What People Actually Put Down When They Buy a House
Down payments range from 3% to 20% of the home price, depending on the loan type and your financial situation
There is no single "average" down payment because it depends on what kind of loan you get. A conventional loan (the kind banks offer without government backing) typically expects 20% down. An FHA loan, which is backed by the Federal Housing Administration, often accepts 3.5% down. A VA loan, available to military members and veterans, can require 0% down. USDA loans in rural areas can also require 0% down. The down payment you actually make depends on which program you may have access to for and which one you choose.
The size of your down payment affects how much you borrow, how much interest you pay over time, and whether you have to pay mortgage insurance on top of your monthly payment. A smaller down payment means a larger loan and higher total cost. A larger down payment means you own more of the house immediately and pay less interest. The choice is yours to make based on what you can afford right now.
Key Takeaways
- Conventional loans typically require 20% down, but FHA loans accept 3.5%, and VA and USDA loans can accept 0% down.
- Putting down less than 20% on a conventional loan means you will pay mortgage insurance (PMI) until you reach 20% equity in the home.
- Your down payment is separate from closing costs, which usually run 2% to 5% of the home price and are due at signing.
- Saving for a down payment takes time, but down payment assistance programs exist in many states and counties to help lower the amount you need to save yourself.
How down payment size changes by loan type
Conventional loans are mortgages from banks or lenders without government backing. Most conventional lenders want 20% down, though some accept as little as 3% to 5%. If you put down less than 20%, you pay PMI (private mortgage insurance), which is an extra monthly fee that protects the lender if you stop paying. PMI typically costs 0.5% to 1% of your loan amount per year, split into monthly payments. You keep paying PMI until you own 20% of the home's value.
FHA loans are backed by the Federal Housing Administration and are designed for people with lower down payments or lower credit scores. FHA loans require a minimum 3.5% down payment. You also pay mortgage insurance with an FHA loan, but it works differently: you pay an upfront fee at closing (1.75% of the loan amount) and then a monthly fee for the life of the loan. This means your total monthly payment is higher than a conventional loan with the same down payment.
VA loans are available to active-duty military members, veterans, and surviving spouses. VA loans require 0% down and do not require mortgage insurance. You do pay a one-time VA funding fee (usually 2.3% of the loan amount for first-time users), which can be rolled into the loan itself. USDA loans, available in rural areas, also require 0% down and do not require mortgage insurance, though they do charge a may provide fee.
What your down payment actually covers
Your down payment is the cash you bring to closing. It reduces the amount you have to borrow. If a house costs $300,000 and you put down 10% ($30,000), you borrow $270,000. The lender then charges you interest on that $270,000 over 15, 20, or 30 years.
Your down payment is separate from closing costs, which are fees for the loan itself, the title search, the home inspection, appraisal, and other services. Closing costs usually run 2% to 5% of the home price. A lender might offer to roll closing costs into your loan (meaning you borrow more), but you still have to pay them somehow. Some down payment assistance programs cover closing costs, some cover the down payment, and some cover both — it depends on the program.
Why down payment size matters to your monthly payment
A larger down payment lowers your monthly mortgage payment because you are borrowing less. On a $300,000 house at 7% interest over 30 years, the difference is real: 10% down ($30,000) means a monthly payment around $1,896 (before taxes and insurance). 20% down ($60,000) means a monthly payment around $1,596. That $300 difference every month adds up to $108,000 over 30 years.
A smaller down payment also triggers mortgage insurance, which adds another $150 to $300 per month depending on the loan type and how much you borrowed. So a 10% down conventional loan could cost you $400 to $500 more per month than a 20% down loan on the same house. Over time, that makes a smaller down payment significantly more expensive.
However, a smaller down payment lets you buy sooner instead of waiting years to save. If you are paying rent now, buying with 5% down might cost less per month than renting, even with mortgage insurance included. The math is personal to your situation.
Down payment assistance programs in your state or county
Many states, counties, and cities offer down payment assistance to first-time homebuyers or people with lower incomes. These programs give you money (usually a grant or a forgivable loan) to cover part or all of your down payment. Some programs also cover closing costs. The amount varies widely — some programs cover $5,000, others cover $50,000 or more.
To find programs in your area, start with your state housing finance agency (search "[your state] housing finance agency") or call 211 and ask for down payment assistance. Your county assessor's office or local housing authority can also point you toward programs. Many programs have income limits, so you may not may have access to if you earn above a certain amount. Others are open to anyone buying in a specific neighborhood or county.
Some programs require you to take a homebuyer education class before you can receive the money. Others require you to use a specific lender or buy in a specific area. Read the rules carefully before you count on the money — programs fill up and close to new applicants, then reopen later.
How to decide what down payment makes sense for you
Start by figuring out how much you can actually save without emptying your emergency fund. Financial advisors often suggest keeping three to six months of living expenses in savings for emergencies. If saving for a 20% down payment means you would have no emergency money left, a smaller down payment might be the right choice even though it costs more in the long run.
Next, compare the total cost of different down payment amounts. Use a mortgage calculator (search "mortgage calculator") and plug in different down payment percentages. See how much the monthly payment changes and how much you pay in interest and insurance over the life of the loan. Then decide whether waiting to save more money makes sense for your life right now.
Finally, look into down payment assistance in your area. If you may have access to for a program that covers $20,000 or $30,000, that changes the math entirely. You might be able to buy sooner and with a larger down payment than you could save on your own.
Frequently Asked Questions
Can I use a gift from family for my down payment?
Yes, most lenders allow down payment gifts from family members. You will need a signed letter from the person giving you the money stating it is a gift, not a loan you have to repay. The lender wants to know your actual debt obligations, so they need to see that this money does not create a new debt.
What happens if I put down less than 3%?
Most conventional lenders will not accept less than 3% down. FHA loans accept 3.5% as the minimum. If you cannot save 3%, your options are VA loans (0% down if you may have access to), USDA loans (0% down in rural areas), or waiting to save more. Some lenders offer special programs for specific groups, so ask your bank what they offer.
Does a larger down payment help me get approved?
Yes, a larger down payment makes you a lower-risk borrower, which can help you get approved and may lower your interest rate. Lenders care most about your credit score and income, but a larger down payment shows you have savings and are serious about the purchase. It can make a difference if your credit or income is borderline.
Can I take money from my retirement account for a down payment?
You can withdraw from some retirement accounts without penalty if you are a first-time homebuyer, but you will owe income taxes on the withdrawal. A traditional IRA allows up to $10,000 lifetime withdrawal for a first-time home purchase. Talk to a tax professional or your account custodian before you withdraw — the tax bill can be large, and you lose years of compound growth on that money.
What if I cannot afford any down payment right now?
Look for VA loans (if you may have access to), USDA loans (if you live in a rural area), or down payment assistance programs in your county. Call 211 or search your state housing finance agency website. If none of those work, renting while you save is a reasonable choice. Buying before you are ready can trap you in a house you cannot afford.