If you are preparing to buy a home, the down payment is probably one of the first numbers you are trying to figure out. The good news is that you may not need the 20% down payment you have heard about.
Depending on your loan program and eligibility, some buyers may qualify for a conventional mortgage with as little as 3% down, an FHA loan with 3.5% down, or an eligible VA or USDA loan with no down payment requirement. Your actual minimum will depend on the loan, lender, property, finances, and program requirements.
That does not necessarily mean putting down the minimum is the right strategy. Your down payment affects how much you borrow, your monthly housing costs, and potentially the mortgage insurance and loan pricing you receive. You also need to leave room in your budget for closing costs and the expenses that come with moving into a home.
Related: What Credit Score Do You Need to Buy a Home?
Short Answer: How Much for a Down Payment?
For many buyers, the answer falls somewhere between 3% and 20% of the purchase price, although qualified buyers may have access to 0% down programs.
For example, on a $400,000 home:
Down Payment | Amount |
|---|---|
3% | $12,000 |
3.5% | $14,000 |
5% | $20,000 |
10% | $40,000 |
20% | $80,000 |
These figures cover only the down payment. They do not include closing costs, prepaid expenses, moving expenses, or other cash you may need during the transaction.
The Consumer Financial Protection Bureau notes that closing costs, excluding the down payment, typically range from about 2% to 5% of the purchase price, although actual costs depend on the loan, lender, property, and location.
Do You Need 20% Down to Buy a House?
No. A 20% down payment can have financial benefits, but it is not a universal requirement.
According to the CFPB, many buyers need at least 3% down, while some lenders and loan programs require 5% or more. The exact requirement depends on your mortgage and lender.
The significance of 20% comes largely from mortgage insurance. With many conventional mortgages, putting less than 20% down means you will typically pay private mortgage insurance, or PMI. PMI protects the lender if a borrower stops making mortgage payments, and it adds to the cost of the loan.
Putting 20% down may allow a conventional borrower to avoid PMI from the beginning. A larger down payment also reduces the amount borrowed, which can lower the principal-and-interest portion of the monthly mortgage payment.
Still, saving for 20% can require significantly more time and cash. A buyer may reasonably decide that preserving savings for closing costs, repairs, emergencies, or other priorities matters more than reaching the 20% threshold.
The right balance depends on your finances and loan options, so compare scenarios with a licensed lender rather than assuming 20% is necessary.
What Are the Minimum Down Payments for Different Loans?
Different mortgage programs have different requirements. These are several common examples.
Conventional Loans
Some conventional mortgages allow eligible borrowers to make a down payment as low as 3%.
For example, Fannie Mae's HomeReady program offers down payments as low as 3% for qualifying borrowers and allows certain eligible sources, including gifts and grants, to help fund the down payment and closing costs. Fannie Mae also offers a 97% loan-to-value option for qualifying first-time buyers.
Freddie Mac also offers qualifying buyers options with down payments as low as 3%, including Home Possible and HomeOne. Eligibility requirements differ by program.
Conventional borrowers putting less than 20% down will typically need mortgage insurance, although cancellation rules may allow many borrowers to remove PMI later after reaching the required equity level.
FHA Loans
FHA-insured mortgages can allow a down payment as low as 3.5% of the purchase price. FHA loans are insured by the Federal Housing Administration and are originated through approved lenders.
FHA financing also carries its own mortgage insurance requirements, so buyers should compare the full cost of an FHA mortgage with available conventional alternatives rather than looking at the down payment percentage alone.
VA Loans
Eligible veterans, service members, and certain surviving spouses may qualify for a VA-backed purchase loan with no down payment, provided applicable program and lender requirements are met. The VA notes that a lender may still require a down payment in certain situations.
VA loans generally do not require PMI, although a VA funding fee may apply unless the borrower qualifies for an exemption.
USDA Loans
USDA's Single Family Housing Guaranteed Loan Program can provide 100% financing, meaning no down payment, for eligible borrowers purchasing qualifying properties in eligible rural areas. Income, property, and lender requirements apply.
