You can buy a house with as little as 3 percent down, and some programs go lower

The minimum down payment for a first-time buyer ranges from 3 percent to 5 percent of the home's purchase price on conventional loans, though Federal Housing Administration (FHA) loans allow 3.5 percent, and some state and local programs go as low as zero percent. The amount you put down affects your monthly payment, the interest rate you receive, and whether you'll pay mortgage insurance on top of your loan. Most first-time buyers put down between 5 and 10 percent, not because they have to, but because they can afford it and want to avoid the cost of insurance.

The real constraint isn't the lender's minimum—it's what you can actually save. If you have $15,000 saved and the house costs $300,000, you're at 5 percent down. If you have $10,500, you're at 3.5 percent. The lender will tell you what they'll accept; your job is to understand what each option costs you over time.

Key Takeaways

  • Conventional loans typically require 3 to 5 percent down; FHA loans require 3.5 percent; VA loans (if you may have access to) require zero percent.
  • Putting down less than 20 percent means you'll pay private mortgage insurance (PMI) on a conventional loan or mortgage insurance premiums (MIP) on an FHA loan, adding $100 to $300+ per month to your payment.
  • A lower down payment gets you into a home sooner but costs more over the life of the loan; a higher down payment reduces monthly costs but delays homeownership.
  • State and local first-time buyer programs sometimes offer down payment help, forgivable loans, or grants that can lower or eliminate your out-of-pocket cost.
  • Your credit score, debt-to-income ratio, and savings history matter as much as the down payment amount when a lender decides whether to approve you.

How down payment percentage affects your monthly cost

A lower down payment means a larger loan amount, which raises your monthly principal and interest payment. On a $300,000 house at 7 percent interest over 30 years, putting down 3 percent ($9,000) instead of 20 percent ($60,000) increases your base payment by roughly $300 per month. That's before mortgage insurance, which adds another $150 to $250 per month depending on the loan type and your credit score.

Mortgage insurance is not optional if you put down less than 20 percent on a conventional loan. The lender requires it to protect themselves if you default. On an FHA loan, mortgage insurance is required regardless of down payment size, though the cost structure differs. The insurance premium is calculated as a percentage of the loan amount and rolled into your monthly payment, so you don't see it as a separate bill—but you pay it every month until you reach 20 percent equity (conventional) or for the life of the loan (FHA 30-year loans with less than 10 percent down).

Conventional loans: 3 to 5 percent minimum, 20 percent to avoid insurance

A conventional loan is a mortgage not backed by a government agency. Lenders set their own rules, but most require a minimum of 3 to 5 percent down for first-time buyers with decent credit. The exact minimum depends on your credit score, debt-to-income ratio, and the lender's appetite for risk at that moment.

If you put down less than 20 percent, you pay private mortgage insurance (PMI). The cost varies but typically runs 0.5 to 1.5 percent of the loan amount annually, divided into your monthly payment. On a $285,000 loan (5 percent down on a $300,000 house), PMI might add $120 to $350 per month. You can remove PMI once you reach 20 percent equity through a combination of payments and home appreciation, though this usually takes 8 to 12 years. Some lenders allow you to request PMI removal once you hit 20 percent; others require you to wait until 22 percent equity.

FHA loans: 3.5 percent down, but mortgage insurance is permanent on longer loans

FHA loans are backed by the Federal Housing Administration and are designed for buyers with lower credit scores or smaller down payments. The minimum down payment is 3.5 percent, and the FHA insures the lender against loss if you default. This insurance is called mortgage insurance premium (MIP), and it works differently than PMI on a conventional loan.

On an FHA loan, you pay an upfront MIP of 1.75 percent of the loan amount (usually rolled into your loan, so you finance it), plus an annual MIP that gets added to your monthly payment. The annual MIP ranges from 0.55 to 0.85 percent depending on your down payment and loan term. Unlike conventional PMI, you cannot remove MIP on a 30-year FHA loan unless you put down at least 10 percent initially. If you put down 10 percent or more, MIP drops off after 11 years. This means a 3.5 percent down FHA loan costs more over time, but it's often the only path for buyers with credit scores below 620 or minimal savings.

VA and USDA loans: Zero down payment options

If you're a military veteran or active-duty service member, a VA loan requires zero percent down and no mortgage insurance. The VA guarantees a portion of the loan to the lender, eliminating the lender's risk. You do pay a one-time VA funding fee (typically 2.3 percent of the loan amount for first-time users), which can be rolled into the loan, but there's no monthly insurance premium. VA loans are among the cheapest ways to buy a home if you're may be able to access.

