The minimum down payment depends on the loan type, not a single rule
There is no single minimum down payment for every home purchase. Instead, the amount you need depends on which type of loan you use. A conventional loan from a bank may require one amount, while a government-backed loan like an FHA loan has different rules. Some programs let you put down as little as 3 percent of the home's price, while others require 20 percent or more.
The down payment is the money you bring to closing — the amount you own outright from day one. The rest of the purchase price becomes a mortgage, which you borrow and repay over time. A smaller down payment means a larger mortgage and higher monthly payments. A larger down payment means you borrow less and your monthly costs are lower.
Key Takeaways
- Conventional loans typically require a down payment between 3 and 20 percent, depending on your credit score and savings.
- FHA loans, backed by the Federal Housing Administration, allow down payments as low as 3.5 percent of the home price.
- VA loans and USDA loans, for military members and rural homebuyers, sometimes require zero down payment.
- A smaller down payment means paying mortgage insurance, which adds to your monthly cost until you reach 20 percent equity.
- The actual dollar amount depends on the home price — a 10 percent down payment on a $300,000 home is $30,000, but on a $150,000 home is $15,000.
Conventional loans: 3 to 20 percent down
A conventional loan is a mortgage from a private bank or lender, not backed by the government. Most conventional loans require a down payment between 3 and 20 percent of the home's purchase price. The exact amount depends on your credit score, savings, 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 charge that protects the lender if you stop paying. PMI typically costs between 0.5 and 1.5 percent of your loan amount per year, added to your monthly payment. Once you own 20 percent of the home (called 20 percent equity), you can request to stop paying PMI.
Some lenders offer conventional loans with 3 percent down, but these usually require a higher credit score — often 620 or above — and may come with higher interest rates. A 10 percent down payment is more common and may may have access to you for better rates.
FHA loans: 3.5 percent down
An FHA loan is backed by the Federal Housing Administration, a government agency. FHA loans allow down payments as low as 3.5 percent of the home price. These loans are designed for first-time homebuyers and people with lower credit scores or less savings.
FHA loans require mortgage insurance, but it works differently than PMI on conventional loans. You pay an upfront insurance fee at closing (called the mortgage insurance premium, or MIP), and then a monthly insurance payment for the life of the loan. This means your monthly cost is higher than a conventional loan, even after you reach 20 percent equity.
FHA loans typically require a credit score of 580 or higher to may have access to for the 3.5 percent down payment. If your score is between 500 and 579, some lenders will work with you but may require 10 percent down instead.
VA loans and USDA loans: Zero down payment
If you are a current or former military member, a VA loan may let you buy a home with zero down payment. VA loans are may provide by the Department of Veterans Affairs. You pay a one-time funding fee instead of a down payment, and this fee can sometimes be rolled into your loan amount.
A USDA loan is for homebuyers in rural areas and also allows zero down payment. USDA loans are backed by the U.S. Department of Agriculture and are designed to help people in areas where conventional lending is harder to find. Like VA loans, USDA loans have an upfront may provide fee and monthly insurance.
Both VA and USDA loans have income limits or property location requirements. A VA loan requires military service history. A USDA loan requires the property to be in a designated rural area, which you can check on the USDA website.
How down payment size affects your monthly cost
The size of your down payment directly changes how much you pay each month. A larger down payment means a smaller loan, which means lower monthly payments. It also means you avoid or reduce mortgage insurance costs.
For example, on a $300,000 home: a 3 percent down payment ($9,000) means you borrow $291,000 and pay mortgage insurance. A 20 percent down payment ($60,000) means you borrow $240,000 and pay no mortgage insurance. The difference in monthly payments can be $200 to $400 or more, depending on interest rates and insurance costs.
Putting down more money upfront also builds equity faster. Equity is the portion of the home you own outright. The more equity you have, the more financial cushion you have if home values drop or if you need to sell quickly.
Saving for a down payment when you have limited funds
If you do not have 20 percent saved, you have real options. FHA loans at 3.5 percent down are designed for this situation. Conventional loans at 3 to 5 percent down are also available, though you will pay mortgage insurance until you reach 20 percent equity.
Some employers, nonprofits, and local housing programs offer down payment help. This money is sometimes a grant (you do not repay it) or a low-interest loan. Your local housing authority or a community development organization can tell you what programs exist in your area.
Putting down a smaller amount now and building equity over time is a legitimate path to homeownership. The goal is to buy a home you can afford, not to wait until you have 20 percent saved if that takes years.
Frequently Asked Questions
Can I borrow the down payment from someone else?
Yes, but with limits. Most lenders allow a gift from a family member, and some allow gifts from close friends. You will need a signed letter from the person stating it is a gift, not a loan. Some loan types have rules about how much can be gifted — for example, FHA loans may require you to put down at least 1.5 percent of your own money.
What happens if I put down less than 3 percent?
Most standard loan programs do not allow down payments below 3 percent. Some lenders offer 1 or 2 percent programs, but these are rare and come with higher interest rates and stricter credit requirements. Your best option for a very small down payment is an FHA loan at 3.5 percent.
Does a bigger down payment always mean a better interest rate?
Usually yes, but not always. A larger down payment shows the lender less risk, so they often offer lower interest rates. However, your credit score, income, and the current market also affect your rate. It is worth comparing offers from multiple lenders to see the actual difference.
Can I increase my down payment after I start the mortgage process?
Yes. If you save more money or receive a bonus before closing, you can put down more. This reduces your loan amount and your monthly payment. Tell your lender as soon as possible so they can recalculate your numbers.