The down payment amount depends on the loan type and your situation
There is no single down payment amount that works for everyone. The money you need upfront ranges from 3 percent to 20 percent of the home's purchase price, depending on which loan program you use and what the lender requires. A $300,000 house, for example, could require anywhere from $9,000 to $60,000 down — a difference that matters enormously to your budget.
The most common misconception is that you must put down 20 percent. That was true decades ago, but today most first-time buyers put down less. Understanding what each loan type actually requires helps you figure out what you can realistically save for.
Key Takeaways
- Conventional loans typically require 3 to 20 percent down, with 5 to 10 percent being most common for first-time buyers.
- FHA loans require 3.5 percent down and are designed for buyers with lower credit scores or smaller savings.
- VA loans and USDA loans can require zero percent down if you meet the program requirements.
- Your down payment amount affects your monthly payment, insurance costs, and total interest paid over the life of the loan.
- The down payment is separate from closing costs, which typically add another 2 to 5 percent of the purchase price.
Conventional loans: 3 to 20 percent down
A conventional loan is a mortgage that is not backed by the federal government. Most conventional loans require between 3 and 20 percent down. The exact amount depends on your credit score, income, and the lender's rules.
If you put down less than 20 percent on a conventional loan, you will pay private mortgage insurance (PMI). This is an extra monthly fee that protects the lender if you stop paying. PMI typically costs 0.5 to 1 percent of your loan amount per year, added to your monthly payment. Once you have paid down the loan to 80 percent of the home's value, you can usually request to have PMI removed.
For a first-time buyer, 5 to 10 percent down is common. This means saving $15,000 to $30,000 for a $300,000 home. The tradeoff is that your monthly payment will be higher than if you put down 20 percent, and you will pay PMI until you reach that 80 percent threshold.
FHA loans: 3.5 percent down
An FHA loan is a mortgage backed by the Federal Housing Administration, a government agency. FHA loans require only 3.5 percent down, making them popular with first-time buyers or people rebuilding credit. On a $300,000 home, that is $10,500.
FHA loans have a tradeoff: you will pay mortgage insurance premiums (MIP) instead of PMI. Unlike PMI, you cannot remove MIP by reaching 80 percent equity. If you put down less than 10 percent, you pay MIP for the entire life of the loan. If you put down 10 percent or more, MIP drops off after 11 years.
FHA loans also have limits on how much you can borrow, which vary by county. These limits are higher in expensive areas and lower in rural areas. Your lender can tell you the limit for your county.
VA and USDA loans: zero percent down
If you are a military veteran or active-duty service member, a VA loan requires zero percent down. The Department of Veterans Affairs backs the loan, so lenders are willing to lend the full purchase price. You still pay a one-time funding fee (usually 1.5 to 3.6 percent of the loan amount), but this can be rolled into the loan itself so you do not need cash upfront.
A USDA loan is for rural homebuyers who meet income limits. USDA loans also require zero percent down. Like VA loans, there is a may provide fee, but it can be included in the loan amount. USDA loans are available only in designated rural areas, which you can check on the USDA website.
Both programs eliminate the need to save a large down payment, but both have specific requirements. VA loans require a Certificate of may be able to access from the VA. USDA loans require that your income fall below a certain threshold for your county and that the property be in an may be able to access area.
What your down payment amount actually costs you
The size of your down payment affects three things: your monthly payment, your insurance costs, and the total interest you pay.
A larger down payment means a smaller loan amount. If you put down 20 percent instead of 5 percent on a $300,000 home at 7 percent interest over 30 years, your monthly payment drops by roughly $200 to $250. Over 30 years, that is $72,000 to $90,000 in savings on the payment alone.
A larger down payment also eliminates PMI or MIP, which can save $100 to $300 per month depending on the loan size. However, the money you use for a larger down payment could instead stay in savings or be invested. This is a personal decision based on your comfort with debt and your other financial goals.
Down payment versus closing costs
Many first-time buyers confuse the down payment with closing costs. They are separate expenses. The down payment is the money you put toward the purchase price. Closing costs are fees paid to the lender, title company, appraiser, and other parties involved in the transaction.
Closing costs typically range from 2 to 5 percent of the purchase price. On a $300,000 home, that is $6,000 to $15,000. You need this money in addition to your down payment. Some loan programs allow you to roll closing costs into the loan, but most require you to pay them at signing.
When you are saving for a home, budget for both. If you are putting down 5 percent plus 3 percent in closing costs, you need 8 percent of the purchase price in cash before you close.
How to figure out what you can actually save
Start by deciding what price range you are looking at. Then calculate 3 to 5 percent of that price — this is a realistic down payment for most first-time buyers. Add another 3 to 5 percent for closing costs. That is your target savings number.
If that number feels out of reach, look at FHA loans (3.5 percent down) or ask whether you may have access to for VA or USDA programs. If you have family who can gift you money toward the down payment, most lenders allow this — you just need a signed letter from the family member stating it is a gift, not a loan.
Some employers and nonprofits offer down payment information programs. These vary widely by location and employer, so ask your HR department or search your city or county website for "down payment information." These programs may offer grants (money you do not repay) or second mortgages (loans with favorable terms).
Frequently Asked Questions
Can I buy a house with no money down?
Yes, if you may have access to for a VA loan or USDA loan. Both require zero percent down. If you do not may have access to for either program, you will need at least 3 to 3.5 percent down for a conventional or FHA loan. Some down payment information programs may cover this amount, depending on where you live.
Does a bigger down payment always mean a better deal?
Not necessarily. A larger down payment lowers your monthly payment and eliminates insurance costs, but the money you put down could be earning interest or growing in investments. If you have high-interest debt or an unstable emergency fund, keeping more cash on hand may be smarter than maximizing your down payment.
What happens if I put down less than 20 percent?
You will pay PMI (on conventional loans) or MIP (on FHA loans) as part of your monthly payment. This insurance protects the lender, not you. On conventional loans, PMI drops off once you reach 80 percent equity. On FHA loans, it may be permanent depending on your down payment amount.
Can I use a gift for my down payment?
Yes. Most lenders allow down payment gifts from family members. You will need a signed letter from the person giving the money stating it is a gift and not a loan you must repay. The lender may ask for bank statements showing the money came from that person.
Are there programs that help with down payments?
Yes, many cities and counties offer down payment information through grants or second mortgages. Some nonprofits and employers offer programs too. Search your city or county website for "down payment information" or contact your local housing authority to learn what is available in your area.