Because eligibility for government-backed and low-down-payment programs can be specific, a lender can help you determine which programs are actually available for your finances and intended property.
How Much Cash Do You Really Need to Buy a House?
Your down payment is only one piece of the upfront budget.
The amount you ultimately bring to closing is often called your cash to close. The CFPB explains that this figure can include your down payment along with closing costs and adjustments, minus applicable deposits, credits, or other amounts already paid.
Common closing expenses can include lender charges, appraisal fees, title-related costs, government fees, homeowners insurance, prepaid interest, and initial escrow deposits. The exact mix varies by transaction and location.
You may also need money outside of closing for expenses such as:
- Moving and utility setup
- Immediate repairs or improvements
- Furniture or appliances
- HOA-related expenses, when applicable
- An emergency reserve after closing
That is why a buyer with $50,000 in savings may not want to put the full $50,000 toward the down payment.
The CFPB suggests considering other savings goals, moving expenses, potential home expenses, and an emergency cushion when determining how much cash you can reasonably commit to closing.
Is It Better to Make a Bigger Down Payment?
A larger down payment can be useful, but the decision involves tradeoffs.
Putting more money down generally means borrowing less. It can also reduce your monthly payment and potentially improve your loan pricing. For conventional borrowers, reaching 20% may eliminate the need for PMI at the start of the loan.
On the other hand, putting more money into the home means keeping less cash available for other priorities.
Consider two buyers purchasing the same home. One buyer might prefer to make a 20% down payment because they have significant savings beyond the amount required for closing. Another might qualify for a lower-down-payment mortgage and choose to preserve more money for emergencies, renovations, or other financial goals.
Neither percentage automatically makes sense for every buyer.
A useful question is not simply, “What is the largest down payment I can make?” Instead, ask, “What down payment gives me an affordable loan while leaving me financially prepared after closing?”
A lender can model multiple down payment amounts so you can compare the resulting loan balance, mortgage insurance, rate, fees, and estimated monthly payment.
Can You Get Help With a Down Payment?
Possibly. Down payment and closing cost assistance programs exist through various state and local housing agencies and other qualifying programs.
Depending on the program, assistance might come through a grant, deferred-payment loan, forgivable loan, or another structure. Eligibility can depend on factors such as income, location, property, loan type, and whether the borrower meets a program's definition of a first-time buyer.
Some mortgage programs also allow eligible gift funds or grants to contribute toward the purchase. Fannie Mae, for example, permits certain assistance sources with its low-down-payment programs.
Before relying on assistance in your budget, confirm the program's current eligibility rules and how it interacts with your primary mortgage.
How Should You Choose Your Down Payment?
Start by looking beyond the minimum percentage.
Before committing to a number, consider:
- How much cash you will have left after closing.
- Whether the down payment changes your interest rate or other loan costs.
- Whether mortgage insurance applies and what it costs.
- What monthly payment fits comfortably within your budget.
- What closing costs and prepaid expenses you expect.
- Whether you qualify for a low-down-payment or assistance program.
- Whether you have sufficient reserves for repairs, maintenance, moving, and unexpected expenses.
It is also helpful to compare several loan scenarios rather than assuming the smallest or largest possible down payment is automatically preferable.
The Nav Agency's step-by-step buyer's guide can help you think through budgeting, financing preparation, the home search, offers, inspections, and the rest of the buying process.
Plan Your Home Purchase With the Full Budget in Mind
So, how much money do you need for a down payment? Potentially far less than 20%, depending on the mortgage for which you qualify. But the minimum down payment is only one part of determining whether you are financially prepared to buy.
The stronger approach is to consider the full picture: your down payment, closing costs, monthly payment, mortgage insurance, reserves, and other homeownership expenses.
Mortgage terms and eligibility depend on the borrower, lender, loan program, property, and market conditions. A licensed lender can help you evaluate financing options specific to your finances.
Once you understand your financing range, The Nav Agency can help you build a home search and purchase strategy around your budget, priorities, and timeline. Explore our home buying resources or connect with a Nav Agency agent to start planning your next move.
Read Next: How Much Is My Home Worth?
