How Much Down Payment You Actually Need to Buy a House

Down payment amounts vary by loan type, not by law

There is no single required down payment percentage for buying a house. What you need depends on the type of loan you get, not on a rule that applies to all buyers. A conventional loan (the kind most people think of) often requires 3 to 20 percent down, but Federal Housing Administration (FHA) loans can go as low as 3.5 percent, and Department of Veterans Affairs (VA) loans sometimes require zero down if you are may be able to access. The lender you choose, not the government, sets the minimum.

The lower your down payment, the higher your monthly payment and the more interest you pay over the life of the loan. A smaller down payment also means you will pay for private mortgage insurance (PMI) — an extra monthly fee that protects the lender if you stop paying. That insurance goes away once you own 20 percent of the home's value, but until then it is part of your bill.

Your credit score, income, debt, and savings all factor into what a lender will actually offer you. A lender might approve you for a 3 percent down conventional loan or might require 10 percent. The only way to know what you can get is to talk to lenders directly — they will tell you what they will lend and at what rate.

Key Takeaways

• Conventional loans typically require 3 to 20 percent down, FHA loans as low as 3.5 percent, and VA loans sometimes zero percent, depending on your may be able to access and the lender.
• Putting down less than 20 percent means you will pay private mortgage insurance (PMI) as part of your monthly payment until you own 20 percent of the home.
• Your credit score, income, and existing debt determine what down payment percentage a lender will actually offer you, not a fixed rule.
• The lower your down payment, the higher your monthly payment and total interest cost over the life of the loan.
• Getting pre-approved by a lender shows you the exact down payment they will accept and what your monthly costs will be.

Conventional loans and the 20 percent benchmark

The 20 percent figure comes from conventional loans, which are mortgages not backed by a government agency. Lenders prefer 20 percent down because it means you have real money in the house and are less likely to walk away if the market drops. If you put down 20 percent, you own a fifth of the home immediately, and the lender's risk is lower.

Most conventional lenders will accept less — often 3, 5, or 10 percent — but the lower you go, the more they charge in interest rate and PMI. A buyer putting 5 percent down will pay a higher rate than a buyer putting 15 percent down, even if both have the same credit score. The lender is pricing in the extra risk.

If you put down less than 20 percent on a conventional loan, PMI is required. The cost varies but typically runs 0.5 to 1.5 percent of the loan amount per year, divided into your monthly payment. On a $300,000 home with 10 percent down, PMI might add $150 to $450 per month. You can remove PMI once you reach 20 percent equity, either by paying down the loan or by the home appreciating in value.

FHA loans and lower down payment thresholds

FHA loans are backed by the Federal Housing Administration and are designed for buyers with lower credit scores or smaller savings. The minimum down payment is 3.5 percent, which is why many first-time buyers choose them. You do not need a perfect credit history — FHA lenders often work with scores in the 580 to 620 range, though a higher score gets you a better rate.

FHA loans require mortgage insurance, but it works differently than PMI on conventional loans. You pay an upfront insurance premium (usually 1.75 percent of the loan amount, rolled into your mortgage) and then an annual premium split into monthly payments. Unlike conventional PMI, FHA mortgage insurance does not automatically disappear at 20 percent equity. If you put down less than 10 percent, you pay it for the life of the loan. If you put down 10 percent or more, it drops off after 11 years.

FHA loans have limits on how much you can borrow, and those limits vary by county. In lower-cost areas, the limit might be around $420,000; in expensive areas, it can exceed $1 million. Check your county's limit before you start house hunting, because it affects what price range you can actually afford.

VA loans and zero-down options

If you are a current or former member of the military, a VA loan may let you buy a home with zero down payment. VA loans are may provide by the Department of Veterans Affairs, which means the government backs the loan if you default. Because of that may provide, lenders are willing to lend the full purchase price with no down payment required.

VA loans do not require PMI, but they do charge a funding fee — a one-time cost paid at closing that typically ranges from 1.4 to 3.6 percent of the loan amount, depending on your military branch and whether you have received a disability rating. That fee is usually rolled into the mortgage, so you pay it over time rather than upfront. The funding fee can be waived if you receive certain disability benefits.

