What Down Payment Amount Actually Works for Your Home Purchase

The down payment that works depends on your loan type and what you can afford without draining your savings

There is no single "good" down payment—it depends on the loan program you use, your financial situation, and what you can afford to put down without leaving yourself broke. A conventional loan typically wants 20 percent of the home's price, but Federal Housing Administration (FHA) loans accept 3.5 percent, and some first-time buyer programs accept 3 percent or less. The larger your down payment, the lower your monthly payment and the less interest you pay over time. But putting down too much can leave you without an emergency fund, which creates a different kind of financial risk.

The real question is not what percentage is "good" in general, but what percentage leaves you stable. A down payment that sounds reasonable on paper—say, 15 percent—can be a mistake if it means you have no savings left for a furnace repair or a job loss. Lenders care about the percentage because it affects their risk. You should care about the percentage because it affects yours.

Key Takeaways

• Conventional loans typically require 20 percent down, but FHA loans accept 3.5 percent and some programs accept 3 percent or less.
• A larger down payment lowers your monthly payment and total interest, but only if you can afford it without eliminating your emergency savings.
• Down payments below 20 percent trigger mortgage insurance (PMI), which adds to your monthly cost until you reach 20 percent equity.
• First-time buyer programs, down payment assistance grants, and employer programs can reduce or eliminate what you pay out of pocket.
• The down payment is separate from closing costs, which typically run 2 to 5 percent of the home price and must be paid at signing.

How down payment size affects your monthly payment and total cost

Every percentage point of down payment you add reduces the amount you borrow, which lowers your monthly mortgage payment. On a $300,000 home at current interest rates, the difference between 5 percent down and 20 percent down is roughly $150 to $200 per month—a real difference, but not the only cost to consider.

When you put down less than 20 percent, lenders require mortgage insurance (PMI), which protects them if you stop paying. PMI typically costs 0.5 to 1.5 percent of your loan amount per year, added to your monthly payment. On a $285,000 loan (5 percent down on a $300,000 home), PMI might add $120 to $360 per month. You pay PMI until you reach 20 percent equity in the home—either through payments or home appreciation—at which point you can request removal.

The math looks like this: a smaller down payment means a lower upfront cost but a higher monthly payment (including PMI). A larger down payment means more money out of your pocket now but lower monthly payments later. The break-even point depends on how long you stay in the home and what interest rate you lock in.

Down payment requirements by loan type

Conventional loans (not backed by a government agency) typically require 20 percent down for the best rates and no mortgage insurance. Some lenders accept 10 or 15 percent down, but PMI applies. A few lenders accept 5 percent down for borrowers with strong credit and income.

FHA loans require a minimum of 3.5 percent down and are designed for first-time buyers or those with lower credit scores. FHA also requires mortgage insurance, but it works differently than PMI on conventional loans—you pay an upfront insurance premium at closing (1.75 percent of the loan) plus an annual premium added to your monthly payment. FHA insurance stays on the loan for the full term if you put down less than 10 percent, even after you reach 20 percent equity.

VA loans (for military members, veterans, and surviving spouses) often require zero down payment and no mortgage insurance. USDA loans (for rural properties) also allow zero down for borrowers who meet income limits. Both programs have their own credit and income requirements.

State and local first-time buyer programs vary widely. Some cover part or all of the down payment as a grant (money you do not repay), others as a second loan you repay separately, and some as a combination. A few programs require no down payment at all if you meet income and location requirements.

What happens if you cannot save 20 percent

Most people do not put down 20 percent. According to the National Association of Realtors, the median down payment for first-time buyers is around 6 to 7 percent. Putting down less than 20 percent is not a failure—it is the normal path for most buyers, and lenders have products designed for it.

If you have saved 5 to 10 percent, an FHA loan or a conventional loan with PMI are both workable routes. If you have saved less than 5 percent, look first at first-time buyer programs in your state or county—many offer down payment assistance that can close the gap. Some employers, credit unions, and nonprofits also offer down payment help. A mortgage lender can tell you which programs you may be able to use.

The risk of putting down very little (under 5 percent) is that you start with negative equity—you owe more than the home is worth—which makes it hard to refinance or sell if circumstances change. But if the alternative is renting for years while you save, a smaller down payment now may make sense.

