veteran.
- A smaller down payment means a larger monthly payment and mortgage insurance costs, while a larger down payment reduces both but requires more cash now.
- Down payment requirements vary by lender, so comparing offers from multiple banks or mortgage brokers can show you what each one will accept.
- Your down payment is separate from closing costs, which typically run 2 to 5 percent of the house price and cover appraisals, inspections, title work, and lender fees.
Common down payment amounts by loan type
Conventional loans (mortgages from banks and lenders, not backed by the government) usually start at 3 percent down. Some lenders go lower, but 3 percent is the floor for most. At the other end, 20 percent is common because it eliminates the need for mortgage insurance — a monthly fee added to your payment if you put down less than 20 percent.
FHA loans (backed by the Federal Housing Administration, a government agency) allow 3.5 percent down. These loans are designed for buyers with lower savings or credit scores. The tradeoff is that FHA loans require mortgage insurance no matter how much you put down, and that insurance stays on the loan for the life of the loan if you put down less than 10 percent.
VA loans (for military members, veterans, and some surviving spouses) often require zero down. USDA loans (for rural properties) also allow zero down for borrowers who meet income limits. Both programs still charge fees, but they let you avoid the down payment entirely.
What happens when you put down less than 20 percent
When your down payment is below 20 percent, your lender requires mortgage insurance — a monthly payment that protects the lender if you stop paying the mortgage. This insurance is not optional; it is built into your loan. On a conventional loan, this is called PMI (private mortgage insurance). On an FHA loan, it is called MIP (mortgage insurance premium).
The cost varies by loan type and down payment size. On a conventional loan with 10 percent down, mortgage insurance might add $150 to $300 per month to your payment, depending on the loan amount and your credit score. On an FHA loan, the cost is typically higher. This is why some buyers choose to put down more than 3 percent even if they can afford less — the monthly savings on insurance can be substantial.
You can remove mortgage insurance from a conventional loan once you have paid down the balance to 80 percent of the original house price, but you have to request it. FHA mortgage insurance stays on the loan permanently if you put down less than 10 percent.
The real cost of a smaller down payment
A smaller down payment feels easier at first because you need less cash upfront. But the monthly cost adds up. Say you are buying a $300,000 house. With 20 percent down ($60,000), you borrow $240,000. With 5 percent down ($15,000), you borrow $285,000. That extra $45,000 in borrowing means roughly $270 more per month in principal and interest alone, plus mortgage insurance on top.
Over a 30-year loan, that difference compounds. You pay far more in total interest. The advantage of a smaller down payment is that you keep more cash in savings for emergencies, repairs, or other needs. The disadvantage is a larger monthly payment for decades.
This is a personal decision based on your situation. If you have steady income, an emergency fund, and the monthly payment fits your budget, a smaller down payment can make sense. If your income is uncertain or your budget is tight, a larger down payment reduces the risk of missing a payment.
Down payment versus closing costs
Many first-time buyers confuse down payment with closing costs — they are different things. Your down payment is the money you give toward the house price. Closing costs are fees for the services needed to complete the sale: the appraisal (to confirm the house is worth the price), the title search (to confirm the seller owns it), the inspection, the lender's processing fee, and others.
Closing costs typically run 2 to 5 percent of the house price on top of your down payment. On a $300,000 house, closing costs might be $6,000 to $15,000. Some lenders allow you to roll closing costs into the loan, but that increases your monthly payment. Some sellers will pay part of your closing costs as part of the negotiation, but that is not may provide.
When you are saving for a house, budget for both. If you plan to put 5 percent down on a $300,000 house, you need $15,000 for the down payment plus $6,000 to $15,000 for closing costs — roughly $21,000 to $30,000 total before you own the house.
How lenders decide what down payment to accept
Lenders look at three main things: the loan program (conventional, FHA, VA, or USDA), your credit score, and your debt-to-income ratio (how much you owe each month compared to how much you earn). A higher credit score and lower debt-to-income ratio can open doors to lower down payments or better interest rates.
Different lenders have different rules. One bank might require 5 percent down for a conventional loan, while another accepts 3 percent. A mortgage broker can shop multiple lenders and show you what each one will offer. This is worth doing because the difference in down payment requirements can mean thousands of dollars in upfront cash.
Some lenders also offer down payment information programs — grants or loans that help cover part of your down payment. These are usually run by nonprofits, state housing agencies, or employers. They vary widely by location and income, so ask your lender or local housing authority whether any programs exist in your area.
Frequently Asked Questions
Can I borrow the down payment from family or friends?
Most lenders allow a gift from a family member, but they require a signed letter stating it is a gift, not a loan you have to repay. Some lenders have limits on how much of your down payment can be a gift — many require at least 5 to 10 percent to come from your own savings. Borrowing from friends or family and then repaying them counts as a debt, which hurts your debt-to-income ratio and may disqualify you.
What if I do not have enough saved for a down payment?
Look into FHA loans (3.5 percent down), VA or USDA loans (zero down if you may have access to), or down payment information programs in your state or city. Some employers and nonprofits also offer down payment help. A mortgage broker can tell you which programs you may be able to use based on your income and location.
Is it better to put down more money or keep savings for emergencies?
Most financial advisors suggest keeping three to six months of expenses in savings before buying a house. If putting down 20 percent would drain your emergency fund, a smaller down payment and mortgage insurance might be the safer choice. You can always pay extra toward the mortgage later to build equity faster.
Can I increase my down payment after I am approved for a loan?
Yes. If you save more money between approval and closing, you can put down more. This reduces the loan amount and your monthly payment. Tell your lender as soon as you know, so they can recalculate the loan and update your closing documents.
Does a larger down payment may provide a lower interest rate?
Not automatically, but it can help. Interest rates are set by the lender based on market conditions, your credit score, and the loan type. A larger down payment shows lower risk to the lender, which may result in a slightly better rate, but the difference is usually small — a few hundredths of a percent. Your credit score matters more than down payment size for the rate you receive.