How Much Down Payment You Need for a Conventional Mortgage
What a conventional mortgage down payment is and how much lenders require
A conventional mortgage is a loan from a bank, credit union, or mortgage company that is not insured or may provide by the federal government. The down payment is the money you pay upfront when you buy the home; the lender finances the rest. Conventional loans typically require a down payment between 3% and 20% of the home's purchase price, though the exact amount depends on your credit score, income, and the lender's rules.
The lower your down payment, the higher your monthly payment and the more interest you pay over the life of the loan. If you put down less than 20%, you will also pay private mortgage insurance (PMI)—an extra monthly fee that protects the lender if you stop paying. PMI typically costs between 0.5% and 1% of your loan amount per year, added to your monthly bill.
Different lenders set different minimums. Some will accept 3% down; others require 5%, 10%, or more. Your credit score, debt-to-income ratio, and savings history all factor into what a lender will offer you. Getting pre-approved by a lender tells you exactly what down payment they will accept for your situation.
Key Takeaways
- Conventional mortgages require down payments ranging from 3% to 20% of the home price, depending on the lender and your financial profile.
- Down payments below 20% trigger private mortgage insurance (PMI), which adds to your monthly payment until you build enough equity.
- Your credit score, debt-to-income ratio, and savings reserves all affect what down payment percentage a lender will accept.
- Getting pre-approved by a lender shows you the exact down payment they require for your income and credit situation.
- Putting down more than the minimum reduces your loan amount, monthly payment, and total interest paid over time.
How down payment size affects your monthly payment and total cost
The down payment directly changes how much you borrow. On a $300,000 home, a 3% down payment means you borrow $291,000; a 20% down payment means you borrow $240,000. The smaller the loan, the smaller your monthly principal and interest payment.
PMI adds another layer. With a 3% down payment on that $300,000 home, you might pay $150 to $300 per month in PMI alone. With 10% down, PMI might be $80 to $150 per month. At 20% down, there is no PMI. Over a 30-year loan, that difference compounds into tens of thousands of dollars.
You can remove PMI once you have paid down the loan to 80% of the home's original purchase price—usually after 8 to 12 years of payments, depending on how fast you pay. Some lenders will remove it automatically; others require you to request it. Check your loan documents to see your lender's PMI removal policy.
Minimum down payments by credit score and lender type
Lenders use your credit score to decide how much risk you represent. A higher score typically unlocks lower down payment requirements. Someone with a credit score above 740 might find lenders willing to accept 3% down; someone with a score between 620 and 660 might face a 10% or 15% minimum.
Credit unions and smaller lenders sometimes have different rules than large national banks. A credit union where you have been a member for years might accept a lower down payment than a bank where you have no history. Mortgage brokers can shop multiple lenders at once, which is useful if your credit or income situation is complicated.
Your debt-to-income ratio—the percentage of your gross monthly income that goes to debt payments—also matters. If you already carry car loans, student loans, or credit card balances, your available borrowing power shrinks. Lenders typically want your total debt payments (including the new mortgage) to be no more than 43% to 50% of your gross income.
Saving for a down payment: realistic timelines and strategies
Saving 3% of a $300,000 home costs $9,000. Saving 10% costs $30,000. The timeline depends on your income and current savings. Someone earning $60,000 per year and able to save $500 per month would reach $9,000 in 18 months and $30,000 in five years.
High-yield savings accounts currently offer interest rates between 4% and 5% annually, which means your down payment fund grows slightly while you save. Opening a separate account for this money keeps it from being spent on other things. Some people set up automatic transfers from each paycheck to make saving automatic.
If you have family who can gift you money toward the down payment, most lenders allow it—but they require a signed gift letter stating the money is a gift, not a loan you have to repay. The gift giver does not need to be a relative; close friends can gift down payment funds too. The lender simply needs proof that you are not borrowing the money.
