What People Actually Put Down When They Buy a Home
The down payment amount varies widely, but most buyers put between 3 and 20 percent of the home price
There is no single "average" down payment because it depends on the loan type, the buyer's savings, and what the lender requires. A buyer purchasing a $300,000 home might put down $9,000 (3 percent) with an FHA loan, while another puts down $60,000 (20 percent) with a conventional loan. Both are real paths people take.
The most common range is 5 to 10 percent for first-time buyers using conventional mortgages, and 3 to 3.5 percent for those using FHA loans backed by the Federal Housing Administration. Buyers with more savings or lower purchase prices sometimes put down 15 or 20 percent. The size of your down payment affects your monthly payment, the interest rate you receive, and whether you pay mortgage insurance.
Key Takeaways
- Down payment amounts range from 3 percent (FHA loans) to 20 percent (conventional loans), with 5 to 10 percent common for first-time buyers.
- A smaller down payment means a larger loan, higher monthly payments, and mortgage insurance added to your bill until you reach 20 percent equity.
- A larger down payment reduces your monthly payment and eliminates mortgage insurance, but it uses cash you might need for closing costs, repairs, or emergencies.
- Your down payment size is one factor lenders use to set your interest rate—larger down payments sometimes may have access to for better rates.
- Down payment assistance programs exist at state and local levels and can cover part or all of your down payment, though they have income and purchase price limits.
How down payment size changes your monthly costs
The down payment you make determines how much you borrow. On a $300,000 home, a 3 percent down payment ($9,000) means you borrow $291,000. A 20 percent down payment ($60,000) means you borrow $240,000. The difference in your monthly mortgage payment is roughly $300 to $350 per month before taxes and insurance.
When your down payment is less than 20 percent, lenders require you to pay mortgage insurance—a monthly fee that protects the lender if you stop paying. This insurance typically costs 0.5 to 1 percent of your loan amount per year, added to your monthly bill. On a $291,000 loan, that is $120 to $240 per month. You pay this fee until you own 20 percent of the home's value through a combination of your down payment and paid-off principal.
A larger down payment also sometimes qualifies you for a lower interest rate. Lenders see less risk when you have more skin in the game. The difference might be 0.25 to 0.5 percent lower, which on a $300,000 loan saves $50 to $150 per month over the life of the loan.
Down payment requirements by loan type
| Loan Type | Minimum Down Payment | Mortgage Insurance Required | Who Backs It |
|---|---|---|---|
| FHA Loan | 3 to 3.5 percent | Yes, for life of loan or until 20 percent equity | Federal Housing Administration |
| Conventional Loan | 3 to 20 percent | Yes, if less than 20 percent down | Private lender; you may have access to based on credit and income |
| VA Loan | 0 percent | No | Department of Veterans Affairs; for may be able to access military members |
| USDA Loan | 0 percent | No | U.S. Department of Agriculture; for rural properties and income-may have access to buyers |
FHA loans allow the smallest down payment and are designed for first-time buyers or those with lower credit scores. The trade-off is that mortgage insurance stays on your loan longer than with conventional loans—you pay it for the entire 30-year term if you put down less than 10 percent.
Conventional loans require a higher down payment but let you remove mortgage insurance once you reach 20 percent equity. VA and USDA loans require no down payment at all, but you must meet specific requirements: military service for VA loans, and rural property location and income limits for USDA loans.
What happens if you cannot save a full down payment
Many buyers do not have 20 percent saved, and that is normal. You have three main paths: put down what you have saved (even 2 or 3 percent), use a down payment assistance program, or delay buying until you save more.
Down payment assistance comes from state housing finance agencies, local nonprofits, and some employers. These programs cover anywhere from a few thousand dollars to your entire down payment. Some are grants (you do not repay them), and some are forgivable loans (you repay them only if you sell the home within a set time). Income limits vary by program and location—some cap household income at $50,000 to $80,000, while others go higher. Purchase price limits also vary; a program might cap the home price at $250,000 or $350,000.
The downside of a small down payment is the mortgage insurance cost, which adds up over time. On a $300,000 loan with 3 percent down, mortgage insurance might cost $150 to $200 per month for five to seven years before you reach 20 percent equity. That is $9,000 to $16,800 in total insurance payments. If you can delay buying for a year or two and save an extra 5 to 10 percent, you reduce or eliminate that cost.
