The amount you need depends on the loan type, not a fixed rule

There is no single down payment amount that works for everyone. A conventional loan from a bank might require 20 percent of the home's price, but an FHA loan can work with 3.5 percent. A VA loan (if you may have access to) requires zero down. The actual number depends on which lender you use, which loan program they offer, and what you can afford to save.

The most common misconception is that you must save 20 percent. That was never a requirement — it was a threshold that avoided mortgage insurance. Putting down less than 20 percent means you pay an extra monthly fee (mortgage insurance premium, or MIP) until you reach 20 percent equity. That fee adds up, but it also means you can buy sooner with less saved.

Your real decision is not "how much should I save" but "how much can I save, and what will that cost me in insurance and interest over time." Those are different questions with different answers depending on your situation.

Key Takeaways

  • FHA loans require 3.5 percent down; conventional loans typically ask for 5 to 20 percent; VA loans require nothing down if you are a may have access to veteran or service member.
  • Putting down less than 20 percent on a conventional loan means paying mortgage insurance monthly until you reach 20 percent equity in the home.
  • The total cost of a smaller down payment includes both the mortgage insurance premium and the higher interest rate you may pay on a larger loan amount.
  • Closing costs (typically 2 to 5 percent of the home price) are separate from the down payment and must be saved or financed separately.
  • Some lenders offer down payment information programs that may reduce or cover part of what you need to save, though these vary by location and income.

What different loan types actually require

FHA loans are backed by the Federal Housing Administration and are designed for people with lower savings or credit scores. The minimum down payment is 3.5 percent of the purchase price. If you buy a $300,000 home, you need $10,500 down. You will pay mortgage insurance (called MIP on FHA loans) for the life of the loan, which adds roughly 0.55 percent to 0.80 percent to your monthly payment depending on your down payment size and loan length.

Conventional loans come from banks and mortgage companies without government backing. Lenders set their own rules, but most require between 5 and 20 percent down. A 5 percent down payment means less saved upfront but a higher monthly mortgage insurance payment. A 20 percent down payment eliminates mortgage insurance entirely. The trade-off is time: saving an extra 15 percent takes years for most people.

VA loans are available to veterans, active-duty service members, and some surviving spouses. They require zero down payment. You pay a one-time funding fee (typically 1.4 to 3.6 percent of the loan amount) instead of mortgage insurance, and this fee can be rolled into the loan itself so you do not pay it upfront.

USDA loans are for rural properties and also require zero down payment if you meet income limits. Like VA loans, you pay an upfront may provide fee that can be financed into the loan.

The real cost of putting down less than 20 percent

Mortgage insurance is not optional if you put down less than 20 percent on a conventional loan — it is a requirement lenders impose to protect themselves. On a $300,000 home with 10 percent down ($30,000), you borrow $270,000. Mortgage insurance on that loan runs roughly $150 to $200 per month, depending on your credit score and the exact loan terms.

Over a 30-year loan, that is $54,000 to $72,000 in insurance payments alone. However, you bought the home five years earlier than if you had saved 20 percent. Whether that trade-off makes sense depends on whether home prices in your area are rising faster than you can save, and whether you can afford the higher monthly payment.

You can remove mortgage insurance once you reach 20 percent equity — either by paying down the loan faster or by refinancing when the home appreciates. Some lenders allow you to request removal at 20 percent equity; others require you to wait until 22 percent. Check your loan documents or ask your lender about their specific rules.

Closing costs are separate from your down payment

Down payment and closing costs are two different expenses, and many people confuse them. Your down payment is what you put toward the home's purchase price. Closing costs are the fees the lender, title company, and other parties charge to process the loan and transfer ownership. These typically run 2 to 5 percent of the home price.

On a $300,000 home, closing costs might be $6,000 to $15,000. Some lenders allow you to roll closing costs into the loan (meaning you finance them rather than pay them upfront), but this increases your total loan amount and your monthly payment. Others require you to pay them at closing in cash.

