Down payment amounts for first-time buyers range from zero to 20 percent, depending on the loan type and lender
There is no single required down payment. A Federal Housing Administration (FHA) loan lets you put down as little as 3.5 percent of the home price. A Veterans Affairs (VA) loan requires zero down if you have military service history. Conventional loans typically start at 3 percent down, though some lenders require 5 or 10 percent. A 20 percent down payment eliminates the need for mortgage insurance, but it is not required to buy a home.
The amount you put down affects your monthly payment, how much you borrow, and whether you pay mortgage insurance for years after closing. A smaller down payment means a larger loan and higher monthly costs. A larger down payment reduces what you owe and can lower your interest rate, because lenders see less risk.
Your actual options depend on three things: the loan program you use, the lender's rules, and your credit score and income. A lender will not offer you a 3 percent down option if your credit is below 620, for example. Some lenders have stopped offering the lowest down payment options altogether. Your job is to find which lenders still offer what you need.
Key Takeaways
- FHA loans allow down payments as low as 3.5 percent; VA loans allow zero down for may be able to access veterans; conventional loans typically start at 3 percent.
- Putting down less than 20 percent triggers mortgage insurance, which adds $100 to $300+ per month to your payment depending on the loan size and type.
- Your credit score, debt-to-income ratio, and savings for closing costs all affect which down payment options a lender will actually offer you.
- The lowest down payment is not always the best choice—a slightly larger down payment can lower your interest rate and reduce long-term costs.
FHA loans: 3.5 percent down for borrowers with lower credit
An FHA loan is backed by the Federal Housing Administration and is designed for first-time buyers and people with credit scores as low as 580. The minimum down payment is 3.5 percent. If your credit is between 580 and 619, you must put down 3.5 percent and pay mortgage insurance for the life of the loan. If your credit is 620 or higher, you can put down 3.5 percent and stop paying mortgage insurance after 11 years (if you put down exactly 3.5 percent) or after 5 years (if you put down 10 percent or more).
FHA loans have limits on how much you can borrow. These limits vary by county and change each year. In 2024, the limit ranges from about $440,000 in lower-cost areas to over $1 million in high-cost areas. Check your county's limit on the HUD website before you start shopping.
The trade-off is mortgage insurance. An FHA loan requires both an upfront mortgage insurance premium (paid at closing or rolled into your loan) and an annual premium added to your monthly payment. On a $300,000 loan with 3.5 percent down, mortgage insurance can add $150 to $200 per month.
VA loans: zero down for veterans and active-duty service members
If you served in the military, a VA loan requires no down payment and no mortgage insurance. You pay a one-time funding fee (usually 2.3 percent of the loan amount for first-time users, less if you have a service-connected disability) that can be rolled into the loan. VA loans have no upper limit on how much you can borrow, though lenders set their own caps.
VA loans are available to veterans, active-duty service members, National Guard members, and surviving spouses of service members who died in service or from a service-connected disability. You will need a Certificate of may be able to access from the VA, which you can request online through VA.gov or through your lender.
The catch is that not all lenders offer VA loans, and those that do sometimes have stricter credit or income requirements than FHA or conventional programs. Start by asking your bank or credit union whether they work with VA loans. If not, ask for a referral to a lender that does.
Conventional loans: 3 to 20 percent down, with variation by lender
A conventional loan is not backed by a government agency. Lenders set their own rules. Most will accept 3 percent down for borrowers with a credit score of 620 or higher, but some require 5 or 10 percent. A few lenders have stopped offering anything below 5 percent.
If you put down less than 20 percent on a conventional loan, you pay private mortgage insurance (PMI). PMI protects the lender if you stop paying. On a $300,000 loan with 5 percent down, PMI can add $150 to $250 per month. You can remove PMI once you have paid down the loan to 80 percent of the home's original purchase price, which usually takes 8 to 12 years depending on your payment schedule and whether home values rise.
