A good down payment is one you can afford without emptying your savings or going into debt to cover it

There is no single "good" down payment amount — it depends on your situation, what you can afford to lose if the deal falls through, and what your lender will accept. The most common benchmark is 20 percent of the home's purchase price, but that is a goal, not a requirement. Many people buy homes with 3 to 5 percent down. Others put down 10 or 15 percent. The trade-off is straightforward: a larger down payment means a smaller loan, lower monthly payments, and no mortgage insurance. A smaller down payment means you keep more cash on hand for emergencies and repairs, but you pay more interest over time and must pay an extra monthly fee called mortgage insurance until you have paid down enough of the loan.

The real question is not what percentage is "good" but what leaves you in a stable position. If putting down 20 percent would drain your emergency fund or force you to borrow from family, that is too much. If you can put down 10 percent and still have three to six months of living expenses saved, that is workable. The lender will tell you the minimum they accept — often 3 percent — but what you can actually afford is a personal decision based on your income, job security, and other debts.

Key Takeaways

  • Twenty percent down is a common target but not required; lenders often accept 3 to 5 percent, though you will pay mortgage insurance on smaller down payments.
  • A good down payment is one that does not wipe out your savings or force you to borrow money; keeping three to six months of expenses in reserve matters more than hitting a specific percentage.
  • Mortgage insurance adds $100 to $300+ per month to your payment on a typical home, so the math changes depending on your loan size and credit score.
  • Down payment information programs exist in many states and counties, and some first-time buyer programs allow down payments as low as 2 percent or even 0 percent.
  • The down payment is separate from closing costs, which typically run 2 to 5 percent of the purchase price and must be paid at signing.

How down payment size affects your monthly payment and total cost

A larger down payment shrinks the loan amount, which directly lowers your monthly mortgage payment. On a $300,000 home, putting down 20 percent ($60,000) means borrowing $240,000. Putting down 5 percent ($15,000) means borrowing $285,000. The difference in monthly payment is roughly $150 to $200, depending on interest rates and loan length.

But the monthly payment is only part of the cost. When you borrow more than 80 percent of the home's value, lenders require you to pay private mortgage insurance (PMI). This insurance protects the lender if you stop paying, and it costs between 0.5 and 1.5 percent of your loan amount per year — typically $100 to $300+ per month on a standard loan. You pay this fee until you have paid down the loan to 80 percent of the home's original value, which can take 10 to 15 years depending on your down payment and how quickly you pay.

Over the life of a 30-year loan, a smaller down payment costs more in total interest and insurance. But that calculation only matters if you keep the home that long. If you sell or refinance in five to seven years, the extra cost of a smaller down payment may be less than the opportunity cost of tying up cash you could have used elsewhere.

When 20 percent down is realistic and when it is not

Twenty percent down is achievable for people who have been saving for years, inherited money, or live in a lower-cost area. In many expensive housing markets, 20 percent down on a median home price is $80,000 to $150,000 or more — a sum most households cannot save in a reasonable timeframe. In those markets, 5 to 10 percent down is the practical standard, and buyers accept the mortgage insurance as a cost of entry.

If you have been saving and can put down 20 percent without hardship, it is worth doing. You avoid mortgage insurance, your monthly payment is lower, and you build equity faster. But if reaching 20 percent means delaying your home purchase by five more years, or borrowing from family, or keeping less than three months of expenses in savings, a smaller down payment is the better choice. A home you can afford to buy and maintain is better than a perfect down payment you cannot reach.

Down payment information programs that lower the amount you need

Many states, counties, and nonprofits offer down payment information for first-time buyers or people buying in certain neighborhoods. These programs vary widely in what they cover and who qualifies, but common options include grants (money you do not repay), forgivable loans (loans that disappear if you stay in the home for a set period), and matched savings programs (the program adds money to what you have saved).

Some programs cover part of your down payment; others cover closing costs instead, which frees up cash for your down payment. A few programs allow you to buy with zero down payment, though these are less common and usually come with higher interest rates or other trade-offs. Your real estate agent, local housing authority, or a nonprofit housing counselor can tell you what exists in your area. The National Council of State Housing Agencies and NeighborWorks maintain searchable databases of programs by state.

These programs often require you to take a homebuyer education course, which is free or low-cost and teaches you how mortgages work, what to expect at closing, and how to avoid common mistakes. The course is worth taking even if you do not use the information — it clarifies what you are signing up for.

