Down payments range from 0% to 20% of the home price, depending on the loan type and your financial situation

A down payment is the money you put toward the purchase price upfront. The rest comes from a mortgage loan. A $300,000 house with a 10% down payment means you pay $30,000 and borrow $270,000. The size of your down payment affects your monthly payment, how much interest you pay over time, and whether you'll need mortgage insurance.

The amount you need depends on which loan program you use. Federal Housing Administration (FHA) loans allow down payments as low as 3.5%. Conventional loans typically require 5% to 20%. Veterans Affairs (VA) loans and U.S. Department of Agriculture (USDA) loans may allow 0% down if you meet their requirements. Putting down less than 20% usually means paying private mortgage insurance (PMI), which protects the lender if you stop paying.

Your credit score, debt-to-income ratio, savings, and the property type all factor into what lenders will offer you. A stronger financial profile often means access to lower down payment options and better interest rates.

Key Takeaways

  • Down payments typically range from 0% to 20%, with FHA loans allowing as little as 3.5% and conventional loans usually requiring 5% or more.
  • Putting down less than 20% on a conventional loan triggers PMI, which adds to your monthly payment until you reach 20% equity in the home.
  • Your credit score, income, and existing debt determine which down payment options a lender will actually offer you, not just what's theoretically possible.
  • Saving for a larger down payment reduces your monthly payment and total interest paid, but delaying a home purchase to save more isn't always the right choice financially.
  • Down payment assistance programs exist through state and local housing agencies, nonprofits, and some employers, though they have income and location limits.

How down payment size affects your monthly payment and total cost

A larger down payment lowers the amount you borrow, which directly reduces your monthly mortgage payment. On a $300,000 house at 7% interest over 30 years, putting down 3.5% ($10,500) means a monthly payment around $1,980 before taxes and insurance. Putting down 20% ($60,000) brings that payment down to around $1,680. That $300 monthly difference compounds to $108,000 over 30 years.

The down payment also affects total interest paid. With a smaller down payment, you're borrowing more money for longer, so you pay more in interest overall. However, the money you don't put down can be invested or kept as emergency savings, which may earn returns or provide security. The math isn't always in favor of the largest down payment you can afford.

If you put down less than 20%, PMI gets added to your payment. On a $270,000 loan (10% down on a $300,000 house), PMI might run $150 to $300 per month depending on your credit score and loan type. PMI drops off automatically once you reach 20% equity through a combination of payments and home appreciation, though this typically takes 5 to 10 years.

Down payment requirements by loan type

FHA loans are designed for first-time buyers and people with lower credit scores. They allow down payments as low as 3.5% and accept credit scores as low as 580. The tradeoff is that FHA loans require mortgage insurance for the life of the loan, not just until you reach 20% equity. This makes FHA loans more expensive over time, but they're often the only option for buyers with limited savings or credit challenges.

Conventional loans are not backed by a government agency and typically require 5% to 20% down. Lenders set their own rules, so a 5% down payment may be available to someone with a 740 credit score and low debt, but not to someone with a 650 score and high existing debt. Conventional loans with less than 20% down require PMI, which you can remove once you reach 20% equity.

VA loans are available to military members, veterans, and surviving spouses. They allow 0% down and don't require PMI. USDA loans are for rural properties and also allow 0% down for borrowers who meet income limits. Both programs have specific property and location requirements, so they're not available everywhere.

What lenders actually look at when deciding your down payment options

Your credit score is the first filter. Lenders use it to predict whether you'll repay the loan. A score above 740 opens access to lower down payment options and better interest rates. A score between 620 and 680 limits you to FHA loans or conventional loans with 10% to 15% down. Below 620, FHA becomes your main option.

Your debt-to-income ratio (DTI) is what you owe each month divided by your gross monthly income. Lenders typically want to see a DTI below 43%, though some will go to 50% with a larger down payment. If you earn $5,000 a month and already have $1,500 in car payments, student loans, and credit cards, a new mortgage payment above $1,650 will push you over the limit. A larger down payment lowers the mortgage payment, which can bring your DTI into range.