Conventional loans have no government limits on loan size, so they work for expensive homes. They also tend to have lower interest rates than FHA loans if your credit is good (680 or higher). The trade-off is stricter income and credit requirements upfront.
How much you actually have available matters more than what is allowed
Lenders care about 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 loans, credit cards, and student loans, you have only $700 left for a mortgage payment. That limits how much you can borrow regardless of your down payment.
You also need money for closing costs, which typically run 2 to 5 percent of the home price. On a $300,000 home, that is $6,000 to $15,000. Some programs let you roll closing costs into the loan or ask the seller to cover them, but you should plan to have this money available. If you are putting down 3 percent and have barely scraped together that amount, you may not have enough left for closing costs.
Before you decide on a down payment amount, talk to a lender about what you actually may have access to for. A pre-qualification letter (not a pre-approval) is free and takes 10 minutes. A full pre-approval takes longer but shows sellers you are serious and tells you exactly what you can afford.
Mortgage insurance: what it costs and how long you pay it
Mortgage insurance exists because lenders lose money when borrowers default. If you put down less than 20 percent, the lender requires you to buy insurance that pays them if you stop paying. You pay for it, but you do not benefit from it.
On an FHA loan, mortgage insurance is mandatory for the life of the loan if you put down 3.5 percent (unless your credit is 620+ and you wait 11 years). On a conventional loan, you can remove PMI once you reach 20 percent equity in the home. On a VA loan, there is no mortgage insurance at all.
The cost varies. FHA mortgage insurance runs roughly 0.55 percent of the loan amount per year on top of your regular payment. Conventional PMI runs 0.5 to 1.5 percent per year depending on your credit score and down payment. On a $300,000 loan, that is $125 to $450 per month. Over 10 years, mortgage insurance can cost $15,000 to $54,000.
Comparing down payment options side by side
| Loan Type | Minimum Down Payment | Credit Score Needed | Mortgage Insurance | Best For |
|---|---|---|---|---|
| FHA | 3.5% | 580+ | Yes, for life if 3.5% down and credit under 620 | Lower credit scores, smaller down payment savings |
| VA | 0% | No minimum | No | Veterans and active-duty service members |
| Conventional | 3–5% (varies by lender) | 620+ | Yes, until you reach 20% equity | Good credit, willing to pay PMI short-term |
Frequently Asked Questions
Can I use a gift from family for my down payment?
Yes. Most lenders allow down payment gifts from family members, but they require a signed gift letter stating the money is a gift, not a loan you have to repay. The lender will ask to see the gift funds in your bank account before closing. Some programs limit how much of your down payment can be a gift; FHA allows 100 percent gift funds, while some conventional lenders require you to contribute at least 3 percent of your own money.
What if I can only afford 2 percent down?
Most lenders will not accept 2 percent down. Your options are to save more, look for a first-time buyer program run by your state or local housing authority (which may have different rules), or explore whether you may have access to for a VA loan. Some state housing finance agencies offer down payment help programs, though these vary widely and have income limits.
Does a bigger down payment always mean a lower interest rate?
Usually, yes. Lenders offer lower rates to borrowers who put down more because they have less risk. The difference is typically 0.25 to 0.5 percent. On a $300,000 loan, that can save you $50 to $100 per month. However, if putting down more means you cannot afford closing costs or an emergency fund, the savings may not be worth the risk.
Can I put down 10 percent instead of 3 percent to avoid mortgage insurance?
On a conventional loan, no—you still pay PMI with 10 percent down. You need to reach 20 percent to eliminate it. On an FHA loan, putting down 10 percent instead of 3.5 percent lets you stop paying mortgage insurance after 5 years instead of 11 years, which can save you money over time.
What happens if the home appraises for less than the purchase price?
If the appraisal comes in low, your down payment percentage goes up. If you agreed to buy a $300,000 home with 5 percent down ($15,000) but it appraises for $280,000, you now have only 5.4 percent equity. You will need to put down more cash, renegotiate the price, or walk away (depending on your contract terms). This is why having extra savings beyond your down payment is important.