USDA loans, backed by the U.S. Department of Agriculture, also require zero percent down for buyers in rural areas who meet income limits. Like VA loans, USDA loans carry an upfront may provide fee and an annual fee, but no traditional mortgage insurance. may be able to access depends on the property location and your household income, which must be at or below 115 percent of the area median income (or up to 150 percent in some cases).

First-time buyer programs that reduce or eliminate down payment costs

Many states, counties, and cities offer down payment assistance to first-time buyers. These programs take different forms: forgivable loans (you borrow money that's forgiven if you stay in the home for a set period), grants (assistance programs you don't repay), or matched savings programs (the program matches what you save). Some programs cover the down payment; others cover closing costs; some cover both.

To find programs in your area, start with your state housing finance agency (search "[your state] housing finance agency") or contact your local housing authority. Many programs have income limits, purchase price caps, and geographic restrictions. Some require you to complete a homebuyer education course. The money usually flows directly to the lender or title company at closing, not to you, so you don't have to manage it. Availability varies by season and funding; some programs run out of money and reopen later in the year.

What lenders look at beyond the down payment amount

Your down payment is one factor, but lenders also examine your credit score, debt-to-income ratio, employment history, and savings pattern. A buyer with a 580 credit score and 3 percent down will face higher interest rates and stricter terms than a buyer with a 740 score and the same down payment. Your debt-to-income ratio—the percentage of your gross monthly income that goes to debt payments—typically can't exceed 43 to 50 percent, depending on the loan type and lender.

Lenders also want to see that you've saved the down payment yourself, not borrowed it. If you received a gift from a family member, most lenders accept it, but you'll need a signed letter from the gift-giver stating it's a gift, not a loan. If you borrowed the down payment, the lender will count that debt in your debt-to-income calculation, which may disqualify you or lower the loan amount you're offered.

The trade-off: Buy sooner with less down, or wait and pay less over time

Putting down 3 percent gets you into a home years earlier than saving for 20 percent, which has real value if rents are rising or you're paying someone else's mortgage. Over those years, you build equity, lock in a fixed payment, and gain the stability of homeownership. The cost is higher monthly payments and mortgage insurance.

Waiting to save 20 percent lowers your monthly payment and eliminates insurance, but you're renting in the meantime and missing out on equity building and tax deductions. The math depends on your local rent versus home prices, your expected time in the home, and your confidence in your income. There's no universal right answer; it's a personal decision based on your situation.

Frequently Asked Questions

Can I use a gift from family for my down payment?

Yes, most lenders accept down payment gifts from family members. You'll need a signed letter from the gift-giver stating the amount, that it's a gift (not a loan), and their relationship to you. The lender may ask for bank statements showing the gift was transferred. Some programs require you to contribute a small percentage of your own funds (often 1 to 2 percent), so you can't gift the entire down payment.

What happens if I can't save 3 percent down?

Look into state and local down payment assistance programs, which may cover part or all of your down payment. You can also explore FHA loans (3.5 percent minimum) or, if you're may be able to access, VA or USDA loans (zero percent). Some nonprofits and community development organizations offer down payment help or matched savings programs. Contact your local housing authority or call 211 to find programs in your area.

Is it better to put down 3 percent or wait and save more?

It depends on your rent, local home prices, and how long you plan to stay. If you're paying high rent and home prices are rising, buying sooner with 3 percent down and paying mortgage insurance may cost less over five years than renting and saving. If you're in a stable rental situation and confident you'll stay in the home for 10+ years, saving for 10 to 15 percent down reduces your long-term cost. Run the numbers for your specific situation.

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

Yes. A larger down payment lowers the lender's risk and can help offset a lower credit score or higher debt-to-income ratio. If you're borderline on approval, putting down 10 percent instead of 3 percent may tip the decision in your favor. It can also secure a better interest rate, which saves you money over the life of the loan.

Can I remove mortgage insurance early?

On a conventional loan, yes—once you reach 20 percent equity through payments and home appreciation, you can request PMI removal. On an FHA loan with less than 10 percent down, no—MIP stays for the life of a 30-year loan. If you put down 10 percent or more on an FHA loan, MIP drops off after 11 years of payments.