Down payment assistance programs and where to find them
State housing finance agencies run down payment assistance in every state. These programs have different names—some call it down payment help, some call it a second mortgage, some call it a grant. Your state's housing finance agency website lists programs available to you, along with income and purchase price limits.
Local nonprofits and community development organizations also offer down payment help, often with lower income limits than state programs. Your city or county housing authority can point you toward local programs. You can also search through the National Council of State Housing Agencies or ask your mortgage lender, who often knows which programs work with their loans.
Employer programs are less common but exist at some large companies. Ask your HR department whether your employer offers down payment assistance or matches savings toward a home purchase. Some credit unions also offer down payment help to members.
Most programs require you to complete a homebuyer education course, provide proof of income and savings, and show that you have been approved for a mortgage. The process typically takes four to eight weeks from application to funding.
The trade-off between down payment size and other costs
A larger down payment is not always the best choice, even if you have the money. Putting down 20 percent uses cash that could go toward closing costs (typically 2 to 5 percent of the home price), home inspections, appraisals, and immediate repairs. If you put all your savings into the down payment and then face a $5,000 roof repair in year two, you have no cushion.
Lenders also care about your cash reserves—the money you have left after closing. Some require you to show three to six months of mortgage payments in savings. If you drain your accounts for a large down payment, you may not meet this requirement, or you may may have access to for a higher interest rate.
A smaller down payment with mortgage insurance might cost less overall than a larger down payment that leaves you house-poor. Run the numbers: calculate your monthly payment with different down payment amounts, add the mortgage insurance cost, and compare that to what you can actually afford while keeping an emergency fund.
How your credit score and income affect down payment options
Lenders use your credit score and debt-to-income ratio to decide what down payment they will accept and what interest rate they will offer. A credit score above 740 and a debt-to-income ratio below 43 percent typically may have access to you for conventional loans with 3 to 5 percent down and competitive interest rates. A score below 620 or a ratio above 50 percent narrows your options to FHA loans, which require 3 to 3.5 percent down but charge higher interest rates and longer mortgage insurance terms.
Your income determines how large a loan you can take. Most lenders cap your monthly housing payment (mortgage, taxes, insurance, and mortgage insurance) at 28 to 31 percent of your gross monthly income. On a $4,000 monthly income, that is roughly $1,120 to $1,240. If your down payment is too small, your monthly payment climbs above that cap, and the lender will not approve you—even if you have the cash for a larger down payment.
Improving your credit score or paying down existing debt before you apply can open up better loan terms and lower down payment options. Even a 20 to 30 point increase in your credit score can lower your interest rate by 0.25 percent, saving you $50 to $100 per month.
Frequently Asked Questions
Is 20 percent down still the standard?
No. Twenty percent is the threshold where mortgage insurance stops, but most first-time buyers put down 5 to 10 percent. Lenders routinely approve loans with 3 to 5 percent down. Twenty percent is an older guideline that assumes you have substantial savings; today's market includes many paths with smaller down payments.
Can I use a gift from family for my down payment?
Yes, but lenders require a gift letter stating the money is a gift, not a loan you must repay. The letter must come from the person giving the money and include their relationship to you, the amount, and a statement that repayment is not expected. Some lenders also require the gift to come from a family member, not a friend or employer.
What if I put down less than 3 percent?
Conventional loans typically require at least 3 percent down. FHA loans require 3 to 3.5 percent. If you have less saved, your options are to wait and save more, use a down payment assistance program, or explore VA or USDA loans if you may have access to. Some lenders offer 2 percent down programs, but they are rare and carry higher interest rates.
Does a larger down payment may provide a lower interest rate?
Not automatically, but it improves your chances. Lenders factor in your credit score, income, debt, and down payment size when setting your rate. A 20 percent down payment with a 650 credit score might not beat a 5 percent down payment with a 750 credit score. Ask lenders for rate quotes at different down payment levels to see the actual difference.
Can I remove mortgage insurance early?
Yes, once you reach 20 percent equity in the home. With a conventional loan, you can request removal when your loan balance drops to 80 percent of the home's original purchase price. With an FHA loan, you can remove mortgage insurance only if you put down at least 10 percent initially; otherwise, you pay it for the loan's full term. Contact your lender to start the removal process.