The down payment amount depends on the loan type, not a fixed rule

There is no single down payment percentage that applies to all house purchases. The amount you put down depends on which loan program you use, your credit history, and the lender's requirements. Conventional loans often require 3 to 20 percent down. FHA loans typically require 3.5 percent down. VA loans and USDA loans may require zero percent down if you meet their may be able to access criteria. The lower your down payment, the higher your monthly mortgage payment and the more interest you pay over the life of the loan.

Lenders use your down payment amount to calculate risk. A larger down payment means you have more of your own money at stake, which makes the lender more willing to offer better interest rates and terms. A smaller down payment means the lender is financing a larger share of the home's cost, so they charge more in interest and may require you to pay mortgage insurance on top of your regular payment.

Key Takeaways

  • Conventional loans typically require between 3 and 20 percent down, with 20 percent eliminating the need for mortgage insurance.
  • FHA loans require a minimum of 3.5 percent down and are designed for borrowers with lower credit scores or smaller savings.
  • VA and USDA loans may allow zero percent down if you meet military service or rural property requirements.
  • The lower your down payment percentage, the higher your monthly payment and total interest cost, because you are borrowing more money.
  • Mortgage insurance is required on most loans when your down payment is less than 20 percent, adding to your monthly cost.

Conventional loans and the 20 percent benchmark

Conventional loans are mortgages not backed by a federal agency. They come from banks, credit unions, and mortgage companies. Most conventional lenders require a down payment between 3 and 20 percent. The 20 percent figure is significant because it is the threshold where lenders typically stop requiring private mortgage insurance (PMI).

If you put down less than 20 percent on a conventional loan, the lender will require you to pay PMI. This insurance protects the lender if you stop paying the mortgage, but you pay the premium as part of your monthly payment. PMI typically costs between 0.5 and 1.5 percent of the loan amount per year, divided into monthly payments. A borrower with a 5 percent down payment will pay more in PMI than a borrower with a 15 percent down payment on the same house.

Conventional loans with down payments below 20 percent also come with stricter credit score requirements. Most lenders want a credit score of at least 620 to 640 for a 3 to 5 percent down payment, and 680 or higher for the best interest rates. If your credit score is lower, you may not may have access to for a conventional loan at all, or you may face a higher interest rate to compensate for the perceived risk.

FHA loans and the 3.5 percent minimum

FHA loans are backed by the Federal Housing Administration and are designed for borrowers who have less money saved or a lower credit score. The minimum down payment is 3.5 percent of the purchase price. This makes FHA loans accessible to first-time homebuyers and people with limited savings, but it comes with a trade-off: FHA loans require mortgage insurance premiums (MIP) that you cannot remove, even after you build equity in the home.

FHA loans charge two types of mortgage insurance. An upfront mortgage insurance premium (UFMIP) is typically 1.75 percent of the loan amount and is added to your total loan balance. An annual mortgage insurance premium is then charged monthly for the life of the loan if your down payment is less than 10 percent. If you put down 10 percent or more, the annual MIP drops off after 11 years. The monthly MIP cost varies based on the loan amount and your credit score, but it typically ranges from 0.4 to 0.9 percent of the loan amount per year.

FHA loans require a credit score of at least 580 to may have access to for the 3.5 percent down payment option. Borrowers with scores between 500 and 579 may still may have access to but will need to put down 10 percent instead. The FHA also limits how much debt you can carry relative to your income, and they require a home inspection and appraisal before closing.

VA loans and USDA loans with zero down

VA loans are available to active-duty service members, veterans, and some surviving spouses. They are backed by the Department of Veterans Affairs and typically require zero percent down. This means you can purchase a home without saving for a down payment, which is a significant advantage for military families. VA loans also do not require mortgage insurance, which saves money on monthly payments compared to conventional or FHA loans with low down payments.

To use a VA loan, you must obtain a Certificate of may be able to access from the VA, which confirms your military service record. The lender will verify this certificate before approving your loan. VA loans do charge a funding fee, which is a one-time cost paid at closing that ranges from 1.4 to 3.6 percent of the loan amount depending on your down payment and whether you have used a VA loan before. This fee can be rolled into the loan amount, so you do not have to pay it upfront in cash.

