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

The down payment is the money you give the seller at closing — it comes out of your own pocket, not from the loan. A conventional loan (the most common type) typically requires 3% to 20% down. A Federal Housing Administration (FHA) loan allows as little as 3.5% down. A VA loan (for military members and veterans) often requires 0% down. A USDA loan (for rural properties) also allows 0% down in many cases.

The amount you put down affects how much you borrow, what your monthly payment will be, and whether you pay an extra fee called private mortgage insurance (PMI). Putting down less means a smaller upfront cost but a larger loan and higher monthly payments. Putting down more means higher upfront costs but lower monthly payments and no PMI.

Key Takeaways

  • Conventional loans typically require 3% to 20% down, while FHA loans allow 3.5% down and VA or USDA loans may allow 0% down.
  • If you put down less than 20% on a conventional loan, you will pay private mortgage insurance (PMI) until you reach 20% equity in the home.
  • Your down payment amount directly affects your monthly mortgage payment — a larger down payment means a smaller loan and lower monthly costs.
  • Some first-time homebuyer programs and state or local grants can help cover part or all of your down payment.

How down payment amounts work with different loan types

Each loan type has its own rules. A conventional loan is not backed by the government, so the lender sets the terms. Most conventional lenders want at least 3% down, though some want 5% or more. If you put down less than 20%, you will pay PMI — an insurance fee that protects the lender if you stop paying. PMI typically costs 0.5% to 1.5% of your loan amount per year, added to your monthly payment.

An FHA loan is backed by the Federal Housing Administration, which means the government insures it if you default. FHA loans allow 3.5% down, making them popular for first-time buyers with limited savings. You will pay mortgage insurance with an FHA loan no matter how much you put down — an upfront fee at closing plus an annual fee added to your monthly payment.

A VA loan is for active-duty service members, veterans, and some surviving spouses. The Department of Veterans Affairs backs these loans, so many lenders offer them with 0% down. You do not pay PMI on a VA loan, though you may pay a one-time funding fee at closing (usually 1% to 3.3% of the loan amount).

A USDA loan is for properties in rural areas and is backed by the U.S. Department of Agriculture. Like VA loans, USDA loans often allow 0% down and do not require PMI, though you will pay a may provide fee at closing.

What happens when you put down less than 20%

If you put down less than 20% on a conventional loan, your lender will require PMI. This is an extra monthly cost that stays on your loan until you have paid down the principal to 80% of the home's original purchase price — meaning you have built up 20% equity.

PMI protects the lender, not you. It does not reduce your interest rate or give you any benefit. The cost varies by lender, loan amount, and your credit score, but a typical range is $100 to $300 per month on a $300,000 loan. Once you reach 20% equity, you can request that your lender remove PMI. Some lenders will remove it automatically once you hit that threshold.

Because of PMI, putting down 3% instead of 20% on a $300,000 home means borrowing an extra $51,000 and paying hundreds of dollars per month in insurance. Over the life of a 30-year loan, that adds up significantly. However, if you do not have $60,000 saved and housing prices are rising in your area, a smaller down payment may still make sense — you build equity in the home while you save more money.

How to calculate what you can afford to put down

Start with the home's purchase price and multiply it by the down payment percentage you are considering. If you are looking at a $350,000 home and want to put down 10%, that is $35,000. If you want to put down 20%, that is $70,000.

Next, add closing costs. These are fees paid at closing and typically range from 2% to 5% of the purchase price. On a $350,000 home, closing costs might be $7,000 to $17,500. You will need to cover these from savings as well — they are separate from your down payment.

Many buyers also keep a cash reserve after closing, usually enough to cover 3 to 6 months of mortgage payments, property taxes, insurance, and homeowners association fees if applicable. This protects you if you lose income or face an unexpected repair.

Add these three amounts together — down payment, closing costs, and reserve — to see how much total cash you need. If that number is more than you have saved, you may need to look at lower-priced homes, wait and save longer, or explore down payment information programs.

Down payment information programs and grants

Many states, counties, and cities offer down payment information to first-time homebuyers. These programs may provide grants (money you do not repay), forgivable loans (loans that disappear if you stay in the home for a set period), or second mortgages with favorable terms.

The National Housing Trust Fund and programs run by state housing finance agencies are common sources. Some employers, credit unions, and nonprofits also offer down payment help. The amount varies widely — some programs cover a few thousand dollars, others cover 10% or more of the purchase price.

To find programs in your area, contact your state's housing finance agency or search the HUD website for local resources. Many programs have income limits or require you to take a homebuyer education course, but the requirements vary. Starting your search early gives you time to understand what you may have access to for and what paperwork you will need.

The trade-off between down payment size and monthly cost

A larger down payment lowers your monthly mortgage payment because you are borrowing less. On a $350,000 home with a 7% interest rate and 30-year loan, putting down 3% ($10,500) means borrowing $339,500, with a monthly payment around $2,260. Putting down 20% ($70,000) means borrowing $280,000, with a monthly payment around $1,865 — roughly $395 less per month.

However, that $59,500 difference in down payment is money you could invest elsewhere or keep as an emergency fund. If you can earn a higher return on that money than your mortgage interest rate, or if you need the cash cushion, a smaller down payment may be the right choice even though your monthly payment is higher.

The decision depends on your situation: your job stability, whether you have other debts, how much emergency savings you already have, and your comfort level with a higher monthly payment. There is no single right answer — it is a personal financial choice.

Frequently Asked Questions

Can I borrow money from family for my down payment?

Yes, but most lenders require a gift letter from the family member stating the money is a gift, not a loan you will repay. The lender wants to confirm you are not taking on additional debt. Some lenders also require the gift to come from a close relative and may ask for bank statements showing the money came from the gift-giver's account.

What if I do not have 20% saved and do not want to pay PMI?

You can wait and save more, look for a less expensive home, or explore loan types that do not require PMI — VA loans and USDA loans are common options if you are may be able to access. Some lenders also offer conventional loans with no PMI if you put down 10% to 15% and accept a slightly higher interest rate instead.

Do I have to put down the same percentage as my friend or family member?

No. Down payment requirements depend on the loan type, your credit score, your income, and the lender's policies. Two people buying similar homes may put down different amounts based on their financial situation and the loan they choose.

What happens to my down payment if the sale falls through?

Your down payment is held in escrow (a neutral account) until closing. If the sale falls through because of a problem with the home inspection or appraisal, you typically get your money back. If you walk away without a valid reason, you may lose it — this is why a home inspection contingency is important.

Can I use my retirement account for a down payment?

Some retirement accounts allow withdrawals for a first home purchase. A traditional or Roth IRA allows up to $10,000 lifetime withdrawal for a first-time homebuyer. A 401(k) may allow a loan against your balance. Withdrawals have tax consequences, so speak with a tax professional before using retirement savings for a down payment.