Lenders also verify that you actually have the down payment saved. They'll ask for bank statements, investment account statements, and documentation of where large deposits came from. Gifts from family are allowed, but the lender needs a signed letter from the gift-giver stating it's a gift, not a loan you'll have to repay.

The property itself matters too. Lenders are more willing to accept lower down payments on single-family homes in established neighborhoods than on condos, new construction, or rural properties. An appraisal confirms the home is worth what you're paying, which protects the lender's collateral.

Down payment assistance and where to find it

State and local housing finance agencies run down payment assistance programs in most states. These are typically forgivable loans or grants that cover 2% to 10% of the purchase price. You repay a forgivable loan only if you sell the home within a set period (often 5 to 10 years); if you stay, it's forgiven. Requirements vary widely by state and county, but most programs limit income to 80% to 120% of the area median income and require you to complete a homebuyer education course.

Nonprofit organizations like NeighborWorks and local community development corporations also offer down payment help. Some are tied to specific employers or industries. Credit unions sometimes offer down payment assistance to members. The National Council of State Housing Agencies maintains a searchable database of state programs, and your local housing authority can point you toward what's available in your area.

Employer assistance is less common but growing. Some large employers, particularly in high-cost areas, offer down payment grants or matching programs as a retention benefit. Ask your HR department whether your company has a homebuying program.

Deciding how much to put down: savings, timing, and trade-offs

Putting down 20% eliminates PMI and gives you the lowest possible monthly payment, but it requires significant savings. If you have $60,000 saved for a down payment on a $300,000 house, you could put down 20% and have no PMI. But if you also have $15,000 in emergency savings and $20,000 in retirement accounts, using all $60,000 for the down payment leaves you vulnerable if the roof leaks or you lose income.

A common approach is to put down 10% to 15%, keep 3 to 6 months of expenses in savings, and accept PMI as the cost of buying sooner. PMI typically costs 0.5% to 1% of the loan amount annually, which on a $270,000 loan is $1,350 to $2,700 per year. If you're paying $150 to $225 per month in PMI, you'll remove it in 10 to 15 years as you pay down the principal and the home appreciates. The alternative—waiting 2 to 3 more years to save 20% down—means paying rent during that time and potentially facing higher home prices.

If you're buying in a stable market where prices aren't rising fast, waiting to save more makes sense. If you're in a competitive market where prices are climbing 5% to 10% annually, buying sooner with a smaller down payment often costs less overall, even with PMI.

Frequently Asked Questions

Can I borrow money for my down payment?

No. Lenders require that your down payment come from your own savings, gifts from family, or down payment assistance programs. Borrowing from a personal loan, credit card, or family member (even if you plan to repay it) disqualifies you because it increases your debt and your DTI ratio. The lender will see the new debt on your credit report or ask you directly about the source of funds.

What happens if I put down less than 3.5%?

Conventional loans require at least 5% down. FHA loans allow 3.5% down. VA and USDA loans allow 0% down if you meet their requirements. If you have less than 3.5% saved, you'll need to wait, save more, or explore down payment assistance programs in your area. Some first-time buyer programs cover the gap between what you have and 3.5%.

Does a larger down payment improve my chances of loan approval?

Yes. A larger down payment lowers your DTI ratio, reduces the lender's risk, and shows you're financially committed. If you're on the edge of approval due to credit score or income, putting down 15% instead of 5% can make the difference. It also gives you access to better interest rates because you're borrowing less relative to the home's value.

When does PMI go away?

PMI drops automatically once you reach 20% equity in the home through a combination of principal payments and home appreciation. This typically takes 5 to 10 years. You can also request removal once you hit 20% equity by asking your lender, though you may need a new appraisal to prove the home's current value. On FHA loans, PMI stays for the life of the loan if you put down less than 10%.

Is it better to put down 20% or invest the extra money?

It depends on your interest rate and investment returns. If your mortgage rate is 7% and you could earn 8% to 10% in the stock market, investing the extra money may come out ahead mathematically. But this assumes you actually invest it and don't spend it, and it ignores the peace of mind of a lower monthly payment and no PMI. Most people benefit from putting down 10% to 15% and keeping the rest in savings and investments.