The minimum down payment depends on the loan type, not on a fixed rule
There is no single answer because different loan programs require different amounts. A conventional loan typically requires 3 to 20 percent of the home's purchase price. An FHA loan requires 3.5 percent. A VA loan (for military members and veterans) requires zero percent down. A USDA loan (for rural properties) also requires zero percent down. The amount you need depends on which program you may have access to for and which one you choose.
The purchase price of the home determines the dollar amount. On a $300,000 house, 3 percent is $9,000. On a $500,000 house, 3 percent is $15,000. On the same $300,000 house, 20 percent is $60,000. The lower your down payment, the more you borrow, and the higher your monthly payment and total interest cost.
Key Takeaways
- FHA loans require 3.5 percent down; conventional loans require 3 to 20 percent; VA and USDA loans require zero percent down.
- A smaller down payment means a larger loan, higher monthly payments, and mortgage insurance costs that add hundreds of dollars per year.
- Lenders look at your debt-to-income ratio and credit score, not just the down payment amount, to decide whether to approve you.
- Putting down less than 20 percent on a conventional loan triggers private mortgage insurance, which you pay until you reach 20 percent equity.
- Down payment information programs exist in many states and counties, though they vary widely in what they cover and who qualifies.
How down payment size affects your monthly payment and total cost
The down payment you make reduces the amount you borrow. If you put down $30,000 on a $300,000 house, you borrow $270,000. If you put down $60,000, you borrow $240,000. The smaller loan means a lower monthly payment, less interest paid over the life of the loan, and no mortgage insurance.
Mortgage insurance is the cost that catches most people off guard. When you put down less than 20 percent on a conventional loan, the lender requires private mortgage insurance (PMI). On a $270,000 loan, PMI typically costs between $150 and $300 per month, depending on your credit score and the size of your down payment. That is $1,800 to $3,600 per year. You pay it until you reach 20 percent equity in the home — which takes years, even as you make payments.
FHA loans require mortgage insurance too, called mortgage insurance premium (MIP). The upfront cost is 1.75 percent of the loan amount, added to what you borrow. On a $270,000 FHA loan, that is $4,725 rolled into your mortgage. Annual MIP is roughly 0.55 percent of the loan amount, or about $150 per month. You pay it for the life of the loan if you put down less than 10 percent.
Minimum down payments by loan type
| Loan Type | Minimum Down Payment | Mortgage Insurance Required |
|---|---|---|
| Conventional | 3 to 5 percent | Yes, until 20 percent equity |
| FHA | 3.5 percent | Yes, for life of loan if under 10 percent down |
| VA | Zero percent | No |
| USDA | Zero percent | Yes, for life of loan |
What lenders actually look at beyond the down payment amount
The down payment is only one part of the lender's decision. They also examine your debt-to-income ratio, which is your total monthly debt payments divided by your gross monthly income. Most lenders want this ratio to be 43 percent or lower. If you earn $5,000 per month and already have $1,500 in car payments, student loans, and credit card minimums, your new mortgage payment can only be about $700 to stay under 43 percent. A larger down payment does not change this calculation.
Your credit score affects whether you are approved and what interest rate you receive. Conventional loans typically require a score of 620 or higher; FHA loans may go as low as 500 or 580 depending on the lender. A score of 740 or above usually gets the best rates. A score of 620 to 680 may mean a higher rate and higher mortgage insurance costs.
Lenders verify your income, employment history, and savings. They want to see that you have been at your job for at least two years and that you have money in the bank beyond the down payment. This reserve amount varies by lender but is often three to six months of your projected mortgage payment.
Down payment information programs in your state or county
Many states and counties offer programs that help with down payment costs. These programs may cover part or all of the down payment, reduce the interest rate you pay, or both. Some are grants (you do not repay them); others are forgivable loans (you repay them only if you sell the house within a set number of years).
The programs vary widely. Some are limited to first-time homebuyers; others are open to anyone. Some cover only the down payment; others also cover closing costs. Some have income limits; others do not. Some require you to take a homebuyer education course. To find what exists in your area, contact your state housing finance agency or search the HUD Homebuyer Resources page, which lists programs by state.
Local nonprofits and community development organizations also run down payment information. Your real estate agent or mortgage lender may know of programs specific to your county. Because these programs change and run out of funding, calling to ask what is currently available is faster than searching online.
How to decide what down payment amount makes sense for you
Start by calculating what you can afford to save without emptying your emergency fund. A down payment that leaves you with no savings is risky — homeownership brings unexpected costs, and you need cash on hand for repairs and emergencies.
Next, compare the cost of a smaller down payment (including mortgage insurance) against the cost of waiting to save more. If you can put down 5 percent now or 20 percent in three years, calculate the mortgage insurance you would pay over those three years, plus the rent you would pay while waiting. Sometimes buying sooner with a smaller down payment costs less overall.
If you have access to down payment information, use it. The money is there to reduce your out-of-pocket cost. The trade-off is usually paperwork and a homebuyer education course, which takes a few hours.
Frequently Asked Questions
Can I borrow the down payment from family or a friend?
Most lenders allow a gift from a family member, but not a loan. If you borrow money, the lender counts it as debt in your debt-to-income ratio, which may disqualify you. If it is a gift, the lender typically requires a letter from the family member stating it is a gift, not a loan, and that they do not expect repayment.
What happens if I put down less than 3 percent?
Conventional loans do not go below 3 percent. FHA loans go down to 3.5 percent. If you have less than 3 percent saved, your options are VA or USDA loans (if you may have access to), or waiting to save more. Some lenders offer 1 to 2 percent down programs, but these are rare and come with higher interest rates and mortgage insurance costs.
Does a larger down payment always mean a lower interest rate?
Not automatically. Your credit score, income, and the current market are the main factors in your interest rate. A larger down payment reduces your risk to the lender, which may result in a slightly lower rate, but the difference is usually small — often a quarter percent or less. Ask your lender to show you rate quotes at different down payment amounts.
Can I use retirement savings for a down payment?
You can withdraw from a traditional or Roth IRA without penalty if you are a first-time homebuyer, up to $10,000 lifetime. You cannot borrow from a 401(k) for a down payment without triggering taxes and penalties. Consult a tax professional before withdrawing retirement funds, as the rules are complex and depend on your age and account type.
What if I cannot save a down payment at all?
VA and USDA loans require zero down if you may have access to. FHA loans require only 3.5 percent. Down payment information programs in your state or county may cover the full amount. Contact your local housing authority or call 211 to ask what programs exist where you live.