The amount you save depends on the loan type, not a fixed rule
There is no single down payment amount that works for everyone. The range runs from 3 percent of the home price on some conventional loans to 20 percent on others, with government-backed loans (FHA, VA, USDA) often sitting between 3 and 11 percent. What you actually need to save depends on which loan program you may have access to for, what the lender requires, and what you can afford to set aside without emptying your emergency fund.
The most common misconception is that 20 percent is the standard. It is not. Twenty percent is the threshold where you stop paying mortgage insurance (PMI), which is a monthly fee added to your payment if you put down less. But you can buy a home with far less saved. The trade-off is that your monthly payment will be higher because you are borrowing more, and you will pay PMI until you reach 20 percent equity.
Your actual target depends on three things: the loan program available to you, the price of the home you are looking at, and how much cash you want to keep after closing. Start by talking to a lender about which programs you might may have access to for, because that narrows the range when ready.
Key Takeaways
- FHA loans typically require 3.5 percent down, conventional loans range from 3 to 20 percent, and VA and USDA loans may require zero down, depending on your situation.
- Putting down less than 20 percent means you will pay mortgage insurance monthly until you reach 20 percent equity, which adds hundreds of dollars per year to your payment.
- Your down payment is only part of closing costs; you also need cash for inspections, appraisals, title insurance, and other fees that typically run 2 to 5 percent of the home price.
- Saving enough to cover both down payment and closing costs, while keeping 3 to 6 months of living expenses in reserve, is more important than hitting a specific percentage.
What different loan programs actually require
FHA loans (Federal Housing Administration) require a minimum of 3.5 percent down if your credit score is 580 or higher. If your score is between 500 and 579, some lenders will go to 10 percent down. On a $300,000 home, 3.5 percent is $10,500. FHA also allows you to roll some closing costs into the loan, which reduces the cash you need upfront.
Conventional loans (not government-backed) start at 3 percent down for borrowers with good credit and stable income, though some lenders require 5 percent. At 3 percent on a $300,000 home, you would save $9,000. The catch is that conventional loans below 20 percent down require PMI, and the monthly cost depends on your down payment percentage, credit score, and loan amount. A borrower putting 5 percent down might pay $150 to $250 per month in PMI; at 10 percent, it might be $75 to $150.
VA loans (for military members, veterans, and surviving spouses) often require zero down payment if you have a full Certificate of may be able to access. You still pay closing costs and a funding fee (typically 1.5 to 3.6 percent of the loan amount), but you do not need to save a down payment percentage.
USDA loans (for rural homebuyers) also allow zero down payment if you meet income and location requirements. Like VA loans, you pay a funding fee instead of a down payment.
The real cost: down payment plus closing costs
Your down payment is not the only money that leaves your account at closing. Closing costs—appraisals, title insurance, inspections, attorney fees, recording fees, and lender fees—typically run 2 to 5 percent of the home price. On a $300,000 home, that is $6,000 to $15,000 on top of your down payment.
If you are putting 5 percent down ($15,000) on that same $300,000 home, you also need $6,000 to $15,000 for closing costs. That is $21,000 to $30,000 total before you own the house. Some lenders allow you to roll closing costs into the loan or ask the seller to cover them, but you cannot count on that. Plan to have both amounts saved.
FHA loans are slightly more forgiving here because they allow you to include some closing costs in the loan amount, and sellers can contribute up to 6 percent of the purchase price toward your costs. Conventional loans typically cap seller contributions at 3 percent. Ask your lender what is negotiable in your situation.
How mortgage insurance changes the math
Mortgage insurance (PMI on conventional loans, MIP on FHA loans) is a monthly fee that protects the lender if you default. It is not optional if you put down less than 20 percent on a conventional loan or less than 10 percent on an FHA loan. The cost varies, but a typical range is 0.5 to 1.5 percent of your loan amount per year, paid monthly.
On a $285,000 loan (5 percent down on a $300,000 home), PMI might run $120 to $360 per month. Over 10 years, that is $14,400 to $43,200 in insurance alone. The higher your down payment, the lower the PMI rate. At 10 percent down, the same loan might cost $60 to $180 per month.
