The minimum down payment depends on the loan type, but ranges from zero to 20 percent
The smallest down payment you can make is determined by your lender and the kind of mortgage you're getting. Conventional loans typically require 3 to 5 percent down, though some lenders go as low as 3 percent. FHA loans allow 3.5 percent down. VA loans and USDA loans can require zero down if you meet their specific requirements. The trade-off is that a smaller down payment means a larger loan amount, higher monthly payments, and mortgage insurance costs that add to your total expense.
Your actual minimum also depends on the home price and what you can afford to borrow. A lender will not approve you for a mortgage larger than their assessment of what you can repay, regardless of how little you put down. This is where your income, credit score, and existing debts matter more than the down payment percentage itself.
Key Takeaways
- Conventional loans typically require 3 to 5 percent down, while FHA loans require 3.5 percent, and VA or USDA loans may require nothing.
- Putting down less than 20 percent triggers mortgage insurance, which increases your monthly payment and total loan cost.
- Your lender sets a maximum loan amount based on your income and debts, so a low down payment does not may provide approval.
- The lower your down payment, the more you pay in interest and insurance over the life of the loan.
Conventional loans and the 3 percent minimum
Most conventional mortgages—loans not backed by a government agency—require a down payment between 3 and 5 percent. Some lenders offer 3 percent programs specifically for first-time buyers or borrowers with limited savings. A few lenders will go lower, but 3 percent is the practical floor for conventional financing.
With a conventional loan under 20 percent down, you pay private mortgage insurance (PMI). This is an insurance policy that protects the lender if you stop paying. PMI typically costs 0.5 to 1 percent of your loan amount per year, added to your monthly payment. On a $300,000 loan, that could be $125 to $250 per month. You can remove PMI once you've paid down the loan to 80 percent of the home's value, but that takes years.
FHA loans and the 3.5 percent option
FHA loans are backed by the Federal Housing Administration and are designed for buyers with lower credit scores or limited down payment savings. The minimum down payment is 3.5 percent. FHA loans are easier to get approved for than conventional loans if your credit is below 620, though some lenders will work with scores in the 580 range.
FHA loans require mortgage insurance, but it works differently than PMI. You pay an upfront insurance premium (1.75 percent of the loan amount) at closing, and then an annual premium added to your monthly payment. Unlike conventional PMI, FHA mortgage insurance does not go away automatically—you pay it for the life of the loan if you put down less than 10 percent. If you put down 10 percent or more, the insurance drops after 11 years.
VA and USDA loans with zero down
If you're a military veteran, active-duty service member, or surviving spouse, you may may have access to for a VA loan with zero down payment. VA loans are may provide by the Department of Veterans Affairs and have no mortgage insurance requirement. You pay a one-time funding fee (1.4 to 3.6 percent of the loan, depending on your service history and down payment) instead. This fee can be rolled into the loan amount, so you don't pay it upfront.
USDA loans are for rural and some suburban properties and also allow zero down for borrowers who meet income limits. USDA loans require an upfront may provide fee and an annual fee, but no traditional mortgage insurance. Both programs have geographic and income restrictions, so not every property or buyer qualifies.
What happens when you put down less than 20 percent
The main consequence of a low down payment is mortgage insurance. On a conventional loan, PMI protects the lender's investment. On an FHA loan, mortgage insurance is mandatory regardless of your credit or financial situation. On a VA or USDA loan, you pay a funding or may provide fee instead, which is typically lower than PMI but still adds to your cost.
A smaller down payment also means a larger loan balance, which increases the total interest you pay over 30 years. On a $300,000 home, the difference between putting 3 percent down ($9,000) and 20 percent down ($60,000) is a $51,000 larger loan. At a 7 percent interest rate over 30 years, that extra $51,000 costs roughly $120,000 more in interest and insurance combined.
How lenders decide your maximum loan amount
Your lender will not approve you for a mortgage just because you have a down payment saved. They calculate a maximum loan based on your income, existing debts, and credit score. Most lenders use a debt-to-income ratio: your total monthly debt payments (mortgage, car loans, credit cards, student loans) cannot exceed 43 to 50 percent of your gross monthly income.
If you earn $5,000 per month and already have $1,500 in car and student loan payments, your new mortgage payment cannot exceed roughly $1,650 (at a 43 percent ratio). That limits how much you can borrow, regardless of your down payment. A low down payment does not change this calculation—it just means you need to find a cheaper home or save more for a larger down payment.
Comparing down payment options across loan types
| Loan Type | Minimum Down Payment | Mortgage Insurance | Best For |
|---|---|---|---|
| Conventional | 3–5% | PMI (0.5–1% annually) | Buyers with good credit and some savings |
| FHA | 3.5% | Required for life of loan (if <10% down) | First-time buyers, lower credit scores |
| VA | 0% | Funding fee instead (1.4–3.6%) | Military veterans and active-duty members |
| USDA | 0% | may provide fee instead | Rural property buyers meeting income limits |
Frequently Asked Questions
Can I borrow money from family for my down payment?
Yes, but lenders have rules about it. Most require a letter from the family member stating the money is a gift, not a loan you have to repay. If it's a loan, you must document it and include the monthly payment in your debt-to-income calculation, which reduces how much you can borrow for the mortgage itself.
What if I only have 2 percent saved?
You have a few options: wait and save more, look for a lender offering a 2 percent conventional program (rare but they exist), consider an FHA loan at 3.5 percent, or explore first-time buyer programs in your state or city that may offer down payment help. Some programs provide grants or forgivable loans specifically for down payments.
Does a larger down payment lower my interest rate?
Sometimes. Lenders view a larger down payment as lower risk, so they may offer a slightly better rate. The difference is usually 0.25 to 0.5 percent, which adds up over 30 years. Compare rate quotes from multiple lenders to see the actual difference a larger down payment makes for your situation.
Can I remove PMI before I reach 20 percent equity?
On a conventional loan, you can request PMI removal once you've paid the loan down to 80 percent of the original purchase price, or when the home's value increases enough that you've reached 20 percent equity. Some lenders allow removal at 80 percent automatically; others require you to ask. FHA mortgage insurance cannot be removed early if you put down less than 10 percent.