Down payments range from 3% to 20% of the home's purchase price, depending on the loan type and your financial situation
On a $300,000 house, a 3% down payment is $9,000. A 20% down payment on the same house is $60,000. The exact amount you'll need depends on which loan program you use, what the lender requires, and what you can afford to put down. There is no single "right" number — lenders offer different paths, each with different costs and trade-offs.
The most common down payment amounts are 3%, 5%, 10%, and 20%. Loans backed by the Federal Housing Administration (FHA) often allow 3.5% down. Conventional loans (not government-backed) typically start at 3% but many lenders prefer 5% or higher. VA loans and USDA loans, if you meet their requirements, may allow 0% down. The lower your down payment, the more you borrow, which means higher monthly payments and more interest paid over the life of the loan.
Key Takeaways
- A 3% down payment on a $300,000 house costs $9,000; a 20% down payment costs $60,000 on the same house.
- FHA loans allow 3.5% down, conventional loans typically start at 3%, and VA or USDA loans may allow 0% down if you meet program requirements.
- Putting down less than 20% usually means paying mortgage insurance (PMI on conventional loans, MIP on FHA loans), which adds to your monthly payment.
- Your actual down payment amount depends on the home price, the loan type, what the lender will accept, and what you can afford without draining your savings.
How down payment size affects your monthly payment and total cost
A smaller down payment lowers the cash you need upfront but raises what you pay each month. On a $300,000 house at a 7% interest rate over 30 years: a 3% down payment ($9,000) means borrowing $291,000, with a monthly payment around $1,935 before taxes and insurance. A 20% down payment ($60,000) means borrowing $240,000, with a monthly payment around $1,596 before taxes and insurance. That's roughly $340 more per month for the smaller down payment.
The difference grows when you add mortgage insurance. If you put down less than 20% on a conventional loan, you pay private mortgage insurance (PMI). On a $291,000 loan with 3% down, PMI might add $150 to $300 per month depending on your credit score and the lender. FHA loans charge mortgage insurance premium (MIP) instead, which is typically higher than PMI and stays for the life of the loan if you put down less than 10%. Over 30 years, that extra insurance cost can total $50,000 or more.
Down payment requirements by loan type
| Loan Type | Minimum Down Payment | Mortgage Insurance Required | Who Can Use It |
|---|---|---|---|
| Conventional | 3% to 5% | Yes, if less than 20% down (PMI) | Most buyers with decent credit |
| FHA | 3.5% | Yes, always (MIP) | First-time buyers, lower credit scores accepted |
| VA | 0% | No | Active military, veterans, surviving spouses |
| USDA | 0% | No | Rural property buyers meeting income limits |
Conventional loans are offered by banks and mortgage companies without government backing. They typically require 3% to 5% down, though some lenders go as low as 3% for borrowers with strong credit and stable income. If you put down less than 20%, you pay PMI until you reach 20% equity in the home.
FHA loans are backed by the Federal Housing Administration and allow 3.5% down. They're designed for first-time buyers and people with lower credit scores. The trade-off is that FHA loans charge mortgage insurance premium (MIP) from the start, and if you put down less than 10%, that insurance stays for the entire 30-year loan. VA loans and USDA loans allow 0% down if you meet their specific requirements — military service for VA loans, and rural property location and income limits for USDA loans.
What counts toward your down payment
Your down payment must come from your own funds or from sources lenders accept. Acceptable sources include your savings account, checking account, retirement account withdrawals (though this has tax consequences), gifts from family members, and proceeds from selling another property. Some lenders allow you to use funds from a 401(k) or IRA, but you'll owe taxes and possibly penalties on the withdrawal.
Lenders will ask for bank statements showing where the money came from. If you received a gift, the person who gave it must sign a gift letter stating it's a gift, not a loan you have to repay. Lenders want to verify the money is actually yours and that you're not borrowing it from somewhere else, which would increase your debt and change your ability to repay the mortgage.
Down payment information programs exist in some states and cities. These programs may offer grants or forgivable loans that reduce the amount you need to put down. Your lender or a local housing counselor can tell you whether your area has these programs and whether you meet their requirements.
Closing costs are separate from your down payment
Your down payment is only part of the cash you need at closing. Closing costs — which include appraisal fees, title insurance, attorney fees, loan origination fees, and property taxes — typically run 2% to 5% of the home price. On a $300,000 house, closing costs might be $6,000 to $15,000. Some lenders allow you to roll closing costs into the loan, which means you don't pay them upfront but you pay interest on them over 30 years.
When you're calculating how much cash you need, add your down payment and closing costs together. If you're putting 5% down on a $300,000 house ($15,000) and closing costs are $9,000, you need $24,000 in cash before you can close. Some lenders offer "no closing cost" loans, but this usually means the costs are built into a higher interest rate rather than eliminated.
How to decide what down payment size makes sense for you
The right down payment depends on three things: how much cash you have available, what you can afford to borrow, and what interest rate you'll get. If you have substantial savings and can put down 20% without depleting your emergency fund, you avoid mortgage insurance and lower your monthly payment. If you have limited savings, a 3% or 5% down payment lets you buy sooner, though your monthly payment will be higher and you'll pay insurance.
Consider keeping 6 to 12 months of expenses in savings after closing. A down payment that leaves you with no emergency fund is risky — one major repair or job loss could force you into default. Some buyers put down 10% to 15% as a middle ground: it's more than the minimum, it reduces (though doesn't eliminate) mortgage insurance, and it doesn't drain their savings completely.
Your credit score affects the interest rate you'll receive. A higher down payment sometimes qualifies you for a better rate, but not always — it depends on the lender and the loan type. Ask lenders for rate quotes at different down payment levels so you can see the actual difference in your monthly payment.
Frequently Asked Questions
Can I borrow money for my down payment?
Most lenders will not allow you to borrow your down payment from another lender or credit source. They want to see that the down payment comes from your own funds because borrowed money increases your total debt and your debt-to-income ratio. A gift from a family member is allowed if documented with a gift letter, but a loan is not.
What happens if I put down less than 3%?
Most conventional lenders require at least 3% down. FHA loans allow 3.5%. If you have less than 3% saved, you may need to wait and save more, look for down payment information programs in your area, or explore VA or USDA loans if you meet their requirements. Some lenders offer "bank statement" programs that let you use alternative documentation of funds, but these are less common and may have higher interest rates.
Does a larger down payment always mean a better interest rate?
Not always. Interest rates depend on your credit score, the loan type, current market rates, and the lender's pricing. A larger down payment can help you may have access to for a loan, but it doesn't automatically lower your rate. Ask multiple lenders for rate quotes at your actual down payment amount so you can compare what you'll actually pay.
Can I use my 401(k) to pay for a down payment?
You can withdraw from a 401(k), but you'll owe income tax on the withdrawal and possibly a 10% early withdrawal penalty if you're under 59½. Some plans allow loans against your balance instead, which avoids the tax hit. Talk to your plan administrator about your options before withdrawing, because the tax bill can be substantial.
What if I can't save a down payment?
Look into down payment information programs through your state housing authority or local nonprofits. Some programs offer grants or forgivable loans. VA and USDA loans allow 0% down if you meet their requirements. FHA loans allow 3.5% down and accept lower credit scores. A housing counselor can tell you which programs exist in your area.