Down payments range from zero to 20 percent, depending on the loan type and lender
There is no single required down payment. What you need depends on which loan program you use, your credit score, your debt-to-income ratio, and the lender's own rules. A conventional loan typically requires 3 to 20 percent. An FHA loan requires 3.5 percent minimum. A VA loan (if you are may be able to access) requires zero percent. A USDA loan (for rural properties) also requires zero percent.
The lower your down payment, the more you borrow and the more interest you pay over the life of the loan. You also pay private mortgage insurance (PMI) on conventional loans when you put down less than 20 percent—this is an extra monthly cost that protects the lender, not you. FHA loans charge mortgage insurance regardless of down payment size.
Lenders set their own minimums within these ranges. One lender may accept 3 percent down on a conventional loan; another may require 5 or 10 percent. Your credit score, savings history, and employment record all factor into what a specific lender will offer you.
Key Takeaways
- Conventional loans typically require 3 to 20 percent down, while FHA loans require 3.5 percent minimum and VA or USDA loans require zero percent.
- Putting down less than 20 percent on a conventional loan means paying private mortgage insurance as an extra monthly cost until you reach 20 percent equity.
- Your credit score, debt-to-income ratio, and the lender's own policies determine what down payment percentage they will actually accept.
- A lower down payment means a larger loan, more total interest paid, and monthly mortgage insurance costs.
- Different lenders have different minimums within the same loan program, so comparing offers matters.
How down payment size affects your monthly payment and total cost
A smaller down payment lowers the cash you need upfront but raises your monthly mortgage payment and the total amount you pay over 30 years. On a $300,000 house: putting 3 percent down means borrowing $291,000; putting 20 percent down means borrowing $240,000. The difference in monthly payment is roughly $300 to $400, plus PMI on the smaller-down-payment loan.
PMI typically costs 0.5 to 1.5 percent of the loan amount per year, divided into monthly payments. On a $291,000 loan, that is roughly $120 to $360 per month depending on your credit score and the lender. You pay PMI until you reach 20 percent equity in the home—either by paying down the principal or by the home appreciating in value.
The trade-off is real: you save cash now but spend more later. Whether that trade-off makes sense depends on your savings, your income stability, and what you could do with the money you did not put down.
Conventional loans and the 20 percent benchmark
A conventional loan is a mortgage not backed by a government agency. Lenders set their own rules, but most require a minimum down payment between 3 and 5 percent. The 20 percent figure is a benchmark because it is the point where PMI stops—you no longer pay insurance once you own 20 percent of the home outright.
Conventional loans are available to borrowers with a credit score of roughly 620 or higher, though most lenders prefer 640 or above. Your debt-to-income ratio (the percentage of your monthly income that goes to debt payments) typically cannot exceed 43 to 50 percent, depending on the lender.
If you put down less than 20 percent, you will pay PMI. If you put down 20 percent or more, you avoid PMI entirely. Some borrowers put down 10 or 15 percent to split the difference—lower upfront cost than 20 percent, but still reducing the years they pay insurance.
FHA loans and the 3.5 percent minimum
An FHA loan is backed by the Federal Housing Administration and is designed for borrowers with lower credit scores or smaller down payments. The minimum down payment is 3.5 percent. FHA loans accept credit scores as low as 580, making them accessible to borrowers who cannot meet conventional loan requirements.
The catch: FHA loans charge mortgage insurance in two forms. You pay an upfront insurance premium (1.75 percent of the loan amount) at closing, and you pay an annual insurance premium (0.55 to 0.8 percent of the loan amount per year) for the life of the loan. This insurance protects the lender if you default, not you.
Because FHA insurance lasts the entire loan term, an FHA loan costs more over 30 years than a conventional loan with PMI, even though the down payment is lower. FHA loans make sense when you cannot meet conventional requirements or when you have limited savings and need the lowest possible down payment.
VA and USDA loans with zero down payment
A VA loan is available to military members, veterans, and some surviving spouses. It requires zero down payment. You borrow the full purchase price. VA loans also do not require PMI, though you pay a one-time VA funding fee (1.4 to 3.6 percent of the loan amount depending on your military status and down payment) at closing.
A USDA loan is available to borrowers buying in rural areas and meeting income limits. It also requires zero down payment and no PMI. You pay a may provide fee (1 percent upfront and 0.35 percent annually) instead.
Both programs have stricter property and location requirements than conventional or FHA loans. A VA loan can be used anywhere; a USDA loan only in designated rural areas. Both require stable income and acceptable credit, though the credit score threshold is often lower than conventional loans.
What lenders actually look at when setting your down payment requirement
Lenders do not just look at the percentage you put down. They assess your ability to repay by examining your credit score, employment history, savings, and debt load. A borrower with a 750 credit score and two years of stable employment may get approved for 3 percent down; a borrower with a 620 score and a recent job change may need 10 percent.
Your debt-to-income ratio is the percentage of your gross monthly income that goes to debt payments (mortgage, car loans, credit cards, student loans). Most lenders cap this at 43 to 50 percent. If your ratio is already high, a lender may require a larger down payment to lower the loan amount and keep your total debt manageable.
Cash reserves matter too. Lenders want to see that you have savings beyond the down payment—typically two to six months of mortgage payments in the bank. A larger down payment can sometimes offset weak reserves or a recent financial disruption.
Saving for a down payment versus buying sooner with less
The decision to save longer for a larger down payment or buy sooner with a smaller one depends on your situation. Saving longer means paying rent longer, but it also means lower monthly mortgage payments and no PMI. Buying sooner with 3 or 5 percent down gets you into a home faster, but you pay more total interest and insurance.
Consider your local rent versus mortgage costs. If rent is high and home prices are stable or rising, buying sooner may save money overall even with PMI. If rent is low and home prices are climbing, waiting to save may be worth it. Also consider your job stability and whether you plan to stay in the area for at least five years—buying costs money upfront (inspection, appraisal, closing costs), so a short stay can wipe out any savings.
Closing costs typically run 2 to 5 percent of the purchase price and are separate from your down payment. Budget for these in addition to whatever down payment you plan to make.
Frequently Asked Questions
Can I use a gift from family toward my down payment?
Yes. Most lenders accept down payment gifts from family members, but they require a signed letter stating the money is a gift, not a loan. You cannot borrow the down payment money—lenders verify your savings to may support you have skin in the game. The gift giver does not need to be a co-borrower.
What if I do not have enough for the minimum down payment?
You have several options: save longer, look for a lower-priced home, explore down payment information programs run by your state or local government, or ask the seller to cover some closing costs (which frees up your cash for the down payment). Some employers and nonprofits also offer down payment help.
Does a larger down payment always mean a better interest rate?
Usually, yes. Lenders offer lower interest rates to borrowers with larger down payments because the loan is smaller and the risk is lower. The difference is typically 0.25 to 0.5 percent. Run the numbers: a lower rate on a smaller loan may save more than a higher rate on a larger loan, even after accounting for PMI.
Can I put down less than the lender's minimum?
No. The lender sets the minimum, and you must meet it to be approved. If one lender requires 5 percent and you only have 3 percent, you need to find a different lender or loan program that accepts 3 percent, or save more money.
What happens to my down payment if the deal falls through?
Your down payment is held in escrow (a neutral third-party account) during the purchase process. If you back out without a valid reason, you lose it. If the inspection reveals major problems or the appraisal comes in low, you may be able to walk away and recover your money, depending on your contract terms.