To use a VA loan, you need a Certificate of may be able to access from the VA, which you can request online through the VA website or through your lender. The process takes a few days to a few weeks. Not all lenders offer VA loans, so you may need to shop around, but many banks and mortgage companies do.

USDA loans for rural home buyers

USDA loans, backed by the Department of Agriculture, also allow zero down payment if you are buying in a designated rural area. These loans are for low- to moderate-income buyers and have income limits that vary by county and family size. Like VA loans, they do not require PMI, but they do charge a may provide fee (typically 1 to 2 percent of the loan amount) that is rolled into your mortgage.

USDA loans are slower to close than conventional or FHA loans because the USDA itself must approve the property and the buyer. The process usually takes 45 to 60 days from application to closing. You can learn about your address qualifies for a USDA loan on the USDA Rural Development website, which has a property may be able to access map.

How down payment size affects your monthly payment

A larger down payment lowers your monthly mortgage payment in two ways: you borrow less money, and you avoid or reduce PMI. On a $350,000 home at 7 percent interest over 30 years, the difference is stark. With 3 percent down ($10,500), you borrow $340,500 and pay roughly $2,265 per month in principal and interest, plus $200 to $300 in PMI — total around $2,500 per month. With 20 percent down ($70,000), you borrow $280,000 and pay roughly $1,865 per month with no PMI.

That $635 monthly difference adds up to over $228,000 over 30 years. However, the $59,500 extra you put down upfront could have been invested or used for other needs. The trade-off between saving for a larger down payment and buying sooner with a smaller one depends on your situation: if you are paying rent and rates are rising, buying sooner might make sense; if you can save more without hardship, a larger down payment reduces your total cost.

Interest rates also depend on down payment size. A buyer with excellent credit putting 20 percent down might get 6.5 percent, while the same buyer putting 3 percent down might get 7.0 percent. That 0.5 percent difference costs tens of thousands over 30 years. Always compare the total cost — rate, PMI, and monthly payment — not just the down payment percentage.

Getting pre-approved to learn what you can actually put down

The only way to know what down payment a lender will accept is to get pre-approved. Pre-approval is free and takes a few days. A lender will review your credit score, income, employment history, existing debts, and savings. They will then tell you the maximum loan amount they will give you, the interest rate they will charge, and the minimum down payment they require.

Pre-approval is not a may provide — the final approval comes after the home is inspected and appraised — but it shows you what is realistic. Many buyers get pre-approved by two or three lenders to compare rates and down payment requirements. Lenders compete for your business, so shopping around can save you thousands.

When you get pre-approved, ask the lender to explain PMI, the funding fee (if applicable), and what happens if you put down more than the minimum. Some lenders will lower your rate if you put down an extra 5 percent; others will not. Understanding these details before you make an offer on a house keeps you from surprises at closing.

Frequently Asked Questions

Can I buy a house with less than 3 percent down?

Some lenders offer 2 percent down conventional loans, and VA and USDA loans allow zero down if you are may be able to access. However, 3 percent is the most common minimum for conventional loans. If you have less saved, a VA or USDA loan may be your best option, or you may need to wait and save more.

What happens if I cannot afford 20 percent down?

You pay PMI (or mortgage insurance on FHA or USDA loans) until you reach 20 percent equity. This adds to your monthly payment but lets you buy sooner. Once you own 20 percent of the home, you can request PMI removal on a conventional loan. Many buyers do this and consider it a reasonable trade-off.

Does a larger down payment always mean a better interest rate?

Usually, yes. A larger down payment signals lower risk to the lender, so they often offer a lower rate. However, your credit score and income matter more than down payment size. A buyer with a 750 credit score and 5 percent down might get a better rate than a buyer with a 620 score and 15 percent down.

Can I use a gift for my down payment?

Most lenders allow down payment gifts from family members, but they require a signed letter stating the money is a gift and does not need to be repaid. Some lenders limit how much of your down payment can be a gift; others allow 100 percent. Ask your lender about their gift policy before you accept money from family.

What if the house appraises for less than the purchase price?

If the appraisal comes in low, you have a few options: renegotiate the price with the seller, put down more cash to make up the difference, or walk away (if your contract allows it). This is why a larger down payment protects you — you have more cushion if the home is worth less than you agreed to pay.