Down payments typically range from 3% to 20% of the home's purchase price, depending on the loan type and your financial situation

A down payment is the cash you give the seller at closing — the part of the purchase price you pay upfront rather than borrow. If you buy a $300,000 house with a 10% down payment, you pay $30,000 in cash and borrow $270,000 through a mortgage.

The amount you put down affects your monthly payment, the interest rate you receive, and whether you pay an extra monthly fee called private mortgage insurance (PMI). Putting down more money means a smaller loan, lower monthly payments, and often a better interest rate. Putting down less means you keep more cash in your pocket now but pay more over the life of the loan.

The minimum down payment depends on which type of mortgage you use. Conventional loans (the most common kind) usually require 3% to 5% down. Federal Housing Administration (FHA) loans allow 3.5% down. Veterans Affairs (VA) loans and U.S. Department of Agriculture (USDA) loans sometimes require no down payment at all, though you must meet specific may be able to access requirements for each.

Key Takeaways

  • Down payments range from 0% to 20% depending on the loan type, with conventional loans typically requiring 3% to 5% minimum.
  • Putting down less than 20% on a conventional loan means you will pay private mortgage insurance (PMI) as an extra monthly cost until you reach 20% equity.
  • A larger down payment lowers your monthly mortgage payment and often gets you a better interest rate from the lender.
  • FHA loans allow 3.5% down, VA loans may require nothing down for may be able to access veterans, and USDA loans may require nothing down for rural properties.
  • Your down payment comes from your own savings — lenders verify the money is yours and not borrowed from another source.

How down payment size affects your monthly payment and interest rate

The larger your down payment, the smaller the loan amount, which directly lowers your monthly mortgage payment. On a $300,000 house at a 7% interest rate over 30 years, a 3% down payment ($9,000) means you borrow $291,000 and pay roughly $1,935 per month. A 20% down payment ($60,000) means you borrow $240,000 and pay roughly $1,596 per month — about $340 less each month.

Lenders also offer better interest rates to borrowers who put down more money, because a larger down payment means less risk for the bank. The difference might be 0.25% to 0.5% lower on your rate, which adds up to thousands of dollars over 30 years. A borrower with 20% down often gets a rate 0.5% lower than one with 3% down on the same house.

If you put down less than 20% on a conventional loan, you will pay private mortgage insurance (PMI) as part of your monthly payment. PMI protects the lender if you stop paying the mortgage. The cost varies but typically runs 0.5% to 1% of the loan amount per year, divided into monthly payments. On a $291,000 loan, PMI might add $120 to $240 per month. PMI stops once you reach 20% equity in the home (either through payments or home appreciation), though you usually have to request the removal.

Minimum down payments by loan type

Conventional loans are mortgages from private lenders not backed by a government agency. Most conventional loans require a minimum 3% to 5% down payment. Some lenders require 10% or more, depending on your credit score and income. With less than 20% down, you pay PMI.

FHA loans are backed by the Federal Housing Administration and are designed for first-time buyers or those with lower credit scores. FHA loans allow 3.5% down on the purchase price. You will pay mortgage insurance with an FHA loan regardless of your down payment size — an upfront fee at closing plus a monthly premium that continues for the life of the loan (or 11 years if you put down 10% or more).

VA loans are available to active-duty service members, veterans, and some surviving spouses. VA loans often require zero down payment. You do not pay PMI with a VA loan, though you do pay a one-time funding fee (usually 1% to 3.3% of the loan amount) that can be rolled into the mortgage. may be able to access requires a Certificate of may be able to access from the Department of Veterans Affairs.

USDA loans are for rural properties and are backed by the U.S. Department of Agriculture. USDA loans often require zero down payment if you meet income limits and the property is in an may be able to access rural area. You pay a may provide fee (similar to PMI) as part of your monthly payment. Income limits vary by county.

Where down payment money comes from and how lenders verify it

Your down payment must come from your own savings or from a gift. Lenders require you to show bank statements, investment account statements, or other proof that the money is yours. They typically ask for two months of recent statements to verify the funds exist and have been in your account for a reasonable time.

If someone gives you money as a gift (a family member, for example), the lender will ask for a signed gift letter stating the money is a gift and not a loan you must repay. The gift giver does not need to be a relative, but the lender wants written proof that you do not owe the money back. The gift letter is a straightforward document your lender provides.

Lenders do not allow you to borrow your down payment from another source — for example, taking out a personal loan or using a credit card cash advance. If the lender discovers borrowed money, they may deny the mortgage or require you to pay it back before closing. The reason is that borrowed money increases your debt-to-income ratio, which affects whether you can afford the mortgage payment.

How to decide what down payment size makes sense for you

Putting down 20% avoids PMI and usually gets you the best interest rate, but it is not always the right choice. If you have $60,000 saved and a house costs $300,000, putting down 20% leaves you with little emergency savings. If your roof leaks or your car breaks down after closing, you have no cushion. Many financial advisors suggest keeping three to six months of living expenses in savings after closing.

Putting down 3% to 5% lets you buy sooner and keep more cash on hand, but you pay PMI until you reach 20% equity. On a $291,000 loan with 3% down, PMI might cost $120 to $240 per month for 10 to 15 years, adding $15,000 to $45,000 to the total cost of the home. Whether that trade-off makes sense depends on your income, job stability, and whether you expect to stay in the house long enough to build equity.

Some buyers put down 10% to 15% as a middle ground — enough to lower PMI costs and get a better rate than 3% down, but not so much that they drain their savings. The right amount depends on your situation, not on what someone else did.

What happens at closing when you hand over the down payment

You do not hand over cash at the closing table. Instead, you wire the down payment to the title company or escrow agent a day or two before closing. The title company holds the money and uses it to pay the seller, the real estate agent commissions, property taxes, homeowners insurance, and other closing costs. Any leftover money goes to you.

At the closing meeting, you sign documents confirming the down payment amount and review a Closing Disclosure — a form that shows all the costs, the loan amount, your monthly payment, and the interest rate. The down payment appears on this form. You do not need to bring a check or cash to the table.

If you are getting a gift, the gift giver wires their money to the title company as well, and the title company combines it with your down payment. The lender verifies that all funds arrived before releasing the mortgage money to close the deal.

Frequently Asked Questions

Can I borrow my down payment from family?

No. Lenders require the down payment to come from your own savings or from a true gift. If a family member gives you money as a gift, they must sign a gift letter stating you do not owe it back. If you borrow the money, you must repay it, which increases your debt and may disqualify you for the mortgage.

What if I do not have 20% saved?

You can put down 3% to 5% on a conventional loan or 3.5% on an FHA loan. You will pay PMI (on conventional) or mortgage insurance (on FHA), which adds to your monthly payment, but you can still buy. As you build equity, you can remove PMI once you reach 20% equity.

Do I have to pay my down payment all at once?

Yes. The down payment is due at closing and must be wired to the title company before the closing meeting. You cannot pay it in installments or after you move in.

Can I use a 401(k) or retirement account for my down payment?

Some retirement accounts allow withdrawals for a first-time home purchase, but rules vary. A traditional or Roth IRA allows up to $10,000 lifetime withdrawal for a first-time buyer. A 401(k) may allow a loan against your balance. Withdrawals may trigger taxes or penalties, so speak with a tax professional before using retirement savings.

What if the house appraises for less than the purchase price?

If the home appraises lower than you agreed to pay, the lender will only lend based on the lower value. You must either renegotiate the price with the seller, put down more cash to cover the difference, or walk away. Your down payment is at risk if you walk away, depending on your contract terms.