Your total savings goal should include both the down payment and closing costs, unless you have arranged for the seller to cover closing costs or your lender offers a no-closing-cost loan (which typically means a higher interest rate instead).

How to calculate what you need to save

Start with the home price you are targeting. If you do not have a specific number, look at recent sales in your area or use online home value tools to get a realistic range.

Next, decide which loan type fits your situation. If you have a military background, a VA loan eliminates the down payment entirely. If you have lower savings or credit, FHA at 3.5 percent down might be your fastest path. If you have time and want to avoid mortgage insurance, conventional at 20 percent is the lowest-cost option long-term.

Multiply your target home price by your down payment percentage. Add 3 to 5 percent for closing costs (or ask a lender what closing costs would be for your specific situation — they vary). That is your savings target.

Example: $300,000 home, FHA loan, 3.5 percent down. Down payment: $10,500. Closing costs (estimate): $9,000. Total to save: $19,500. With mortgage insurance, your monthly payment will be higher than someone with 20 percent down, but you can buy now instead of waiting five years.

Down payment information and other sources

Many states, counties, and nonprofits offer down payment information programs. These are grants or forgivable loans that reduce or cover part of your down payment. They are not available everywhere, and rules vary widely by location and income level.

Some programs are tied to specific loan types (FHA only, or first-time buyers only). Others require you to complete a homebuyer education course. A few have income caps; others do not. The only way to know what is available in your area is to contact your local housing authority or search your state's housing finance agency website.

Some employers, unions, and nonprofits also offer down payment information to their members or employees. If you work for a large organization, ask your HR department whether a program exists.

Family gifts are another common source. The lender will ask where the money came from, and you may need a letter from the family member stating it is a gift, not a loan. Lenders have specific rules about gifts, so confirm with them before accepting money.

The timing question: save more now or buy sooner with less

Saving 20 percent takes time. On a $300,000 home, that is $60,000 plus closing costs. If you save $1,000 per month, it takes five years. If you buy now with 5 percent down ($15,000 plus closing costs), you own the home when ready and build equity while you live in it.

The math depends on whether home prices in your area are rising faster than your savings rate. If homes appreciate 4 percent per year and you save 2 percent of the home price annually, buying sooner usually wins. If the market is flat or declining, waiting to save more makes sense.

There is no universal right answer. A financial advisor or mortgage lender can run the numbers for your specific situation and show you the long-term cost difference between buying now with a smaller down payment versus waiting.

Frequently Asked Questions

Can I use a credit card or loan to fund my down payment?

Most lenders will not allow it. They want to see that the down payment comes from your own savings, a gift, or an approved down payment information program. If you take out a new loan before closing, it increases your debt-to-income ratio and may disqualify you or lower the loan amount you are offered. Ask your lender before borrowing money for a down payment.

What happens if I put down less than 3.5 percent?

Conventional loans rarely go below 3 percent, and those that do charge higher interest rates and require strong credit. FHA's minimum is 3.5 percent. If you have less saved, a VA or USDA loan (if you may have access to) is your only option for zero down. Otherwise, you need to save more or look at down payment information programs.

Can I remove mortgage insurance early?

Yes, once you reach 20 percent equity in the home. This happens either through paying down the loan or through home appreciation. Some lenders let you request removal at 20 percent; others require 22 percent. You can also refinance into a new loan without mortgage insurance once you have enough equity. Ask your lender about their specific rules when you close.

Do I need to save the down payment in a specific account?

No, but lenders will ask to see bank statements showing the money has been in your account for at least two months. This is to prevent fraud and to confirm the money is actually yours. If you receive a gift, the lender will want documentation. Keep your savings in a regular checking or savings account and be prepared to show statements.

What if the seller pays my closing costs?

Some sellers agree to cover closing costs as part of the purchase negotiation. This reduces what you need to save upfront, but it typically means the purchase price is slightly higher to account for what the seller is paying. The net effect is usually neutral, but it helps if your savings are tight. Ask your real estate agent whether this is negotiable in your market.