The difference between down payment and closing costs

Down payment and closing costs are separate expenses, and many first-time buyers confuse them. Your down payment is the money you give the seller as proof you are serious and to reduce the amount you borrow. Your closing costs are fees paid to the lender, appraiser, title company, and others who process the loan and transfer the property. Closing costs typically run 2 to 5 percent of the purchase price — on a $300,000 home, that is $6,000 to $15,000.

You must have both amounts ready at closing. If you are putting down 5 percent on a $300,000 home, you need $15,000 for the down payment plus $6,000 to $15,000 for closing costs — a total of $21,000 to $30,000 out of pocket. Some lenders allow you to roll closing costs into the loan, but that increases what you borrow and your monthly payment. Others allow the seller to pay part of your closing costs as part of the negotiation, which reduces what you need to bring.

How your credit score and debt affect down payment expectations

Lenders care about down payment size partly because it shows you have saved money, but also because it reduces their risk. A larger down payment means you have more of your own money at stake, so you are less likely to walk away if the market drops. But lenders also look at your credit score and existing debts to decide whether to lend at all and what interest rate to charge.

If your credit score is below 620, many conventional lenders will not work with you, and you may need an FHA loan (backed by the Federal Housing Administration), which accepts scores as low as 500 but requires a 3.5 percent down payment minimum and mortgage insurance that lasts the life of the loan. If your score is 620 to 679, you may face higher interest rates and may need a larger down payment — 10 to 15 percent — to offset the lender's risk. If your score is 680 or above, you have more options and can may have access to for better rates with a smaller down payment.

High existing debt — car loans, credit cards, student loans — also affects how much you can borrow and what down payment the lender expects. If your total monthly debt payments (including the new mortgage) would exceed 43 percent of your gross monthly income, most lenders will not approve you, no matter how large your down payment. In that case, paying down debt before buying makes more sense than saving for a larger down payment.

What to do if you cannot save a down payment right now

If you are renting and want to buy but have not saved anything yet, you have several paths. The first is to look for down payment information in your area — many programs exist specifically for people in this situation. The second is to ask whether a family member can gift you the down payment; lenders allow this as long as the gift is documented and the giver signs a statement saying it does not need to be repaid. The third is to delay buying for one to two years while you save, which also gives you time to improve your credit score and pay down other debts.

A fourth option, less common but available, is to buy with a co-signer — usually a parent or relative with better credit or savings — who is on the loan with you. This increases the lender's confidence and may lower your interest rate or allow a smaller down payment. The trade-off is that the co-signer is legally responsible if you cannot pay, and the loan appears on their credit report, which can affect their ability to borrow.

The worst option is to borrow the down payment from a credit card, personal loan, or payday lender. Lenders see this as a red flag — it means you are borrowing to buy a home you cannot afford — and many will deny your mortgage process. Even if you get approved, you are starting homeownership already in debt, which makes it harder to handle repairs or emergencies.

Frequently Asked Questions

Is 10 percent down considered good?

Ten percent down is a reasonable middle ground. It is low enough that most people can save it in a few years, high enough that mortgage insurance is not excessive, and it shows the lender you have some skin in the game. You will still pay mortgage insurance, but it is less than with 3 to 5 percent down.

Can I use a gift from family for my down payment?

Yes. Lenders allow down payment gifts from family members, but they require a written gift letter stating the amount, the giver's relationship to you, and that the money does not need to be repaid. The lender may also ask for bank statements showing the gift was actually transferred. This protects the lender from loans disguised as gifts.

What happens if I put down less than 20 percent?

You will pay private mortgage insurance (PMI) until you have paid the loan down to 80 percent of the home's original value. PMI typically costs $100 to $300+ per month and does not build equity — it only protects the lender. You can remove it once you reach 80 percent equity by requesting it in writing, though some lenders require you to wait a set period first.

Do I need to have my down payment saved before I start looking at homes?

Not necessarily. Many people get pre-approved for a mortgage before they have saved the full down payment, which tells them what price range they can afford. Once you know the price range, you can calculate exactly how much you need to save and set a timeline. However, having at least some down payment saved shows lenders you are serious and can manage money.

Can the seller pay my down payment?

No, but the seller can pay part of your closing costs, which frees up your cash for the down payment. This is negotiated as part of the purchase agreement. Lenders limit how much the seller can contribute — usually 3 to 6 percent of the purchase price — to prevent inflated sale prices.