What the lowest down payments are right now
The lowest down payment available depends on the type of loan you get. Conventional loans typically require 3% down. FHA loans (backed by the Federal Housing Administration) allow 3.5% down. VA loans (for military members and veterans) and USDA loans (for rural properties) both allow 0% down, meaning no down payment at all.
These are the minimums lenders will accept. Some lenders may require more, and some programs have closed or changed their terms. The actual lowest payment you can make depends on which loan type you may have access to for, what the house costs, and what your lender offers.
A lower down payment means you borrow more money and pay more interest over the life of the loan. It also usually means you'll pay mortgage insurance — an extra monthly fee that protects the lender if you stop paying. That insurance stays on your loan until you've paid down enough of the principal.
Key Takeaways
- VA and USDA loans allow 0% down; FHA loans require 3.5% down; conventional loans typically require 3% down.
- A lower down payment means higher monthly payments and mortgage insurance costs that can add hundreds of dollars per month.
- You must meet specific requirements to use VA, USDA, or FHA loans — you cannot choose them just because they have lower down payments.
- Mortgage insurance does not disappear automatically; you must request removal once you reach 20% equity in the home.
How much mortgage insurance costs with a low down payment
If you put down less than 20%, you will pay private mortgage insurance (PMI) on a conventional loan or mortgage insurance premium (MIP) on an FHA loan. These are not optional — they are required by the lender.
On a conventional loan with 3% down, PMI typically runs 0.5% to 1.5% of the loan amount per year, paid monthly. On a $300,000 house with 3% down ($9,000), you'd borrow $291,000. PMI might cost $145 to $365 per month, depending on your credit score and the lender.
FHA mortgage insurance is higher. The upfront premium is 1.75% of the loan amount, added to what you borrow. Annual premiums range from 0.55% to 0.8% depending on your down payment and loan term. On the same $300,000 house with 3.5% down, you'd pay roughly $200 to $250 per month in insurance, plus the upfront cost rolled into your loan.
VA and USDA loans do not require mortgage insurance, but VA loans charge a one-time funding fee (0.5% to 3.3% of the loan, depending on your military status and whether you've used the benefit before). USDA loans charge a may provide fee, also rolled into the loan amount.
When you can remove mortgage insurance from your loan
On a conventional loan, you can request PMI removal once you reach 20% equity in the home — meaning you've paid the loan down to 80% of the original purchase price. You must request it; the lender will not remove it automatically.
You'll need to show proof of the home's current value (usually an appraisal) and proof that you've made all payments on time. Some lenders require you to have owned the home for at least two years or paid for at least five years of PMI before they'll remove it.
FHA mortgage insurance is harder to shed. If you put down less than 10%, the insurance stays for the entire loan term — 15, 20, or 30 years. If you put down 10% or more, you can request removal after 11 years of payments. The only way to remove it sooner is to refinance into a conventional loan once you have enough equity.
VA and USDA loans have no mortgage insurance to remove, so this step does not explore.
Which loan types require what down payment
| Loan Type | Minimum Down Payment | Who Can Use It | Mortgage Insurance Required |
|---|---|---|---|
| Conventional | 3% | Anyone who meets credit and income requirements | Yes, until 20% equity |
| FHA | 3.5% | Anyone; easier credit requirements than conventional | Yes; permanent if down payment under 10% |
| VA | 0% | Military members, veterans, surviving spouses | No, but funding fee applies |
| USDA | 0% | Rural property buyers; income limits explore | No, but may provide fee applies |
Why lenders care about your down payment size
The down payment is your "skin in the game." If you put down 3%, you own 3% of the house and the lender owns 97% of the collateral. If you stop paying, the lender forecloses and sells the house. If the house has dropped in value, the lender loses money.
A larger down payment means the lender's risk is smaller. That's why they charge mortgage insurance when you put down less than 20% — it protects them, not you. It's also why a larger down payment can get you a lower interest rate. A 10% down payment might earn you a 0.25% lower rate than a 3% down payment, which saves you tens of thousands in interest over 30 years.
Your credit score and debt-to-income ratio matter just as much as your down payment. A lender will deny a 10% down payment process from someone with a 580 credit score before they'll deny a 3% process from someone with a 740 score.
The real cost of a low down payment over time
A 3% down payment feels cheaper at closing, but the total cost is higher. On a $300,000 house:
- 3% down ($9,000) + mortgage insurance for 8 years = roughly $15,000 to $20,000 in extra costs before you own 20% equity.
- 10% down ($30,000) + mortgage insurance for 4 years = roughly $8,000 to $12,000 in extra costs.
- 20% down ($60,000) = no mortgage insurance, no extra cost.
The difference between 3% and 20% down is not just $51,000 in cash at closing. It's also the interest you pay on that extra $51,000 borrowed, plus years of mortgage insurance. Over 30 years, putting down 3% instead of 20% can cost you $80,000 to $120,000 more in total payments.
That said, if you don't have $60,000 saved, a 3% down payment is the only option. Renting while you save may not be realistic. The question is not whether 3% is ideal — it's whether buying now with 3% down is better than your alternative.
Frequently Asked Questions
Can I use a gift for my down payment?
Yes. Most lenders allow down payment gifts from family members. You'll need a signed gift letter stating the money is a gift, not a loan, and that the giver expects no repayment. Some lenders require the gift to cover the entire down payment; others allow you to combine a gift with your own savings.
What if I don't have enough for even 3% down?
Some nonprofits and state programs offer down payment help, though availability varies by location. Your local housing authority or a HUD-approved housing counselor can tell you what exists in your area. Some employers and unions also offer down payment information. These programs may have income limits or require you to take a homebuying course.
Does a bigger down payment lower my interest rate?
Usually yes, but not always by much. A 10% down payment might earn you a 0.25% lower rate than 3% down. The difference depends on your credit score, the lender, and current market conditions. Always ask your lender for rate quotes at different down payment levels before you decide.
Can I put down less than 3% on a conventional loan?
No. Conventional loans have a 3% minimum. If you cannot save 3%, your options are FHA (3.5%), VA (0%), or USDA (0%). You cannot choose a loan type just because it has a lower down payment — you must meet the program's other requirements.
What happens if the house value drops after I buy it?
You still owe the full loan amount. If you put down 3% and the house loses 5% of its value, you now owe more than the house is worth. This is called being "underwater." You cannot remove mortgage insurance until you reach 20% equity, which may take years longer than planned. This is one reason a larger down payment protects you, not just the lender.