Down payment assistance programs and where to find them
Some employers, nonprofits, and state housing agencies offer down payment help. Habitat for Humanity builds homes and finances them with minimal down payments. Some state housing finance agencies run programs that cover part or all of a down payment for first-time buyers or low-to-moderate-income households. Your state's housing finance agency website lists what is available where you live.
Employer programs vary widely. Some large companies offer down payment grants or forgivable loans to employees. Ask your human resources department whether your employer has a homebuying benefit. Union members sometimes have access to special mortgage programs through their union.
Local nonprofits focused on housing often know about programs specific to your city or county. The National Council of State Housing Agencies (NCSHA) maintains a directory of state programs. 211.org can also connect you to local resources, though you will need to research what each program actually offers.
What happens if you cannot save the full down payment
If you cannot reach even a 3% down payment, conventional mortgages are not an option. Federal Housing Administration (FHA) loans allow down payments as low as 3.5%, and some VA loans (for military members and veterans) require zero down. These are different loan types with different rules, costs, and insurance requirements. Learning about FHA and VA loans is worth doing if conventional financing is out of reach.
Delaying homeownership to save more is also a valid choice. Renting while you save means you avoid PMI, reduce your monthly payment, and build equity faster once you do buy. The math of renting versus buying depends on local home prices, rental costs, and how long you plan to stay in the area.
Some people buy with a lower down payment now and refinance later once they have built equity or improved their credit score. Refinancing means taking out a new loan to pay off the old one. If your credit improves or home values rise, refinancing can lower your interest rate and remove PMI sooner. However, refinancing has closing costs, so it only makes sense if the savings outweigh those costs.
How to get pre-approved and lock in your down payment requirement
Pre-approval is a lender's written statement of how much they will lend you and on what terms. It requires you to provide pay stubs, tax returns, bank statements, and permission for a credit check. The process usually takes three to five business days. Pre-approval is free and does not obligate you to borrow; it simply shows you what is possible.
Pre-approval tells you the exact down payment a lender will accept for your situation. It also gives you a clear budget for house hunting. Once you find a home and make an offer, you move to the formal application stage, which is more detailed and takes longer.
Getting pre-approved by more than one lender is smart. Different lenders may offer different down payment minimums, interest rates, and fees. Comparing two or three pre-approvals takes a few extra days but can save you thousands over the life of the loan. Hard inquiries from multiple lenders within a short window (usually 14 to 45 days, depending on the credit bureau) count as a single inquiry, so your credit score is not dinged multiple times.
Frequently Asked Questions
Can I use a gift from family for my entire down payment?
Yes, most lenders allow the entire down payment to be a gift. You will need a signed gift letter from the person giving the money, stating it is a gift and not a loan. The lender will verify the gift funds are in your bank account before closing. The gift giver does not have to be related to you.
What is the difference between PMI and mortgage insurance on an FHA loan?
PMI is required on conventional loans with less than 20% down and can be removed once you reach 80% equity. FHA mortgage insurance is required for the life of the loan if you put down less than 10%, and it costs more than PMI. FHA loans allow lower down payments but carry higher insurance costs overall.
If I put down 15%, when can I remove PMI?
You can request PMI removal once your loan balance reaches 80% of the original home purchase price. With a 15% down payment, that typically takes 8 to 12 years of regular payments. Some lenders remove it automatically at that point; others require you to ask. Check your loan documents for your lender's specific policy.
Does a larger down payment mean a lower interest rate?
Not always. Your interest rate is set by the lender based on your credit score, the loan term, and current market rates. A larger down payment reduces your loan amount and monthly payment, but it does not automatically lower the interest rate itself. However, a larger down payment does reduce the total interest you pay because you are borrowing less money.
What if my credit score is below 620?
Most conventional lenders require a credit score of at least 620. If yours is lower, you may need to wait and rebuild credit before applying, or explore FHA loans, which accept scores as low as 500 (though 580 or higher is more common). Paying down existing debt and correcting errors on your credit report can raise your score over time.