USDA loans are backed by the U.S. Department of Agriculture and are designed for rural homebuyers with low to moderate incomes. Like VA loans, USDA loans typically require zero percent down. They also do not require mortgage insurance in the traditional sense, but they do charge a may provide fee that is similar in function. USDA loans have income limits that vary by county, and the property must be in a designated rural area. You can check whether a specific address qualifies using the USDA's property may be able to access tool.

How down payment size affects your monthly payment

The relationship between down payment and monthly payment is direct and measurable. On a $300,000 home with a 7 percent interest rate over 30 years, a 3 percent down payment ($9,000) means you borrow $291,000. A 20 percent down payment ($60,000) means you borrow $240,000. The difference in principal is $51,000, which translates to roughly $340 more per month in principal and interest alone, before adding mortgage insurance or property taxes.

When you add mortgage insurance to a low down payment scenario, the monthly cost gap widens further. A borrower with 5 percent down on that same $300,000 home would pay approximately $200 to $300 per month in PMI, depending on credit score and lender. Over 10 years, that is $24,000 to $36,000 in insurance premiums that go to the lender, not toward building equity in your home.

The total interest paid over the life of the loan also increases with a smaller down payment. Borrowing more money means paying interest on a larger balance for 30 years. A $51,000 difference in principal at 7 percent interest over 30 years costs roughly $120,000 more in total interest. This is why financial advisors often recommend saving for a larger down payment if you can, even though it is not required.

Down payment information programs and gifts

Some borrowers use down payment information programs offered by nonprofits, state housing agencies, or employers to reduce the amount they need to save. These programs vary widely by location and income level. Some provide grants that do not need to be repaid, while others offer forgivable loans that become grants after you stay in the home for a certain number of years. A few programs require repayment like a traditional loan.

Lenders also allow down payment gifts from family members in most cases. The gift must come from a relative, and the lender will require a signed gift letter stating that the money does not need to be repaid. Some loan programs limit how much of your down payment can come from a gift—for example, FHA loans allow 100 percent of the down payment to be a gift, while some conventional loans require you to contribute at least 5 percent of your own funds. The lender will verify the source of the gift money to may support it is not a loan in disguise.

Frequently Asked Questions

Is 20 percent down required to buy a house?

No. Twenty percent down eliminates mortgage insurance on conventional loans, but it is not required. You can buy with 3 to 5 percent down on a conventional loan, 3.5 percent on an FHA loan, or zero percent on a VA or USDA loan. The trade-off is that lower down payments mean higher monthly payments due to mortgage insurance and a larger loan balance.

What happens if I put down less than 20 percent?

You will pay mortgage insurance (PMI on conventional loans, MIP on FHA loans) as part of your monthly payment. This insurance protects the lender and typically costs 0.5 to 1.5 percent of the loan amount per year. On conventional loans, PMI can be removed once you build enough equity. On FHA loans, MIP may be permanent depending on your down payment size.

Can I use a gift for my down payment?

Yes, most lenders allow down payment gifts from family members. You will need a signed gift letter stating the money does not need to be repaid. The lender verifies the source to confirm it is a genuine gift, not a loan. Some loan programs limit how much of your down payment can be a gift, so check with your lender first.

Which loan type requires the smallest down payment?

VA loans and USDA loans typically require zero percent down if you meet may be able to access requirements. FHA loans require a minimum of 3.5 percent. Conventional loans usually require at least 3 percent, though some lenders offer programs with 1 to 2 percent down. Your may be able to access depends on military service, income, location, and credit score.

Does a larger down payment mean a lower interest rate?

Usually, yes. Lenders offer better interest rates to borrowers who put down more money because the risk is lower. A borrower with 20 percent down typically receives a lower rate than one with 5 percent down, assuming similar credit scores. The difference can be 0.25 to 0.5 percent, which adds up to thousands of dollars over 30 years.