Down payments are usually between 3 and 20 percent of the home's price, depending on the loan type and your situation
A down payment is the money you give upfront when you buy a home. The percentage is straightforward that amount divided by the total price of the house. If a home costs $200,000 and you put down $40,000, that is a 20 percent down payment. The rest of the purchase price — $160,000 in this example — becomes your mortgage loan, which you repay over time with interest.
The percentage you pay depends on what kind of loan you are getting and what the lender requires. A conventional loan (the most common type from a bank) often asks for 20 percent down. Government-backed loans like FHA loans, VA loans, and USDA loans allow much smaller percentages — sometimes as low as 3 to 3.5 percent. Some first-time homebuyers put down less than 3 percent.
The percentage matters because it affects your monthly payment, how much interest you pay over the life of the loan, and whether you have to pay extra insurance. A larger down payment means a smaller loan, lower monthly payments, and no mortgage insurance. A smaller down payment means higher monthly payments and usually mortgage insurance added to your bill.
Key Takeaways
- Down payment percentages range from 3 percent to 20 percent depending on your loan type, with conventional loans typically requiring 20 percent and government-backed loans allowing 3 to 10 percent.
- A smaller down payment percentage means a larger loan, higher monthly payments, and mortgage insurance costs added to your bill each month.
- A larger down payment percentage reduces your monthly payment and total interest paid, but requires more money upfront.
- The percentage you can afford depends on your savings, income, and what lenders will accept for your situation.
How down payment percentage affects your monthly payment
The percentage you put down directly changes how much you borrow and therefore how much your monthly mortgage payment will be. Using a $200,000 home as an example: a 20 percent down payment ($40,000) means you borrow $160,000. A 10 percent down payment ($20,000) means you borrow $180,000. A 3 percent down payment ($6,000) means you borrow $194,000.
On a 30-year loan at the same interest rate, the monthly payment on $160,000 might be around $760 (before taxes and insurance). The payment on $180,000 might be around $855. The payment on $194,000 might be around $925. The difference between 3 percent and 20 percent down can be $150 to $200 per month — money that adds up over 30 years.
However, a smaller down payment percentage also usually triggers mortgage insurance, an extra monthly fee that protects the lender if you stop paying. This insurance cost varies but often runs 0.5 to 1 percent of your loan amount per year, divided into monthly payments. So while your base mortgage payment might be lower with a smaller down payment, the insurance can add $100 to $300 per month depending on the loan size.
Down payment percentages by loan type
Different loan programs allow different minimum percentages. Knowing which type of loan you might use helps you understand what percentage is realistic for your situation.
Conventional loans (loans from banks and mortgage companies, not backed by the government) typically require a minimum of 3 to 5 percent down, though 20 percent is common for borrowers with strong credit and income. Loans with less than 20 percent down require mortgage insurance.
FHA loans (Federal Housing Administration loans, designed for first-time and lower-income buyers) allow down payments as low as 3.5 percent. These loans also require mortgage insurance, which is built into the loan terms.
VA loans (for military members, veterans, and surviving spouses) often require zero percent down — meaning you can buy a home with no down payment at all. These loans do not require mortgage insurance.
USDA loans (for rural homebuyers who meet income limits) also allow zero percent down and do not require mortgage insurance, though they do charge a may provide fee.
Why lenders care about your down payment percentage
A lender looks at your down payment percentage as a measure of risk. If you put down 20 percent, you have already invested a significant amount of your own money. If the home value drops or you run into trouble paying, the lender is more likely to recover their money when the home is sold. If you put down 3 percent, the lender's risk is much higher — a small drop in home value means they could lose money.
This is why mortgage insurance exists. It is insurance that protects the lender, not you. You pay for it, but it covers the lender's loss if you default on the loan. Once you have paid down your loan to 80 percent of the original home value (meaning you have built up 20 percent equity), you can usually request to have the insurance removed.
Your credit score, income, and debt also affect what percentage a lender will accept. Someone with a strong credit score and stable income might be approved for a 3 percent down conventional loan. Someone with a lower credit score might need to put down 10 or 15 percent, or might only be approved for an FHA loan.
Calculating the actual dollar amount from a percentage
To find out how much money you need to save, multiply the home price by the percentage as a decimal. A 10 percent down payment on a $250,000 home is $250,000 × 0.10 = $25,000. A 5 percent down payment on the same home is $250,000 × 0.05 = $12,500.
Remember that your down payment is not your only upfront cost. You also pay for a home inspection, appraisal, title search, homeowners insurance, property taxes, and closing costs (which typically run 2 to 5 percent of the home price). Many first-time homebuyers are surprised that closing costs alone can be $5,000 to $15,000 on a $250,000 home. Budget for these costs separately from your down payment.
Down payment percentage and total interest paid
A larger down payment percentage means you borrow less money, which means you pay less interest over the life of the loan. On a $200,000 home at 7 percent interest over 30 years, a 20 percent down payment ($160,000 borrowed) costs roughly $214,000 in total interest. A 10 percent down payment ($180,000 borrowed) costs roughly $241,000 in total interest. A 3 percent down payment ($194,000 borrowed) costs roughly $259,000 in total interest.
The difference between 3 percent and 20 percent down can mean $45,000 more in interest paid over 30 years. However, this calculation assumes you keep the loan for the full 30 years and that the interest rate is the same. In reality, many people refinance (get a new loan with better terms) or sell the home before 30 years pass, which changes the total interest paid.
Frequently Asked Questions
Can I put down less than 3 percent?
Some lenders offer loans with down payments below 3 percent, but these are less common and usually require excellent credit and income. Some state and local programs for first-time homebuyers also allow very small down payments. Your best option is to talk directly with a lender or mortgage broker about what is possible in your area.
What if I can only save 2 percent?
You have a few options. You can wait and save more, look for a down payment information program in your state or city, ask family members to gift you money toward the down payment, or explore loans that allow smaller percentages like FHA or VA loans if you are a veteran. Some employers and nonprofits also offer down payment help.
Does a higher down payment percentage always mean a better deal?
Not always. If you have savings earning interest, or if you have high-interest debt like credit cards, it might make more sense to put down a smaller percentage and use your money to pay off debt first. A mortgage at 7 percent is cheaper than credit card debt at 20 percent. Talk through your full financial picture with a lender or financial counselor.
What happens to my down payment after I buy the home?
Your down payment becomes your initial equity in the home — the portion you own outright. As you make monthly mortgage payments, you build more equity. If you sell the home later, you get back your equity (minus selling costs) after the lender is paid off.