What first-time buyers actually put down
First-time buyers put down anywhere from 0% to 20% of the home's purchase price, depending on the loan type and your financial situation. There is no single required amount — it varies by the mortgage program you use, not by law or a universal standard.
The most common range for first-time buyers is 3% to 5% down. This is because most first-time buyer programs — FHA loans, VA loans, USDA loans, and many conventional loans with first-time buyer overlays — allow down payments in that range. A 20% down payment eliminates mortgage insurance but is not required and is less common among first-time buyers because it requires more cash upfront.
Your actual down payment depends on three things: the loan program you choose, the lender's requirements, and how much cash you have available. A lender will not let you put down less than the program allows, but you can always put down more if you have the funds.
Key Takeaways
- FHA loans allow down payments as low as 3.5%, VA loans may require 0% down, and USDA loans in rural areas may also require 0% down, while conventional loans typically start at 3% to 5% for first-time buyers.
- Putting down less than 20% means you will pay mortgage insurance (PMI on conventional loans, MIP on FHA loans), which adds to your monthly payment but does not go toward the home's equity.
- Your down payment is separate from closing costs, which typically run 2% to 5% of the purchase price and are due at closing — you need cash for both.
- Some first-time buyer programs offer down payment information or grants that reduce or cover part of your down payment, though these vary by state and local area.
- The amount you put down affects your interest rate, monthly payment, and total loan cost, so the lowest down payment is not always the best choice for your situation.
How down payment amount changes by loan type
FHA loans allow down payments as low as 3.5% of the purchase price. This is the most common choice for first-time buyers with limited cash. You will pay mortgage insurance (called MIP on FHA loans) for the life of the loan if you put down less than 10%, or for at least 11 years if you put down 10% or more. An FHA loan on a $300,000 home with 3.5% down means you put down $10,500.
VA loans are for military members, veterans, and some surviving spouses. Many VA loans require 0% down — you can borrow the full purchase price. There is no mortgage insurance, though you will pay a VA funding fee (typically 2.3% of the loan amount for first-time use). VA loans are not available to all buyers, only those who meet military service requirements.
USDA loans are for rural and some suburban areas and may also allow 0% down. Like VA loans, they have no mortgage insurance but do charge a may provide fee. USDA loans are limited to properties in designated rural areas and to buyers whose income does not exceed 115% of the area median income.
Conventional loans for first-time buyers typically start at 3% to 5% down through first-time buyer programs offered by Fannie Mae, Freddie Mac, or individual lenders. You will pay private mortgage insurance (PMI) if you put down less than 20%. Conventional loans have stricter credit and income requirements than FHA loans.
What mortgage insurance costs and when you pay it
Mortgage insurance protects the lender if you stop paying, not you. On a conventional loan with less than 20% down, you pay PMI (private mortgage insurance). On an FHA loan, you pay MIP (mortgage insurance premium). Both are added to your monthly payment.
PMI on a conventional loan typically costs 0.5% to 1.5% of the loan amount per year, depending on your down payment, credit score, and loan type. On a $285,000 conventional loan (after putting 5% down on a $300,000 home), PMI might run $120 to $360 per month. You can remove PMI once you reach 20% equity in the home, either through payments or home appreciation, though this takes years.
FHA mortgage insurance is higher upfront. You pay an upfront MIP of 1.75% of the loan amount at closing (often rolled into the loan), plus an annual MIP of 0.55% to 0.80% per year depending on your down payment and loan term. On the same $285,000 FHA loan, upfront MIP would be about $4,987, and annual MIP would add roughly $130 to $190 per month. Unlike PMI, you cannot remove MIP on FHA loans with less than 10% down.
The choice between FHA and conventional often comes down to total cost over time. FHA has higher upfront costs but may have lower interest rates and easier approval. Conventional has lower upfront costs but higher monthly insurance if you put down less than 10%.
Down payment information and grants for first-time buyers
Many states, cities, and nonprofits offer down payment information programs that reduce or cover part of your down payment. These are not loans you repay — they are grants or forgivable loans. Availability and amounts vary widely by location.
Common sources include state housing finance agencies, local housing authorities, and nonprofits like NeighborWorks America. Some programs cover 2% to 5% of the purchase price; others cover more. Many have income limits, credit score minimums, and require you to complete a homebuyer education course.
To find programs in your area, contact your state housing finance agency or search the HUD website for local down payment information. Your lender may also know of programs they work with. Start this search early — some programs have waiting lists or limited funding.
Down payment versus closing costs: what you actually need in cash
Your down payment is only part of the cash you need at closing. Closing costs — appraisal, title insurance, attorney fees, inspections, and lender fees — typically run 2% to 5% of the purchase price and are due at closing.
On a $300,000 home, a 5% down payment is $15,000. Closing costs might be another $6,000 to $15,000. You need both amounts in cash, though some closing costs can be negotiated or rolled into the loan in certain situations. Some lenders offer "no closing cost" loans, but the costs are built into your interest rate instead.
Many first-time buyers underestimate total cash needed. Budget for down payment plus 2% to 5% of the purchase price for closing costs, plus a small reserve for inspections or appraisal gaps. If you do not have enough for both, explore down payment information programs or ask the seller to cover some closing costs as part of the purchase agreement.
How down payment size affects your interest rate and monthly payment
A larger down payment typically lowers your interest rate. Lenders see a larger down payment as lower risk — you have more skin in the game and are less likely to walk away. The difference is usually 0.25% to 0.5% in interest rate, which adds up over 30 years.
On a $285,000 loan, the difference between a 6.5% rate and a 7% rate is roughly $100 per month. Over 30 years, that is $36,000 in additional interest. A larger down payment also means a smaller loan amount, so your monthly payment is lower even before the rate difference.
However, a larger down payment is not always the best move. If you have limited cash, putting down 3% and keeping reserves for emergencies or home repairs may be smarter than stretching to put down 10%. A home inspection, roof repair, or HVAC replacement can cost $5,000 to $15,000 in the first year. Running out of cash after closing creates real problems.
Frequently Asked Questions
Can I put down less than 3% on a conventional loan?
Some lenders offer 1% to 2% down conventional loans, but these are less common and usually require a higher credit score, larger cash reserves, and a higher interest rate. Most first-time buyer programs start at 3%. Ask your lender what they offer — availability varies by lender and your financial profile.
What if I do not have enough for a down payment?
Explore down payment information programs in your state or city, which may cover 2% to 10% of the purchase price. You can also ask family members for a gift (most lenders allow this if documented in writing), or delay buying until you have saved more. VA and USDA loans may allow 0% down if you meet may be able to access requirements.
Does putting down 20% mean I avoid all mortgage insurance?
Yes, on conventional loans. A 20% down payment eliminates PMI. On FHA loans, you still pay mortgage insurance even with 20% down, though it drops to a lower annual rate. If you are considering FHA, ask your lender whether conventional with 20% down or FHA with a lower down payment costs less over time.
Can I increase my down payment after I start the mortgage process?
Yes, most lenders allow you to increase your down payment up until closing. This changes your loan amount and may affect your interest rate and monthly payment. Tell your lender as soon as you know you have additional funds — they will recalculate your numbers and provide an updated closing disclosure.
What happens if the home appraises for less than the purchase price?
If the appraisal comes in low, your down payment percentage increases (because you are borrowing less than expected). For example, if you agreed to put 5% down on a $300,000 home but it appraises at $280,000, you now have 5.7% down. You may need to bring additional cash to closing, renegotiate the price, or walk away depending on your contract terms.