Down payment amounts depend on the loan type and your financial situation
The down payment you need ranges from zero to 20 percent of the home's purchase price, depending on which loan program you use. A conventional loan typically requires 3 to 20 percent down. An FHA loan requires 3.5 percent down. A VA loan (for military members and veterans) requires zero down. A USDA loan (for rural properties) also requires zero down. The lender you choose and the specific loan product matter more than any single rule.
The down payment is the money you bring to closing. The lender finances the rest through the mortgage itself. A smaller down payment means a larger loan, which means higher monthly payments and more interest paid over the life of the loan. A larger down payment means a smaller loan and lower monthly costs, but it requires more cash upfront.
Your credit score, debt-to-income ratio, and savings history all affect what down payment amount a lender will actually accept. Two people buying the same house may face different minimum down payment requirements based on their financial profile.
Key Takeaways
- Conventional loans typically require 3 to 20 percent down, with 20 percent avoiding mortgage insurance costs.
- FHA loans require 3.5 percent down and are designed for first-time buyers and those with lower credit scores.
- VA and USDA loans require zero down payment but have specific may be able to access requirements based on military service or property location.
- Putting down less than 20 percent on a conventional loan triggers private mortgage insurance, which adds to your monthly payment.
- Your lender will verify your down payment funds come from your own savings, not from borrowed money.
Conventional loans and the 20 percent benchmark
A conventional loan is a mortgage that is not backed by a government agency. Lenders typically want 20 percent down on a conventional loan, but they will accept as little as 3 percent. The difference matters because of private mortgage insurance (PMI).
If you put down less than 20 percent on a conventional loan, the lender requires you to pay PMI. This is an insurance policy that protects the lender if you stop paying the mortgage. PMI typically costs 0.5 to 1.5 percent of your loan amount per year, added to your monthly payment. A $300,000 loan with PMI might add $125 to $375 per month. You can remove PMI once you reach 20 percent equity in the home, but that takes years of payments.
Putting down 20 percent avoids PMI entirely. On a $300,000 home, that is $60,000 out of pocket. Many buyers cannot save that much and choose a smaller down payment instead, accepting the PMI cost as the trade-off for buying sooner.
FHA loans for buyers with limited savings
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. On a $300,000 home, that is $10,500.
FHA loans require mortgage insurance regardless of down payment amount. The insurance has two parts: an upfront premium (1.75 percent of the loan amount, usually rolled into the loan) and an annual premium (0.55 to 0.8 percent of the loan amount per year, added to your monthly payment). The annual premium stays on the loan for the life of the mortgage if you put down less than 10 percent, or for at least 11 years if you put down 10 percent or more.
FHA loans are available to first-time buyers and repeat buyers. You need a credit score of at least 580 to may have access to for the 3.5 percent down option. Scores between 500 and 579 may be accepted by some lenders but require 10 percent down.
VA and USDA loans with zero down
A VA loan is available to active-duty military members, veterans, and surviving spouses. It requires zero down payment. You pay a funding fee instead (1.4 to 3.6 percent of the loan amount, depending on your military branch and whether you have used a VA loan before). The fee is usually rolled into the loan.
A USDA loan is available for homes in rural areas and requires zero down payment. You pay a may provide fee (1 percent upfront, rolled into the loan, plus 0.35 percent annually). USDA loans have income limits that vary by county, and the property must meet USDA standards for rural classification.
Both programs have no mortgage insurance requirement. Your monthly payment covers only the loan principal, interest, property taxes, homeowners insurance, and the annual fees. This makes the monthly cost lower than a conventional or FHA loan with the same purchase price.
How lenders verify your down payment funds
Lenders require proof that your down payment comes from your own savings, not from borrowed money. Two months of bank statements are standard. The lender looks for the money sitting in your account before you make an offer on the home.
If you received a gift of money from a family member, most lenders allow it, but you must provide a signed gift letter stating the money does not need to be repaid. The gift giver may need to provide proof the money came from their own account. Some loan programs limit how much of your down payment can be a gift (conventional loans typically allow 100 percent gift funds, while FHA loans may have different rules depending on the lender).
Money from the sale of a previous home, an inheritance, or a bonus counts as your own funds. Retirement account withdrawals are allowed but may trigger tax consequences. Borrowed money—credit cards, personal loans, lines of credit—cannot be used for the down payment.
Down payment information programs
Some states, counties, and nonprofits offer down payment information to first-time buyers or buyers in specific income ranges. These programs may provide grants (money you do not repay) or forgivable loans (loans that are forgiven if you stay in the home for a set period). The amount varies widely, from $2,000 to $50,000 or more, depending on the program and your location.
Down payment information is not the same as a gift. It is a separate funding source that reduces how much you need to save yourself. Some programs require you to take a homebuyer education course before you receive the funds. Others have income limits or require you to buy in a specific neighborhood.
Your lender can tell you whether they accept down payment information and which programs they work with. Local housing authorities and nonprofit housing organizations in your area maintain lists of current programs.
What happens if you cannot save the full down payment
If you have saved 3 to 5 percent but not 20 percent, an FHA loan or a conventional loan with PMI are your main options. Both let you buy with a smaller down payment. The trade-off is a higher monthly payment due to mortgage insurance or a larger loan amount.
If you have saved nothing but meet the may be able to access requirements, a VA loan or USDA loan may be available to you. Both require zero down and no mortgage insurance. If you do not may have access to for either, waiting to save more is often the most cost-effective choice, because every percentage point you add to your down payment reduces your monthly payment and total interest paid.
Some buyers use a combination of strategies: they save what they can, receive a gift from family, and use down payment information to reach the amount their chosen loan program requires. This approach is common and is not a red flag to lenders as long as each funding source is documented.
Frequently Asked Questions
Can I use a credit card to pay my down payment?
No. Lenders consider credit card debt as borrowed money and will not allow it to count toward your down payment. If you put the down payment on a credit card and then pay it off with a loan or borrowed funds, the lender will see the debt and may deny your mortgage. The down payment must come from your own savings or from a documented gift.
What if I put down 10 percent instead of 20 percent on a conventional loan?
You will pay PMI, but it will be lower than if you put down 3 percent. PMI cost decreases as your down payment increases. You can also remove PMI once you reach 20 percent equity through a combination of payments and home appreciation, though this typically takes 8 to 12 years.
Do I have to use my entire savings for the down payment?
No. Lenders want to see that you have reserves—money left over after closing. Most lenders require you to have two to six months of mortgage payments in savings after the down payment and closing costs are paid. This shows you can handle the loan if your income drops temporarily.
Can I borrow money from my 401(k) for a down payment?
Yes, but it has tax consequences. A 401(k) loan must be repaid, and if you leave your job, the loan is often due when ready. A 401(k) withdrawal is taxed as income and may trigger a 10 percent early withdrawal penalty if you are under 59½. Consult a tax professional before using retirement funds for a down payment.
What if the home appraises for less than the purchase price?
If the home appraises lower than what you agreed to pay, your down payment percentage increases because the loan amount stays the same but the home's value is lower. For example, if you agreed to pay $300,000 with 10 percent down ($30,000), but the home appraises at $280,000, your down payment is now 10.7 percent of the appraised value. You may need to renegotiate the price, increase your down payment, or walk away from the deal.