The down payment amount depends on the loan type and your financial situation
There is no single down payment amount that works for everyone. The money you need upfront ranges from 3 percent to 20 percent of the home's purchase price, depending on which loan program you use, your credit history, and what the lender requires. A $300,000 home could require anywhere from $9,000 to $60,000 down, and the difference matters because it changes your monthly payment, your interest rate, and whether you pay mortgage insurance.
The most common paths are conventional loans (which usually want 5 to 20 percent down), FHA loans (which accept 3.5 percent down), VA loans (which allow zero down if you may have access to), and USDA loans (also zero down in may be able to access rural areas). Each has different rules about what counts as your down payment, what credit score you need, and what happens if you put down less than 20 percent.
Key Takeaways
- Conventional loans typically require 5 to 20 percent down, but some lenders will go as low as 3 percent if your credit score is strong.
- FHA loans let you put down 3.5 percent, making them the lowest-down-payment option for most first-time buyers, though you will pay mortgage insurance for the life of the loan.
- VA and USDA loans require zero down payment if you meet the may be able to access requirements, but VA loans are only for military members and veterans, and USDA loans only work in designated rural areas.
- Putting down less than 20 percent on a conventional loan means you will pay private mortgage insurance (PMI) until you reach 20 percent equity, which adds $100 to $300+ per month to your payment.
- Your down payment does not have to come from your own savings — gifts from family, down payment information programs, and employer grants can all count, depending on the loan type.
Conventional loans: 3 to 20 percent down
A conventional loan is a mortgage that is not backed by the federal government. Most conventional loans require 5 to 20 percent down, though some lenders will accept 3 percent if you have a credit score of 680 or higher and a stable income history. On a $300,000 home, 5 percent down is $15,000; 20 percent is $60,000.
The catch is mortgage insurance. If you put down less than 20 percent, you pay private mortgage insurance (PMI) every month until you reach 20 percent equity in the home. PMI typically costs 0.5 to 1.5 percent of your loan amount per year, which means $100 to $300+ monthly on a $300,000 loan. You can remove PMI once you hit 20 percent equity, either by paying down the principal or by waiting for the home to appreciate. Some lenders will drop PMI automatically once you reach 22 percent equity; others require you to request it.
Conventional loans also have stricter credit and income requirements than government-backed loans. Most lenders want a credit score of at least 620, though 680 or higher gets you better rates and lower down payment options. Your debt-to-income ratio (the percentage of your monthly income that goes to debt payments) usually cannot exceed 43 to 50 percent, depending on the lender.
FHA loans: 3.5 percent down with mortgage insurance
An FHA loan is backed by the Federal Housing Administration and is designed for buyers who cannot put down 20 percent. The minimum down payment is 3.5 percent, which on a $300,000 home is $10,500. FHA loans accept credit scores as low as 580, making them accessible to buyers with less-than-perfect credit histories.
The tradeoff is mortgage insurance. FHA loans require both an upfront mortgage insurance premium (paid at closing, usually 1.75 percent of the loan amount) and an annual mortgage insurance premium (paid monthly, usually 0.55 to 0.8 percent of the loan amount per year). Unlike PMI on conventional loans, FHA mortgage insurance does not go away when you reach 20 percent equity — you pay it for the life of the loan if you put down less than 10 percent. If you put down 10 percent or more, the insurance drops off after 11 years.
FHA loans have looser income and credit requirements than conventional loans, but they also have limits on how much you can borrow. The maximum loan amount varies by county and is set by the Federal Housing Finance Agency each year. In 2024, limits range from about $472,000 in low-cost areas to over $1 million in high-cost areas.
VA loans: Zero down for may be able to access veterans and service members
If you are a current or former member of the military, a VA loan allows you to buy a home with zero down payment. You do not pay mortgage insurance either. Instead, you pay a one-time VA funding fee (usually 1.4 to 3.6 percent of the loan amount, depending on your service branch and down payment amount), which can be rolled into the loan itself so you do not have to pay it upfront.
VA loans have no credit score minimum, though most lenders require a score of at least 620. The Department of Veterans Affairs guarantees a portion of the loan, which means lenders are willing to take on more risk. You do need a Certificate of may be able to access from the VA, which you can request through the VA website or through your lender.
The main limitation is that VA loans can only be used to purchase a primary residence. You cannot use a VA loan to buy an investment property or a second home. Also, the VA funding fee applies each time you use the benefit, though disabled veterans may be exempt.