Down payment assistance: grants, loans, and employer programs

Many states and counties offer down payment assistance through housing finance agencies or community development programs. These come in three forms: grants (assistance programs), forgivable loans (you repay only if you sell within a set time), and second mortgages (you repay in full). Some programs combine them—for example, a grant covering half the down payment and a forgivable loan covering the rest.

To find programs in your area, start with your state housing finance agency (search "[your state] housing finance agency") or call 211, which connects you to local housing resources. Many programs have income limits and require you to take a homebuyer education course, which usually takes a few hours and is offered online or in person.

Employers, credit unions, and some nonprofits also offer down payment help. Ask your HR department or credit union whether they have a program. Some programs are portable (you can use them with any lender), while others require you to use a specific lender, which may limit your options.

Closing costs are separate from your down payment

A common mistake is assuming your down payment is all the cash you need at closing. Closing costs—the fees lenders, title companies, and local governments charge—typically run 2 to 5 percent of the home price on top of your down payment. On a $300,000 home, that is $6,000 to $15,000 extra.

Closing costs include the loan origination fee, appraisal, title search, title insurance, property taxes, homeowners insurance, and recording fees. Some of these you can negotiate or shop around for; others are set by local government. Your lender must provide a Loan Estimate within three business days of your application, which itemizes all closing costs so you know the total before you commit.

Some programs allow you to roll closing costs into the loan (meaning you borrow them instead of paying them upfront), but this increases your total debt and monthly payment. Others allow the seller to pay part of your closing costs as a concession during negotiation. Ask your lender what options exist for your loan type.

How to decide what down payment makes sense for you

Start by calculating what you can afford without eliminating your emergency fund. Most financial advisors recommend keeping three to six months of expenses in savings. If saving for a down payment would drop you below that, a smaller down payment (with PMI) may be the safer choice.

Next, compare the monthly cost of different down payment amounts. A mortgage calculator can show you the payment for 5 percent, 10 percent, 15 percent, and 20 percent down on the home price you are considering. Add PMI to the lower amounts. Then ask yourself: which payment fits your budget without cutting into other savings or retirement contributions?

Finally, consider how long you plan to stay in the home. If you are likely to move within five to seven years, the monthly savings from a larger down payment may not offset the upfront cost. If you plan to stay longer, a larger down payment makes more financial sense.

Frequently Asked Questions

Is 10 percent down considered a good down payment?

Ten percent down is reasonable and common for first-time buyers. It is enough to avoid the highest PMI rates and shows lenders you have some skin in the game. You will pay mortgage insurance until you reach 20 percent equity, but the monthly cost is manageable for most borrowers. Whether it is "good" depends on whether you can afford it without draining your savings.

Can I use a gift for my down payment?

Yes, most lenders allow down payment gifts from family members. You will need a signed gift letter stating the money is a gift, not a loan you have to repay. The lender will verify the gift came from the person's own account, not from a loan they took out. Lenders typically allow gifts to cover the entire down payment, though some require you to contribute at least 1 to 5 percent of your own money.

What if I put down 25 percent instead of 20 percent?

Putting down 25 percent avoids PMI and lowers your monthly payment further, but the benefit is small compared to 20 percent. You would save roughly $50 to $100 per month in PMI elimination, but you are tying up an extra $15,000 to $30,000 in the home. For most people, that money is better kept liquid for emergencies or invested elsewhere.

Do I have to put down 3.5 percent on an FHA loan, or can I put down more?

You can put down more than 3.5 percent on an FHA loan. Putting down 10 percent or more reduces your mortgage insurance cost and removes it after 11 years instead of keeping it for the life of the loan. However, you still pay an upfront insurance premium at closing. Compare the total cost of FHA with a conventional loan at your down payment amount before deciding.

What if I have been saving for years but still cannot reach 20 percent?

Home prices have risen faster than most people's savings, so this is common. Look at first-time buyer programs, down payment assistance, and employer help before assuming you need to wait longer. An FHA loan at 3.5 percent down with PMI may get you into a home sooner than saving for years. Run the numbers with a lender to see what is actually affordable for your situation.