How Much Down Payment Do You Need?
Your down payment is the portion of a home's price you pay upfront in cash, with the rest covered by your mortgage. How much you need depends on the loan program you choose, your credit profile, and your goals. The widely cited "20% down" figure is a useful benchmark, but most buyers put down far less.
Typical Down Payment Minimums by Loan Type
Minimum requirements vary by program. As a general guide:
- Conventional loans can require as little as 3% down for many first-time and qualified buyers.
- FHA loans typically require 3.5% down for borrowers with a credit score of 580 or higher.
- VA loans (for eligible service members and veterans) and USDA loans (for qualifying rural buyers) often allow 0% down.
These are general minimums. Lenders may ask for more depending on the property type, your credit, and your overall financial picture.
The 20% Rule and Private Mortgage Insurance
The 20% figure matters because of private mortgage insurance (PMI). On most conventional loans, if you put down less than 20%, your lender will require PMI to protect itself against default. PMI adds to your monthly payment and provides no benefit to you.
Once your loan-to-value ratio reaches about 80% — meaning you've built roughly 20% equity — you can usually request to cancel PMI. Reaching 20% down at purchase lets you skip PMI entirely from day one.
FHA loans use a separate mortgage insurance premium that often stays for the life of the loan, which is one reason some buyers refinance into a conventional loan later.
How Your Down Payment Affects Monthly Costs
A larger down payment lowers your monthly mortgage payment in two ways: you borrow less, and you may avoid PMI. It can also help you qualify for a better interest rate, since lenders view more equity as lower risk.
The trade-off is liquidity. Putting every dollar into a down payment can leave you short on cash for closing costs, moving expenses, and an emergency fund. Many buyers aim for a balance between a healthy down payment and a comfortable cash cushion.
Choosing the Right Amount for You
There is no single correct down payment. Consider:
- Your monthly budget — a bigger down payment means smaller payments.
- Your savings — keep enough in reserve after closing.
- Your timeline — if you plan to stay long term, building equity faster may be worth it.
- PMI cost — weigh paying PMI now against waiting to save more.
To see how different down payments change your numbers, try our mortgage payment calculator or estimate your budget with the how much house can I afford calculator.
