How Much Money You Actually Need to Buy a House
The minimum down payment depends on the loan type, not on a single rule
There is no single minimum down payment for every house purchase. Instead, the amount you need depends on which loan program you use—and those programs set their own floors. Conventional loans (the kind most people get from a bank) typically require 3 to 5 percent down. Federal Housing Administration (FHA) loans allow 3.5 percent. VA loans and USDA loans, both backed by the federal government, can go as low as zero percent down if you meet their requirements. The catch: lower down payments mean higher monthly payments and additional costs added to your loan.
The lender will also look at your credit score, income, and debt-to-income ratio. A lower down payment often means the lender sees you as higher risk, so they may require a higher credit score or charge you a higher interest rate. Some programs have no minimum down payment but do have minimum credit score requirements—usually 580 or higher for FHA, 620 or higher for conventional loans.
Key Takeaways
- Conventional loans typically require 3 to 5 percent down, while FHA loans require 3.5 percent, and VA or USDA loans may require zero percent if you meet program rules.
- A lower down payment means a higher monthly mortgage payment and mortgage insurance added to your loan, which increases the total cost of the house.
- Your credit score, income, and existing debt all affect whether a lender will accept a low down payment and what interest rate they will offer.
- Down payment assistance programs run by cities, counties, and nonprofits can cover part or all of your down payment, though may be able to access rules vary by location.
What happens when you put down less than 20 percent
If your down payment is less than 20 percent of the home's purchase price, the lender will require you to pay mortgage insurance. This is an extra monthly fee added to your mortgage payment. For conventional loans, this is called private mortgage insurance (PMI). For FHA loans, it is called mortgage insurance premium (MIP). Neither protects you—both protect the lender if you stop paying.
The cost of mortgage insurance varies. For conventional loans, PMI typically runs 0.5 to 1 percent of your loan amount per year, divided into monthly payments. For FHA loans, the upfront mortgage insurance premium is 1.75 percent of the loan amount (added to what you borrow), plus an annual premium of 0.55 to 0.80 percent depending on your loan size and down payment. On a $300,000 house with a 3.5 percent down payment, mortgage insurance can add $200 to $400 per month to your payment.
You can remove PMI from a conventional loan once you have paid down the principal to 80 percent of the home's original value, or once the home appreciates enough that you reach that threshold. MIP on FHA loans stays for the life of the loan if you put down less than 10 percent; if you put down 10 percent or more, you can remove it after 11 years.
Down payment minimums by loan type
Each loan program sets its own floor, and the differences matter for your monthly payment and total cost. The table below shows where each program stands and who can use it.
| Loan Type | Minimum Down Payment | Who Can Use It | Mortgage Insurance Required |
|---|---|---|---|
| Conventional | 3–5% | Anyone with sufficient credit and income | Yes, if under 20% |
| FHA | 3.5% | First-time and repeat homebuyers; credit score 580+ | Yes, always |
| VA | 0% | Active military, veterans, surviving spouses | No |
| USDA | 0% | Rural property buyers; income limits apply | No |
Conventional loans are the most common but require the highest credit score and income verification. FHA loans are designed for borrowers with lower credit scores or smaller savings. VA and USDA loans eliminate the down payment entirely but have strict may be able to access rules—you must be a veteran or active-duty service member for VA, or buying in a rural area with income below a certain threshold for USDA.
How down payment assistance programs work
Many cities, counties, and nonprofit organizations run programs that give or lend money specifically for down payments. These are separate from the loan itself—the assistance covers part of what you need to put down, and then you still get a mortgage for the rest. Some programs give the money as a grant (you do not repay it), while others structure it as a second loan that you repay over time, often with no interest.
may be able to access rules vary widely by location and program. Common requirements include a maximum household income (often 80 to 120 percent of the area median income), a minimum credit score (usually 620 or higher), and proof that you are a first-time homebuyer or have not owned a home in the past two years. Some programs limit the purchase price of the home or require you to buy in a specific neighborhood.
To find programs in your area, start with your city or county housing authority, your state housing finance agency, or a local nonprofit focused on housing. You can also search the HUD website for down payment assistance programs by state. Many programs move slowly—approval can take four to eight weeks—so start looking before you are ready to make an offer.
