What Most Buyers Put Down When They Buy a House
The most common down payment is 20 percent of the home's price, but many buyers put down less
A down payment is the money you give the seller at closing — the part of the purchase price you pay in cash rather than borrow. The rest comes from a mortgage loan. If a house costs $300,000 and you put down $60,000, you are borrowing $240,000.
Twenty percent ($60,000 in that example) is the figure you hear most often because it is the threshold where lenders stop requiring mortgage insurance — an extra monthly fee that protects the bank if you stop paying. But 20 percent is not a requirement. Many buyers put down 3 percent, 5 percent, 10 percent, or other amounts depending on what they can afford and what their lender will accept.
The down payment you choose affects how much you borrow, how much your monthly payment is, and whether you pay mortgage insurance. It also affects how much cash you need to have on hand before closing day.
Key Takeaways
- Down payments typically range from 3 percent to 20 percent of the home price, with 20 percent being the amount that avoids mortgage insurance.
- Putting down less than 20 percent means you will pay mortgage insurance as part of your monthly payment until you reach 20 percent equity in the home.
- The down payment you choose is separate from closing costs, which are additional fees you pay at closing and usually run 2 to 5 percent of the home price.
- First-time homebuyers may find down payment help through state programs, local housing authorities, or employer benefits, though these vary widely by location.
- A smaller down payment means a larger loan and higher monthly payments, but it lets you buy sooner if you do not have 20 percent saved.
Why 20 percent is the number everyone mentions
Lenders created the 20 percent standard because it represents the point where you have enough skin in the game that the bank feels reasonably safe. If you default and the house is foreclosed, the lender can usually sell it and recover their money if you have already paid 20 percent of the price.
When you put down less than 20 percent, the lender requires you to buy private mortgage insurance (PMI). This is an insurance policy that pays the lender if you stop paying the mortgage. PMI typically costs 0.5 to 1.5 percent of your loan amount per year, added to your monthly payment. On a $240,000 loan, that could be $100 to $300 per month.
PMI is not permanent. Once you have paid down the loan to 80 percent of the original home price (meaning you have 20 percent equity), you can request that PMI be removed. Some loans remove it automatically at that point; others require you to ask.
Common down payment amounts and what they mean for your payment
Down payments vary based on the type of loan and the buyer's situation. Conventional loans (the most common type) typically allow down payments as low as 3 percent. Federal Housing Administration (FHA) loans, designed for first-time and lower-income buyers, allow down payments as low as 3.5 percent. VA loans (for military members and veterans) and USDA loans (for rural properties) sometimes allow 0 percent down.
Here is how down payment size affects what you owe:
| Home Price | Down Payment % | Down Payment $ | Loan Amount | Mortgage Insurance? |
|---|---|---|---|---|
| $300,000 | 3% | $9,000 | $291,000 | Yes |
| $300,000 | 5% | $15,000 | $285,000 | Yes |
| $300,000 | 10% | $30,000 | $270,000 | Yes |
| $300,000 | 20% | $60,000 | $240,000 | No |
A smaller down payment means a larger loan, which means higher monthly payments. It also means you pay more interest over the life of the loan because you are borrowing more. But it also means you need less cash upfront, which matters if you do not have $60,000 saved but can save $15,000.
Down payment assistance programs for first-time buyers
Many states, cities, and nonprofits offer down payment help to first-time homebuyers or buyers with lower incomes. These programs work in different ways: some give you a grant (money you do not repay), some give you a loan at a lower interest rate than a mortgage, and some give you a forgivable loan (you repay it only if you sell the house within a certain number of years).
Down payment help is not uniform across the country. What is available in one state may not exist in another, and programs often have income limits, credit score requirements, or restrictions on the type of home you can buy. Some programs require you to take a homebuyer education course first.
To find what exists in your area, start with your state housing finance agency (search "[your state] housing finance agency") or call 211 to be connected to local resources. Your employer may also offer down payment help as an employee benefit, especially if you work for a large company or a government agency.
Down payment versus closing costs — they are not the same
The down payment is only one part of the cash you need at closing. Closing costs are separate fees for services like the appraisal, title search, home inspection, loan origination, and recording the deed. These typically run 2 to 5 percent of the home price on top of your down payment.
On a $300,000 home with a 5 percent down payment and 3 percent closing costs, you would need $15,000 for the down payment plus $9,000 for closing costs — $24,000 total before you own the house. Some programs that help with down payments also help with closing costs, but not all do. Ask before you assume.
What happens if you put down less than 3 percent
Most conventional lenders will not accept a down payment below 3 percent. If you have less than 3 percent saved, your options are FHA loans (3.5 percent minimum), VA loans (0 percent if you may have access to), USDA loans (0 percent if you buy in a rural area), or state and local down payment assistance programs.
Some employers and nonprofits also offer down payment grants or forgivable loans to employees or members of their community. These are less common than government programs, but they exist. If you are stuck below 3 percent, ask your lender what loan types they offer and ask your local housing authority or 211 what assistance programs exist in your area.
How to decide what down payment makes sense for you
The right down payment depends on three things: how much you have saved, how much you can afford to borrow, and how soon you want to buy. If you have $60,000 saved and can afford the monthly payment on a $240,000 loan, putting down 20 percent makes sense because you avoid mortgage insurance. If you have $15,000 saved and waiting five more years to save $60,000 is not realistic, a 5 percent down payment with mortgage insurance may be the right choice.
Talk to a lender before you decide. They can tell you what loan types you may have access to for, what your monthly payment would be at different down payment amounts, and how much mortgage insurance would cost. This conversation is free and does not commit you to anything. It simply shows you the real numbers for your situation.
Frequently Asked Questions
Can I borrow my down payment from someone else?
Most lenders allow down payment gifts from family members, but they require a signed letter stating it is a gift, not a loan you have to repay. Some lenders have limits on how much of your down payment can be a gift. Ask your lender about their gift policy before you accept money from a relative.
What if I put down more than 20 percent?
Putting down more than 20 percent is allowed and reduces your loan amount and monthly payment. It also means you have less cash left after closing. There is no financial penalty for putting down more, but there is also no benefit — you still avoid mortgage insurance at 20 percent, so anything above that is a personal choice about how much cash you want to keep.
Does my down payment affect my interest rate?
Yes, usually. Lenders typically offer lower interest rates to buyers who put down more money because the bank's risk is lower. The difference is usually small — maybe 0.25 to 0.5 percent — but it adds up over 30 years. Ask your lender for rate quotes at different down payment amounts to see the real difference.
Can I use my retirement account for a down payment?
Some retirement accounts allow you to withdraw money for a first-time home purchase without the usual early withdrawal penalty. A traditional or Roth IRA allows up to $10,000 lifetime for first-time buyers. A 401(k) may allow a loan against your balance. Withdrawing from retirement accounts has tax consequences, so talk to a tax professional before you do this.
What if I have bad credit — does that affect my down payment options?
Credit score affects whether you are approved for a loan and what interest rate you get, but it does not directly change the down payment amount lenders will accept. However, if your credit is very low, some lenders may require a larger down payment to offset the risk. FHA loans are more forgiving of lower credit scores than conventional loans, so that may be a better option if your score is below 620.