The typical down payment is 20 percent of the home's purchase price, but most first-time buyers put down less
A down payment is the money you give the seller at closing—the part of the purchase price you pay in cash rather than borrow. The size of your down payment depends on the loan program you use, not on what is "normal" across all buyers.
If you are getting a conventional loan (a mortgage not backed by a government agency), lenders typically want to see 20 percent down. On a $300,000 home, that would be $60,000. But conventional loans can close with as little as 3 percent down, though you will then pay private mortgage insurance (PMI)—an extra monthly cost that protects the lender if you stop paying.
Government-backed loans have different minimums. FHA loans require 3.5 percent down. VA loans (for military members and veterans) often require zero down. USDA loans (for rural properties) also often require zero down. These programs exist because they let people buy homes with less cash upfront.
The median down payment for all home purchases in the United States has been in the range of 6 to 8 percent in recent years, according to data from the National Association of Realtors. That means half of buyers put down less, and half put down more. First-time buyers typically put down less than repeat buyers.
Key Takeaways
- The 20 percent down payment rule applies mainly to conventional loans; most actual buyers put down between 3 and 10 percent.
- FHA loans require 3.5 percent down, VA loans often require zero, and USDA loans often require zero, making these programs useful if you have limited savings.
- Putting down less than 20 percent on a conventional loan means you will pay private mortgage insurance (PMI) each month until you reach 20 percent equity.
- Your down payment size affects your monthly payment, your interest rate, and whether you may have access to for the loan at all.
- The amount you can afford to put down depends on your savings, your income, and what other debts you carry.
How down payment size affects your monthly payment and interest rate
A larger down payment lowers your monthly mortgage payment because you are borrowing less money. On a $300,000 home at 7 percent interest over 30 years, putting down 20 percent ($60,000) means borrowing $240,000 and paying roughly $1,596 per month in principal and interest. Putting down 5 percent ($15,000) means borrowing $285,000 and paying roughly $1,897 per month—before PMI.
A larger down payment can also lower your interest rate. Lenders see less risk when you have more skin in the game. The difference is usually small—a quarter to half a percentage point—but it compounds over 30 years. On a $285,000 loan, a 0.5 percent rate difference costs you roughly $70 per month.
PMI adds another layer. On a conventional loan with 5 percent down, PMI typically runs 0.5 to 1.5 percent of the loan amount per year, paid monthly. On a $285,000 loan, that is $119 to $356 per month. You pay PMI until you reach 20 percent equity in the home—either through payments or through the home's value rising.
Why 20 percent became the benchmark
The 20 percent figure comes from the mortgage industry's risk math. When you put down 20 percent, you own one-fifth of the home when ready. If you stop paying and the lender forecloses and sells the home, a 20 percent cushion usually covers the lender's costs and losses. Below that threshold, the lender needs insurance to cover the gap.
This rule has been standard for decades, but it is not a requirement—it is a threshold where PMI becomes unnecessary on conventional loans. Lenders will lend at 10 percent down, 5 percent down, or even 3 percent down. They just charge you PMI to offset the risk.
The 20 percent benchmark also became cultural shorthand for "responsible borrowing," which is why many people believe it is the only acceptable amount. In reality, it is one option among several, and it is not the most common choice.
Down payment requirements by loan type
| Loan Type | Minimum Down Payment | Who It Is For |
|---|---|---|
| Conventional | 3 percent (with PMI); 20 percent (without PMI) | Borrowers with good credit and stable income |
| FHA | 3.5 percent | First-time buyers, lower credit scores |
| VA | 0 percent | Military members, veterans, surviving spouses |
| USDA | 0 percent | Rural property buyers meeting income limits |
Each program has its own rules about credit score, income, property type, and location. A VA loan requires a Certificate of may be able to access from the Department of Veterans Affairs. A USDA loan requires the property to be in a designated rural area and your income to fall below the area's limit. An FHA loan requires mortgage insurance for the life of the loan if you put down less than 10 percent.
What happens if you cannot save 20 percent
You have options. The most straightforward is to put down what you can afford and accept PMI as a cost of homeownership right now. PMI is not permanent—once you reach 20 percent equity, you can request to have it removed (on a conventional loan). This usually takes 5 to 10 years of payments, depending on the home's appreciation and how much you pay toward principal.
You can also explore down payment information programs run by nonprofits, state housing agencies, and some employers. These programs vary widely by location and income level. Some offer grants (money you do not repay), some offer forgivable loans (loans that disappear if you stay in the home for a set period), and some offer low-interest loans. Your mortgage lender or local housing authority can point you toward programs in your area.
Another option is to wait and save more, though this means delaying your purchase. The tradeoff is that home prices and interest rates may change, and you may miss out on a home you want. There is no universally right answer—it depends on your timeline, your local market, and your financial situation.
How your down payment affects what you can afford
Lenders use debt-to-income ratios to decide how much they will lend you. Most want your total monthly debt payments (mortgage, car loans, credit cards, student loans) to be no more than 43 to 50 percent of your gross monthly income. A larger down payment lowers your monthly mortgage payment, which can let you borrow more overall.
If you earn $5,000 per month and already have $800 in car and student loan payments, you have roughly $1,350 left for a mortgage payment (at 43 percent). That limits how much house you can afford. A larger down payment shrinks the mortgage payment and frees up room in your debt-to-income ratio.
Your down payment also affects your closing costs. Lenders charge origination fees, appraisal fees, title insurance, and other costs that typically run 2 to 5 percent of the loan amount. A larger down payment means a smaller loan, which means lower closing costs in dollar terms.
The real cost of a small down payment
Putting down 3 or 5 percent instead of 20 percent costs you money over time, but the cost is not always as large as it seems. On a $300,000 home with a 7 percent interest rate over 30 years, the difference between 5 percent down and 20 percent down is roughly $300 per month (including PMI). Over 30 years, that is $108,000 more in total payments.
But that comparison assumes you keep the loan for 30 years, which most people do not. The median homeowner stays in a home for 7 to 10 years. If you sell or refinance within that window, PMI costs you far less. Also, if your income rises or the home appreciates, you can refinance and drop PMI sooner.
The real question is whether the money you save by putting down less now is worth more to you than the extra monthly cost. If you put down 5 percent instead of 20 percent, you keep $45,000 in cash. That money could go toward an emergency fund, paying off other debt, or investing. For some people, that trade is worth it. For others, it is not.
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 (like a personal loan or credit card), because it increases your debt-to-income ratio and signals financial strain. Some programs allow a gift from a family member, but the gift must be documented and you cannot be required to repay it. Ask your lender about their gift policy before you accept money from anyone.
What if I put down more than 20 percent?
Putting down more than 20 percent lowers your monthly payment and interest rate further, but it also ties up cash you might need elsewhere. There is no tax benefit to a larger down payment, and the extra money does not earn interest in the home. Some financial advisors suggest putting down only 20 percent and investing the rest, while others prefer to minimize debt. The right choice depends on your goals and risk tolerance.
Does my down payment affect my credit score?
The down payment itself does not affect your credit score. Your credit score is based on payment history, credit utilization, length of credit history, and credit inquiries. However, saving for a down payment may require you to pay down credit card balances, which can improve your score. And taking out a mortgage will add a new account to your credit report, which may lower your score slightly at first.
What if the home appraises for less than the purchase price?
If the appraisal comes in lower than the purchase price, your down payment percentage rises automatically. If you agreed to pay $300,000 and put down 5 percent ($15,000), but the home appraises for $280,000, you are now putting down 5.4 percent. This can affect your PMI cost and may require you to renegotiate the purchase price or bring more cash to closing.