Saving versus borrowing for a down payment
The money for your down payment must come from somewhere, and lenders have rules about where. Most lenders require that at least part of your down payment come from your own savings or assets. They want to see that you have "skin in the game"—that you have something at stake if the house loses value or you cannot pay the mortgage.
Lenders will ask for bank statements, investment account statements, or other proof of funds. If someone gives you money as a gift, most lenders allow it, but they will require a signed letter from the gift-giver stating that the money is a gift and does not need to be repaid. Some lenders have limits on how much of your down payment can be a gift; conventional loans typically allow 100 percent gift funds, while FHA loans also allow 100 percent.
Borrowing the down payment from a family member as a loan (rather than a gift) is much harder. Most lenders will count that loan as debt on your credit report, which raises your debt-to-income ratio and may disqualify you or lower the amount you can borrow. Some lenders prohibit down payment loans entirely.
What affects the down payment amount a lender will accept
Your credit score is the biggest factor. A higher score opens doors to lower down payments and better interest rates. If your score is below 620, most conventional lenders will not work with you; FHA loans go down to 580, but the interest rate will be higher. If your score is 740 or above, you may may have access to for a 3 percent conventional loan with a competitive rate.
Your debt-to-income ratio (DTI) is the second major factor. This is the total of all your monthly debt payments—car loans, student loans, credit cards, child support—divided by your gross monthly income. Most lenders want your DTI to be 43 percent or lower. If your DTI is high, a lender may require a larger down payment to offset the risk, or they may deny you altogether. Paying down existing debt before you apply for a mortgage can improve your chances.
Employment history and income stability matter too. Lenders want to see at least two years of steady income. If you recently changed jobs, were self-employed, or had a gap in employment, the lender may ask for more documentation or may require a larger down payment. If you are self-employed, expect to provide two years of tax returns and possibly a profit-and-loss statement.
The real cost of a low down payment
Putting down 3 percent instead of 20 percent means you are borrowing more money, and that extra borrowing costs you. On a $300,000 house, a 3 percent down payment is $9,000, leaving you to borrow $291,000. A 20 percent down payment is $60,000, leaving you to borrow $240,000. The difference is $51,000 in additional borrowing.
Over a 30-year mortgage at 7 percent interest, that extra $51,000 costs roughly $120,000 more in interest alone. Add mortgage insurance (which can run $200 to $400 per month for years), and the total cost of a low down payment climbs quickly. However, if you cannot save $60,000 and you need to buy now, a low down payment may still be the right choice—especially if home prices are rising in your area or if you are paying rent that is higher than a mortgage payment would be.
The math is personal. A financial advisor or mortgage lender can show you the total cost of different down payment scenarios for your specific situation.
Frequently Asked Questions
Can I use a 401(k) or IRA to pay for a down payment?
Yes, but it comes with tax consequences. You can withdraw from a traditional IRA penalty-free if you are a first-time homebuyer (defined as not having owned a home in the past two years), up to $10,000 lifetime. A 401(k) withdrawal is more complicated and usually requires a loan from your plan rather than a withdrawal. Talk to a tax professional before you withdraw, because you will owe income tax on the amount.
What if I have bad credit but need to buy a house?
FHA loans accept credit scores as low as 580, though you will pay a higher interest rate. Some lenders specialize in lower-credit borrowers. You can also work on raising your score before you apply—paying down credit card balances and making all payments on time for six months can move your score up. Down payment assistance programs sometimes have more flexible credit requirements than traditional lenders.
Do I have to put down the minimum, or can I put down more?
You can always put down more than the minimum. Putting down more reduces your monthly payment, eliminates or reduces mortgage insurance, and means you owe less to the lender. The only reason not to put down more is if you need to keep cash on hand for emergencies or other expenses.
What if I cannot save enough for any down payment?
Look for down payment assistance programs in your area through your city or county housing authority, your state housing finance agency, or nonprofits focused on housing. VA and USDA loans require zero down payment if you meet their may be able to access rules. Some employers and unions also offer down payment help as an employee benefit.
Does the down payment amount affect my interest rate?
Yes. A larger down payment typically means a lower interest rate because the lender sees less risk. The difference can be 0.25 to 0.5 percent, which adds up over 30 years. A lender will show you the rate for different down payment amounts when you get a quote.