Down payments range from 0% to 20% of the home's purchase price, depending on the loan type you choose
A down payment is the money you pay upfront when you buy a house. The rest of the purchase price comes from a mortgage loan. The percentage you pay down affects your monthly payment, how much interest you'll pay over time, and whether you'll need to pay extra insurance.
The amount you put down is not set by law — it depends on which mortgage program you use. A conventional loan from a bank often requires 5% to 20% down. A Federal Housing Administration (FHA) loan typically requires 3.5% down. A U.S. Department of Veterans Affairs (VA) loan may require 0% down if you are a may have access to veteran. A U.S. Department of Agriculture (USDA) loan may also require 0% down for rural properties if you meet income limits.
The down payment you choose affects what you pay each month and over the life of the loan. A larger down payment means a smaller loan amount, which lowers your monthly payment and the total interest you pay. A smaller down payment means you borrow more, so your monthly payment is higher and you pay more interest overall.
Key Takeaways
- Down payment amounts vary by loan type: conventional loans often require 3% to 20%, FHA loans require 3.5%, and VA or USDA loans may require 0%.
- Putting down less than 20% on a conventional loan usually means paying private mortgage insurance (PMI), which adds to your monthly cost until you build enough equity.
- The down payment you choose directly affects your monthly mortgage payment and the total interest you pay over 15, 20, or 30 years.
- Your credit score, income, and savings determine which loan types and down payment amounts are realistic for your situation.
- Down payment information programs exist through state and local housing agencies, though they vary by location and income level.
How down payment size changes your monthly payment
A larger down payment reduces the amount you borrow, which lowers your monthly mortgage payment. For example, on a $300,000 house with a 30-year loan at 7% interest, putting down 20% ($60,000) means borrowing $240,000. Putting down 5% ($15,000) means borrowing $285,000. The difference in monthly payment is roughly $210 per month before taxes and insurance.
The down payment also affects how much total interest you pay. On that same $300,000 house, a 20% down payment over 30 years costs roughly $310,000 in interest. A 5% down payment costs roughly $370,000 in interest — about $60,000 more over the life of the loan. That extra cost is the price of borrowing more money.
However, a smaller down payment lets you buy sooner if you don't have $60,000 saved yet. The trade-off is a higher monthly payment and more interest paid overall. Whether that trade-off makes sense depends on your income, how long you plan to stay in the house, and current interest rates.
Private mortgage insurance (PMI) and when you pay it
Private mortgage insurance is an extra monthly cost you pay when you put down less than 20% on a conventional loan. PMI protects the lender if you stop paying the mortgage. It is not homeowners insurance — it does not protect you or your home.
PMI costs vary but typically run 0.5% to 1.5% of the loan amount per year, paid monthly. On a $285,000 loan, PMI might cost $120 to $360 per month. The exact cost depends on your credit score, the size of your down payment, and the lender. A 5% down payment usually costs more in PMI than a 10% down payment.
You stop paying PMI once you have paid down the loan to 80% of the home's original purchase price. On a $300,000 house, that means paying the loan down to $240,000. How long that takes depends on your monthly payment and interest rate. On a 30-year loan, it typically takes 10 to 15 years, though it can be faster if you make extra payments or if your home value rises and you refinance.
Down payment requirements by loan type
| Loan Type | Typical Down Payment | Who It's For |
|---|---|---|
| Conventional | 3% to 20% | Borrowers with good credit and stable income; requires PMI below 20% |
| FHA | 3.5% | First-time buyers or those with lower credit scores; includes mortgage insurance |
| VA | 0% | Active-duty military, veterans, and surviving spouses; no PMI required |
| USDA | 0% | Rural property buyers meeting income limits; no PMI required |
Each loan type has different rules about credit score, income, and property type. A conventional loan usually requires a credit score of 620 or higher, though 740 or higher gets better interest rates. An FHA loan may accept credit scores as low as 500 to 580. A VA loan has no minimum credit score set by the VA, though individual lenders may require one. A USDA loan requires income below 115% of the area median income in most cases.
What counts toward your down payment
Your down payment comes from your own savings or from a gift. Most lenders accept down payment gifts from family members without requiring repayment. You will need a signed letter from the gift-giver stating the money is a gift, not a loan.
Some down payment information programs provide grants or forgivable loans through state housing agencies, nonprofits, or employer programs. These vary widely by location and income level. Your lender can tell you which programs serve your area, or you can contact your state housing finance agency to ask what is available.
Funds in your bank account, retirement accounts (with some restrictions), and proceeds from selling another property all count. Borrowed money — except the mortgage itself — typically does not count. If you take out a personal loan to fund your down payment, most lenders will count that loan as debt when deciding whether to approve your mortgage.
How to decide what down payment makes sense for you
A 20% down payment avoids PMI and is often presented as the ideal target. However, it is not the only reasonable choice. If you have $60,000 saved for a $300,000 house but also have high-interest credit card debt, paying off the debt first and putting down 5% to 10% may cost less overall.
Consider how long you plan to stay in the house. If you are likely to move within 5 years, the PMI you pay may cost less than the interest you save with a larger down payment. If you plan to stay 15 years or longer, a larger down payment usually saves money.
Also consider your income stability and emergency savings. If your job is find and you have 3 to 6 months of expenses saved separately, a smaller down payment is less risky. If your income is variable or you have little emergency savings, a larger down payment reduces the risk that a job loss or unexpected expense will make your mortgage payment unaffordable.
Frequently Asked Questions
Can I get a mortgage with less than 3% down?
Yes, through VA or USDA loans if you meet the requirements. Conventional loans rarely go below 3%, though some lenders offer 2% or 1% down programs for borrowers with good credit and stable income. Ask your lender what programs they offer.
Does my down payment affect my interest rate?
Yes. A larger down payment typically qualifies you for a lower interest rate because the lender's risk is lower. The difference is usually 0.25% to 0.5%, which adds up to thousands of dollars over the life of the loan. Your credit score and income also affect your rate.
What if I can't save 20% down?
Most people don't put down 20%. You can buy with 3% to 10% down and pay PMI until you reach 20% equity. Some state and local programs offer down payment grants or forgivable loans. Contact your state housing finance agency or a nonprofit housing counselor to learn what is available in your area.
Can I use my retirement account for a down payment?
Some retirement accounts allow withdrawals for a first home purchase without the usual early withdrawal penalty. A traditional or Roth IRA allows up to $10,000 lifetime for a first-time home buyer. A 401(k) may allow a loan against your balance. Withdrawals count as income for tax purposes, so talk to a tax professional before withdrawing.
Does a larger down payment mean a shorter loan?
Not automatically. A larger down payment reduces your monthly payment, but the loan term (15, 20, or 30 years) is a separate choice. You can put down 20% and still take a 30-year loan, or put down 5% and choose a 15-year loan. Your monthly payment depends on both the down payment size and the loan term.