USDA loans: Zero down in rural areas
If you are buying in a rural area, a USDA loan (backed by the U.S. Department of Agriculture) allows zero down payment and no mortgage insurance. Instead, you pay a one-time may provide fee (usually 1 percent of the loan amount, rolled into the loan) and an annual fee (0.35 percent of the loan amount, paid monthly).
USDA loans are available only in designated rural areas, which the USDA defines more broadly than you might expect — some suburbs and small towns may have access to, while some rural counties do not. You can check whether your address is may be able to access on the USDA website. Income limits explore: you cannot earn more than 115 percent of the area median income for your county, though this varies widely by location.
Like VA loans, USDA loans have no credit score minimum, though lenders typically require 620 or higher. You must occupy the home as your primary residence.
Where your down payment money can come from
Your down payment does not have to be money you saved yourself. Lenders accept down payment funds from several sources, though the rules vary by loan type. Family gifts are allowed on all loan types, but most lenders require a signed gift letter stating that the money is a gift and does not need to be repaid. Some lenders also require proof that the gift-giver has the funds available.
Down payment information programs exist in most states and many cities. These programs offer grants or forgivable loans to help with down payments and closing costs. Some are income-based; others target first-time buyers or specific professions (teachers, healthcare workers, law enforcement). The amount varies from a few thousand dollars to 10 percent or more of the purchase price. You can search for programs through your state housing finance agency or through nonprofit organizations like NeighborWorks.
Some employers offer down payment information as an employee benefit, particularly in high-cost areas or for workers in shortage fields. If your employer offers this, the money typically counts toward your down payment without triggering additional requirements. Employer grants do not need to be repaid.
Retirement accounts can sometimes be tapped. If you are a first-time homebuyer, you can withdraw up to $35,000 from a Roth IRA without the usual early-withdrawal penalty, though you will still owe income tax on any earnings. Traditional IRA withdrawals are taxed as income. Some 401(k) plans allow loans against your balance, which you repay to yourself with interest.
How down payment size affects your monthly payment and interest rate
A larger down payment lowers your monthly mortgage payment in two ways. First, you borrow less money, so the principal is smaller. Second, lenders offer better interest rates to buyers who put down more, because they have less risk if the home loses value.
The difference is real. On a $300,000 home with a 30-year mortgage at current rates, putting down 3 percent versus 20 percent can change your monthly payment by $200 to $400, depending on the loan type and your credit score. That includes both the principal-and-interest payment and mortgage insurance (if applicable). Over 30 years, that difference adds up to tens of thousands of dollars.
However, a smaller down payment is not always the wrong choice. If you have a low interest rate locked in, or if you expect your income to rise significantly, or if you want to keep cash available for emergencies or investments, putting down 3 to 5 percent and paying mortgage insurance may make sense. The key is understanding the full cost, not just the upfront amount.
Frequently Asked Questions
Can I use a credit card or personal loan for my down payment?
Most lenders do not allow down payment funds that come from debt. If you use a credit card or personal loan, lenders will see the new debt on your credit report and may deny your mortgage process or require you to pay off the debt first. Some lenders allow personal loans if they are paid off before closing. Ask your lender before you borrow.
What if I do not have enough saved for the minimum down payment?
Down payment information programs, employer grants, and family gifts can bridge the gap. Start by checking your state housing finance agency website for local programs, and ask your employer whether they offer down payment help. If you have family who can gift money, a signed gift letter makes it acceptable to lenders.
Does a larger down payment always mean a better interest rate?
Usually, yes — lenders offer lower rates to buyers with larger down payments because the risk is lower. However, the difference between 10 percent and 20 percent down may be smaller than the difference between 3 percent and 10 percent. Ask your lender for a rate quote at different down payment levels to see the actual impact.
Can I put down less than 3 percent on a conventional loan?
Some lenders offer 2 percent down conventional loans, but they are rare and require a strong credit score (usually 700+), stable income, and a low debt-to-income ratio. Most buyers in this situation are better served by FHA loans, which have more consistent 3.5 percent options.
What happens if the home is worth less than I paid after I buy it?
If the home loses value and you owe more than it is worth, you are underwater on the mortgage. A larger down payment protects you because you have more equity cushion. With 20 percent down, the home would have to lose 20 percent of its value before you are underwater; with 3 percent down, even a small decline puts you underwater.