How much down payment do I need to buy a house?

How much down payment do I need? Far less than 20% for most buyers. Eligible veterans and service members can buy with no down payment on a VA loan. Some conventional loans allow 3% down, and FHA loans allow 3.5% down with a credit score of 580 or higher.

The 20% figure is real, but it is not a minimum. It is the point where most conventional loans stop needing private mortgage insurance. Below, you will see the minimum for each loan type, what a smaller down payment costs you, and how to decide on the right amount for your situation.

What is the minimum down payment for each loan type?

The minimum depends on the loan. VA loans can need 0% down, certain conventional loans 3%, and FHA loans 3.5% with a 580+ credit score or 10% with a score from 500 to 579. Many conventional loans that are not part of a special program ask for 5% or more.

Sources: VA’s purchase loan page, Freddie Mac’s Home Possible page, Fannie Mae’s HomeReady eligibility rules and HUD’s FHA Handbook 4000.1. Lenders can add their own stricter rules, called overlays, so the minimum one lender offers may be higher.

Why do people say you need 20% down?

Because on a conventional loan, putting down less than 20% usually means paying private mortgage insurance. At 20% down, most buyers avoid that cost and may get a lower payment overall. So 20% is a cost-saving target, not a rule for getting approved for a mortgage.

The Consumer Financial Protection Bureau (CFPB) explains that PMI protects the lender, not you, if you stop making payments. You may need it on a conventional loan when your down payment is under 20% of the price. It is most often paid as a monthly premium added to your mortgage payment, though some lenders offer an upfront payment or a mix of both.

PMI is not permanent on most conventional loans. The CFPB notes that you can ask to cancel PMI once your balance is scheduled to reach 80% of the home’s original value, and your servicer generally must end it automatically when the balance is scheduled to reach 78%, as long as you are current. Our guide on when you can remove PMI walks through the steps.

How does FHA mortgage insurance work with a small down payment?

FHA loans charge an upfront mortgage insurance premium of 1.75% of the base loan, which is usually added to the loan, plus an annual premium paid monthly. With less than 10% down, the annual premium generally lasts for the life of the loan. With 10% or more down, it lasts 11 years.

These rates come from HUD Mortgagee Letter 2023-05, effective for loans endorsed on or after March 20, 2023. For a 30-year FHA loan at or below the national conforming loan limit, the annual premium is:

• 0.55% a year when the LTV is above 95% (for example, 3.5% down).
• 0.50% a year when the LTV is above 90% but no more than 95%.
• 0.50% a year for 11 years when the LTV is 90% or less (10% or more down).

The life-of-loan rule matters. If you buy with 3.5% down, the only common way to stop paying FHA mortgage insurance later is to refinance into another loan, such as a conventional loan, once you have enough equity. Our comparison of FHA vs. conventional loans shows when each one tends to cost less.

What does a bigger or smaller down payment do to your monthly payment?

A bigger down payment lowers your loan amount, so your principal-and-interest payment drops. It can also cut or remove mortgage insurance. A smaller down payment keeps more cash in your pocket today but raises your monthly cost and the total interest you pay.

The example rate is for illustration only. For current national averages, check Freddie Mac’s weekly Primary Mortgage Market Survey.

The CFPB also notes that you may get a better interest rate with a larger down payment, and that mortgage insurance can increase both your upfront and monthly costs. When you get Loan Estimates, ask each lender to price two or three down payment amounts so you can see the real trade-off.

How do VA loans work with no down payment?

VA-backed purchase loans can require no down payment as long as the sales price is not higher than the home’s appraised value. They also do not charge private mortgage insurance or monthly mortgage insurance premiums. Most borrowers pay a one-time VA funding fee instead, unless they are exempt.

The VA funding fee for a first-time use of the benefit with less than 5% down is 2.15% of the loan amount. You are exempt if, among other cases, you receive VA compensation for a service-connected disability, or you are a surviving spouse receiving Dependency and Indemnity Compensation. Putting money down on a VA loan is optional, but it lowers the funding fee and your loan balance.

Where can the down payment money come from?

Most loans let you use your own savings, gifts from family and, in many cases, down payment assistance from a government or nonprofit program. What you usually cannot use is money from the seller or anyone else who profits from the sale. Lenders must document where every dollar came from.

Common sources include:

• Your savings and checking accounts: lenders will look at recent bank statements, so large unexplained deposits need a paper trail.
• Gifts: HUD’s FHA rules allow gifts from a family member, an employer or labor union, a close friend with a documented interest in the borrower, a charitable organization, or a government agency with a homeownership assistance program.
• Down payment assistance: state housing finance agencies and some cities and counties offer grants or second loans. See our guide to first-time homebuyer down payment assistance.
• Employer programs and sweat equity: Freddie Mac’s Home Possible program lists family, employer-assistance programs, secondary financing and sweat equity as eligible sources.

Sellers and other interested parties can often help with closing costs, but not the down payment. On FHA loans, HUD caps these contributions at 6% of the sales price and does not let them count toward the borrower’s minimum required investment.

How do you decide how much to put down?

Put down enough to get a payment you are comfortable with, but not so much that you are left with no emergency savings. For many buyers, the right answer sits somewhere between the loan’s minimum and 20%, based on credit, savings and how long they plan to stay.

Ask yourself these questions:

1. How much cash will I have left after closing? Keep an emergency fund for job changes and repairs. A new home rarely comes with zero surprises.
2. What will mortgage insurance cost me, and for how long? Conventional PMI can usually be removed later. FHA’s annual premium often cannot, unless you refinance.
3. How does my credit score affect pricing? Your score can change both your rate and your mortgage insurance cost. See our guide on buying a house with a 620 credit score.
4. How long will I stay? If you may move within a few years, keeping cash flexible can matter more than shaving a little off the payment.
5. Does the payment fit my budget? Use our guide on how much house you can afford to check the monthly payment before you pick a price.

What should you do next?

Turn the minimums into a plan for your own budget. Start by finding out which loan programs you qualify for, then price several down payment amounts side by side. Keep enough cash for closing costs and an emergency fund, and choose the down payment that leaves you comfortable on both counts:

1. Check which programs you may qualify for. If you served in the military, ask about VA eligibility. If your income is moderate, ask lenders about HomeReady and Home Possible.
2. Price two or three down payment options. Request Loan Estimates at, for example, 3.5%, 5% and 10% down, and compare monthly payments and cash to close.
3. Look for local help. Search your state housing finance agency for down payment assistance, and document any family gifts early.
4. Protect your reserves. Decide on an emergency fund amount first, then put down what is left.
5. Get free advice if you want it. The CFPB lets you find a HUD-approved housing counselor near you who can review your options at little or no cost.