Down payments range from 3% to 20% of the home price, depending on the loan type and your financial situation
The amount you put down when you buy a home is not fixed. A conventional loan typically requires 5% to 20% down. An FHA loan (backed by the Federal Housing Administration) can go as low as 3.5% down. A VA loan (for military service members and veterans) often requires 0% down. USDA loans in rural areas can also require 0% down for borrowers who meet income limits.
The actual dollar amount depends entirely on the home's price. On a $300,000 home, 5% down is $15,000. On a $500,000 home, 5% down is $25,000. On a $200,000 home, 20% down is $40,000. The percentage you put down affects your monthly payment, your interest rate, and whether you pay mortgage insurance.
Most first-time buyers put down between 3% and 10%. Repeat buyers and those with substantial savings often put down 15% to 20%. The choice depends on how much cash you have available, what your lender will accept, and whether you want to avoid mortgage insurance payments.
Key Takeaways
- FHA loans allow down payments as low as 3.5%, while conventional loans typically start at 5% and VA or USDA loans can be 0%.
- A smaller down payment means a lower upfront cost but a higher monthly mortgage payment and mortgage insurance premiums added to your bill.
- Putting down 20% or more eliminates private mortgage insurance (PMI), which can save hundreds of dollars per month depending on the loan size.
- Your down payment amount affects the interest rate your lender offers, with larger down payments often may have access to for better rates.
How down payment size changes your monthly cost
The percentage you put down directly changes what you owe each month. On a $300,000 home at 7% interest over 30 years, putting down 3% ($9,000) means borrowing $291,000. Your principal and interest payment is roughly $1,935 per month. Putting down 20% ($60,000) means borrowing $240,000, and your payment drops to roughly $1,596 per month—a difference of $339 monthly.
That gap widens when mortgage insurance enters the picture. With less than 20% down on a conventional loan, you pay private mortgage insurance (PMI). On a $291,000 loan, PMI might add $200 to $400 per month depending on your credit score and the lender. That $339 monthly savings from a larger down payment can disappear entirely once you factor in PMI on the smaller down payment scenario.
The interest rate itself also shifts based on down payment size. A borrower putting down 3% might receive a rate 0.25% to 0.5% higher than someone putting down 20%. Over 30 years, that rate difference compounds into tens of thousands of dollars in extra interest paid.
Down payment requirements by loan type
| Loan Type | Minimum Down Payment | Who It's For | Other Notes |
|---|---|---|---|
| Conventional | 3% to 5% | Borrowers with good credit and stable income | Requires PMI below 20% down; rates vary by credit score |
| FHA | 3.5% | First-time buyers and those with lower credit scores | Mortgage insurance is required regardless of down payment size |
| VA | 0% | Military service members, veterans, and surviving spouses | No mortgage insurance required; funding fee applies instead |
| USDA | 0% | Borrowers in rural areas meeting income limits | Mortgage insurance required; limited to properties in may be able to access areas |
What happens when you put down less than 20%
Putting down less than 20% on a conventional loan triggers private mortgage insurance. This is insurance that protects the lender if you stop paying, not insurance that protects you. You pay the premium as part of your monthly mortgage bill, and it stays there until you reach 20% equity in the home or refinance.
PMI costs vary. On a $300,000 loan with 5% down, PMI might run $150 to $300 per month. On the same loan with 10% down, it might be $100 to $200 per month. The exact amount depends on your credit score, the loan amount, and the lender's pricing. A lower credit score means higher PMI premiums.
FHA loans work differently. They require mortgage insurance no matter how much you put down. An FHA loan with 3.5% down includes both an upfront mortgage insurance premium (rolled into your loan balance) and an annual premium added to your monthly payment. This insurance stays for the life of the loan if you put down less than 10%.
How to remove mortgage insurance once you own equity
On a conventional loan, you can request PMI removal once you reach 20% equity in the home. This happens through a combination of paying down the principal and home appreciation. If you bought a $300,000 home with 5% down and the home is now worth $330,000 while you owe $270,000, you have 18% equity and can request removal.