This is why some people choose to save longer and put down 10 or 15 percent instead of 3 or 5 percent—the monthly payment is lower, and you reach 20 percent equity faster. Others buy sooner with a smaller down payment and accept the PMI cost. Both are valid choices depending on your timeline and how much you have saved.
Balancing down payment against your emergency fund
Saving for a down payment should not leave you with no cash cushion. Most financial advisors recommend keeping 3 to 6 months of living expenses in a separate account after you close on the home. A new homeowner faces unexpected costs: a roof repair, a furnace replacement, or a plumbing emergency. If you drain your savings to hit a down payment target, you are vulnerable.
If you have $40,000 saved and your target down payment is $30,000, you might choose to put down $20,000 instead and keep $20,000 in reserve. You will pay PMI, but you will not be house-poor. The monthly PMI cost is often less painful than an emergency repair bill with no savings to cover it.
This is especially true for first-time buyers. You do not yet know what the home will cost to maintain. Putting down the minimum and keeping cash in reserve is a reasonable strategy.
Working backward from what you can afford monthly
Another way to think about down payment is to start with the monthly payment you can actually afford, then work backward to see what down payment makes sense. A mortgage lender will typically approve you for a loan where your housing payment (mortgage, insurance, taxes, HOA) does not exceed 28 percent of your gross monthly income.
If you earn $5,000 per month gross, your maximum housing payment is around $1,400. On a $300,000 home in a state with moderate property taxes, a 3 percent down payment ($9,000) might result in a $1,600 payment with PMI. A 10 percent down payment ($30,000) might bring that to $1,350. The difference is $250 per month—or $3,000 per year.
If you can save an extra $21,000 to move from 3 percent to 10 percent down, you save $3,000 per year in payments. That is a 14 percent annual return on your extra savings, which is a strong incentive. But if you cannot save that extra amount without waiting years, buying sooner with PMI might be the right move.
Typical down payment targets by situation
| Your Situation | Typical Down Payment Range | Why This Range |
|---|---|---|
| First-time buyer, good credit, stable income | 3–10 percent | You may have access to for conventional loans with lower minimums; 10 percent balances PMI cost against keeping emergency savings. |
| First-time buyer, credit under 620 | 10 percent or FHA at 3.5 percent | Conventional loans require higher credit; FHA is more accessible but carries mortgage insurance. |
| Veteran or active military | 0 percent (VA loan) | VA loans do not require down payment; you pay a funding fee instead. |
| Rural homebuyer, moderate income | 0 percent (USDA loan) | USDA loans do not require down payment for borrowers who meet income and location rules. |
| Buying in a competitive market, strong finances | 15–20 percent | Larger down payment makes your offer more attractive to sellers and eliminates PMI. |
Frequently Asked Questions
What if I have saved 7 percent but lenders want 10 percent?
Ask your lender about 7 percent down options; many conventional lenders will approve it. You will pay PMI, but the monthly cost is usually manageable. Alternatively, ask the seller to cover some closing costs, which reduces the cash you need upfront. FHA loans at 3.5 percent are also an option if you want to preserve savings.
Can I borrow the down payment from family?
Most lenders allow a gift from a family member, but they require a signed letter stating it is a gift, not a loan you have to repay. The lender wants to know your actual debt obligations. If the money is a loan, you have to count the monthly payment in your debt-to-income ratio, which may disqualify you. Check with your lender before accepting family money.
Does putting down more than 20 percent help me get approved?
It can help, but it is not required. A 20 percent down payment removes PMI and shows the lender you have significant savings, which is a positive sign. Putting down 25 or 30 percent does not usually change your approval odds if you already may have access to at 20 percent, but it does lower your monthly payment and total interest paid over the life of the loan.
What if the home inspection finds problems—do I lose my down payment?
Your down payment is held in escrow (a neutral account) until closing. If the inspection reveals major problems and you walk away, the down payment is returned to you, provided your purchase contract includes an inspection contingency. Always include this protection in your offer.
Should I save for 20 percent down or buy sooner with less?
This depends on your timeline and local market. If home prices are rising faster than you can save, buying sooner with PMI might cost less overall than waiting. If prices are stable or falling, waiting to save more makes sense. Run the numbers with a lender: compare the total cost of buying now with PMI versus waiting two more years to save 20 percent.