Down payment amounts depend on the loan type, not a fixed rule
There is no single down payment amount that works for every house purchase. The amount you need depends on which type of mortgage you get, what the lender requires, and what you can afford to put down. Conventional loans often ask for 3 to 20 percent of the home price. Federal Housing Administration (FHA) loans typically require 3.5 percent. VA loans and USDA loans may allow zero down payment if you meet their requirements. The lender sets the minimum; you decide whether to put down more.
A larger down payment lowers your monthly mortgage payment and may help you avoid paying mortgage insurance. A smaller down payment means you keep more cash on hand but pay more interest over the life of the loan. Both approaches are legitimate — the right choice depends on your financial situation, not on what is "normal."
Key Takeaways
- Conventional mortgages typically require 3 to 20 percent down, while FHA loans require 3.5 percent and some VA or USDA loans require nothing.
- Putting down less than 20 percent on a conventional loan usually means paying private mortgage insurance (PMI) as an extra monthly cost.
- The down payment is calculated as a percentage of the home's purchase price, so a larger home price means a larger dollar amount even at the same percentage.
- You can put down more than the minimum required, which reduces your loan amount and monthly payment but uses more of your savings upfront.
How down payment percentages translate to dollar amounts
The down payment is a percentage of what you are paying for the house. If you buy a $300,000 home and put down 10 percent, that is $30,000. If you buy a $500,000 home at 10 percent, that is $50,000. The percentage stays the same; the dollar amount changes with the price of the house.
Lenders calculate the down payment from the purchase price or the appraised value of the home, whichever is lower. This matters because if you negotiate the price down after an appraisal, your down payment percentage may shift. For example, if you agreed to pay $300,000 but the appraisal comes in at $280,000, a 10 percent down payment is now $28,000 instead of $30,000.
Conventional loans and the 20 percent benchmark
Conventional mortgages are loans that are not backed by a federal agency. Lenders offering conventional loans have their own rules, but most require a down payment between 3 and 20 percent. The 20 percent figure is a common benchmark because it is the point at which most lenders stop requiring private mortgage insurance (PMI).
If you put down less than 20 percent on a conventional loan, you will pay PMI — an insurance policy that protects the lender if you stop paying. PMI typically costs 0.5 to 1.5 percent of your loan amount per year, added to your monthly payment. This cost continues until you have paid down the loan to 80 percent of the home's original value or until you refinance. You can remove PMI once you reach 20 percent equity if you request it and meet other conditions, but the lender does not remove it automatically.
Putting down 3 to 5 percent is common for first-time buyers. Putting down 10 to 15 percent is another common range. The choice between these depends on how much cash you have saved and whether you want to minimize your monthly payment or keep reserves for emergencies.
FHA loans and lower down payment requirements
FHA loans are mortgages insured by the Federal Housing Administration. They are designed for buyers who have lower credit scores or smaller down payments. FHA loans require a minimum down payment of 3.5 percent. Like conventional loans with less than 20 percent down, FHA loans require mortgage insurance — in this case, called mortgage insurance premium (MIP).
FHA mortgage insurance has two parts: an upfront premium paid at closing (usually 1.75 percent of the loan amount) and an annual premium paid monthly (usually 0.55 to 0.80 percent of the loan amount per year, depending on the loan size and down payment). The upfront premium can be rolled into your loan, meaning you do not pay it in cash at closing. The annual premium stays on the loan for the life of the loan if you put down less than 10 percent; if you put down 10 percent or more, it falls off after 11 years.
An FHA loan makes sense if you have limited savings for a down payment or a credit score below 620, since conventional lenders often require higher scores. The trade-off is that you pay mortgage insurance for longer than you might on a conventional loan.
VA and USDA loans with zero down payment options
VA loans are available to military members, veterans, and some surviving spouses. The Department of Veterans Affairs guarantees these loans, which means lenders are willing to lend without requiring a down payment. You can buy a home with zero down if you are a VA loan borrower and meet the lender's other requirements.
VA loans do not require mortgage insurance. Instead, borrowers pay a one-time VA funding fee (usually 2.3 percent of the loan amount for first-time users, lower for subsequent uses, and waived for borrowers receiving disability compensation). This fee can be rolled into the loan.
USDA loans are backed by the U.S. Department of Agriculture and are intended for rural and some suburban homebuyers with low to moderate income. USDA loans also allow zero down payment and do not require a down payment in cash. USDA loans do require an upfront may provide fee (usually 1 percent of the loan amount) and an annual fee (0.35 percent of the loan amount per year), both of which can be included in the loan.
If you are a veteran or an may be able to access rural homebuyer, these programs can eliminate the need to save a large down payment. The catch is that not all properties may have access to — VA loans work for most homes, but USDA loans are limited to properties in designated rural areas.
What happens if you put down more than the minimum
You can always put down more than the lender requires. Putting down 25, 30, or even 50 percent is an option if you have the cash. A larger down payment reduces the amount you borrow, which lowers your monthly payment and the total interest you pay over the life of the loan.
A larger down payment also means you build equity faster and may may have access to for a better interest rate, since the lender's risk is lower. However, putting a large amount down uses cash that you could keep in savings for emergencies, home repairs, or other goals. There is no universal "right" amount — it depends on your comfort level with having cash on hand versus lowering your monthly payment.
Closing costs are separate from the down payment
The down payment is not the only money you need at closing. Closing costs — which include appraisal fees, title insurance, attorney fees, and loan origination fees — typically run 2 to 5 percent of the home price. These are separate from the down payment and are due at closing.
Some lenders allow you to roll closing costs into the loan, but this increases the amount you borrow and the interest you pay. Other lenders require you to pay closing costs in cash. Some sellers will cover part or all of the buyer's closing costs as part of the negotiation, but this is not may provide. When you are saving for a home purchase, budget for both the down payment and closing costs.
Frequently Asked Questions
Can I borrow money for my down payment?
Most lenders do not allow you to borrow the down payment from another lender. However, some lenders allow a gift from a family member, and some programs allow you to borrow from your retirement account under specific rules. Ask your lender what sources of down payment funds they accept before you commit to a loan program.
What if I do not have 20 percent saved?
You do not need 20 percent to buy a home. FHA loans require 3.5 percent, conventional loans often accept 3 to 5 percent, and VA or USDA loans may require zero down. The trade-off is that lower down payments mean paying mortgage insurance or a higher interest rate. Calculate the total monthly cost under each scenario to see what fits your budget.
Does the down payment affect my interest rate?
Yes, typically. A larger down payment usually qualifies you for a lower interest rate because the lender's risk is lower. The difference may be 0.25 to 0.5 percent, which adds up over 30 years. Ask your lender for rate quotes at different down payment levels so you can compare the total cost.
Can I put down less than 3 percent?
Conventional loans rarely go below 3 percent down. FHA loans require 3.5 percent minimum. VA and USDA loans allow zero down. Some lenders offer portfolio loans (loans they keep rather than sell) with lower down payments, but these are less common and may have higher interest rates or stricter credit requirements.
What if the appraisal is lower than the purchase price?
If the home appraises for less than you agreed to pay, your down payment percentage changes. If you agreed to 10 percent down on a $300,000 purchase but it appraises at $280,000, your 10 percent is now $28,000. You can renegotiate the price, increase your down payment to keep the same dollar amount, or walk away depending on your contract terms.