The lender will order an appraisal to confirm the home's current value. If the appraisal supports 20% equity, PMI drops off your payment. Some lenders remove it automatically once you hit the equity threshold; others require you to request it. Check your loan documents or call your servicer to understand your specific terms.
FHA mortgage insurance cannot be removed if you put down less than 10%. If you put down 10% or more on an FHA loan, the insurance can be removed after 11 years of payments. Refinancing into a conventional loan is another path to remove FHA insurance, though you will need sufficient equity and a strong credit profile to may have access to.
Saving for a down payment versus paying PMI
The choice between saving longer for a larger down payment or buying sooner with a smaller one depends on your situation. If you are paying rent and home prices are rising faster than you can save, buying with 5% down and PMI might cost less over time than waiting two more years to save 20%. If you are in a stable rental situation and can save without pressure, waiting to avoid PMI saves money on the monthly payment.
Run the numbers for your specific scenario. Calculate what you would pay monthly with 5% down plus PMI, then calculate what you would pay with 20% down. Factor in how long you plan to stay in the home. If you are likely to move or refinance within five years, the PMI cost might be acceptable. If you plan to stay 15+ years, the cumulative PMI cost often justifies waiting to save more.
Some buyers also explore down payment information programs offered by state housing agencies, nonprofits, or employers. These programs vary widely in what they cover and who qualifies. Your lender can point you toward programs available in your area, though you will need to research the specific terms and requirements.
Credit score and down payment size
Your credit score affects both the interest rate you receive and the down payment options available to you. Borrowers with credit scores above 740 typically may have access to for conventional loans with 3% to 5% down and the best available rates. Borrowers with scores between 620 and 680 may face higher rates, larger required down payments, or may need to use an FHA loan instead.
An FHA loan with 3.5% down is often the only realistic path for borrowers with lower credit scores or recent credit problems. The trade-off is that FHA mortgage insurance costs more than conventional PMI and lasts longer. If your credit score is below 620, most lenders will not work with you until you improve it, regardless of down payment size.
Improving your credit score before you buy can save tens of thousands of dollars over the life of the loan. Even a 40-point improvement in your score can lower your interest rate by 0.25% to 0.5%, which translates to hundreds of dollars per month in savings.
Frequently Asked Questions
Can I borrow money from family for my down payment?
Most lenders allow down payment gifts from family members, but they require a signed letter stating it is a gift, not a loan you must repay. The lender will verify the source of the funds to prevent money laundering. Some loan programs have restrictions on how much of the down payment can be a gift, so confirm with your lender before accepting money from family.
What if I only have 2% saved for a down payment?
Conventional loans require at least 3% down. An FHA loan at 3.5% down is your next option. If you cannot reach 3.5%, you could wait and save more, explore down payment information programs in your area, or consider a co-borrower with stronger finances. Some employers and nonprofits offer down payment help programs with their own requirements.
Does putting down more than 20% change anything?
Putting down 25%, 30%, or more eliminates PMI and may may have access to you for a slightly better interest rate, but the benefit diminishes after 20%. The real advantage is a lower monthly payment and less total interest paid over the loan term. Whether it makes sense depends on whether that cash could earn better returns elsewhere or if you need it for emergencies.
Can I remove PMI before reaching 20% equity?
On a conventional loan, you must reach 20% equity to remove PMI. Refinancing into a new loan is one way to remove it early if your home has appreciated significantly, but refinancing costs money and resets your loan term. On an FHA loan, PMI cannot be removed until 11 years of payments if you put down less than 10%.
What is the difference between a down payment and closing costs?
Your down payment is the percentage of the home price you pay upfront. Closing costs are separate fees for appraisal, title insurance, inspections, and lender fees—typically 2% to 5% of the home price. You need cash for both. Some lenders allow you to roll closing costs into the loan, but this increases your monthly payment and total interest paid.