Key Takeaways
Down Payment
A down payment is the portion of a home's purchase price you pay upfront, out of pocket, at closing. It's the difference between what a home costs and how much you borrow through a mortgage. For example, on a $300,000 home with a $15,000 down payment, you'd finance $285,000. The size of your down payment directly affects your loan terms, monthly payment, and whether you'll owe private mortgage insurance.
Down payment percentage is calculated as the upfront cash divided by the purchase price. Lenders use the inverse — the loan-to-value ratio (LTV) — to assess risk; a higher down payment means a lower LTV and generally more favorable loan terms.
The 20% Myth — and What the Numbers Actually Look Like
The idea that you must save 20% before buying a home has discouraged many potential buyers from even starting the process. In reality, the 20% threshold is a benchmark, not a rule. It's the point at which conventional lenders waive private mortgage insurance (PMI) — a cost that protects the lender if you default — but it's far from the only path to homeownership.
Here's how common down payment amounts break down on a $300,000 home:
- 3% down: $9,000 upfront; you finance $291,000
- 5% down: $15,000 upfront; you finance $285,000
- 10% down: $30,000 upfront; you finance $270,000
- 20% down: $60,000 upfront; you finance $240,000
Each step up reduces your monthly payment and eliminates or reduces PMI, but the upfront cash requirement grows substantially. For many first-time buyers, the gap between 3% and 20% can represent years of additional saving. Understanding the true cost of each option — not just the sticker amount — is the starting point for making a sound decision.
To understand how the financed amount becomes your mortgage balance, see our explainer on how a mortgage actually works.
Down Payment Requirements by Loan Type
Different loan programs serve different buyers, and their down payment requirements reflect that. Here's a plain-language breakdown of the four main categories:
Conventional Loans
Backed by private lenders and conforming to Fannie Mae or Freddie Mac guidelines, conventional loans are the most common mortgage type. Many programs allow 3% down for first-time buyers, though putting down less than 20% means you'll pay PMI until your equity reaches that threshold.
FHA Loans
Insured by the Federal Housing Administration, FHA loans accept lower credit scores and down payments as low as 3.5% (for borrowers with a 580+ credit score). The trade-off is mandatory mortgage insurance premiums (MIP), which can last the life of the loan depending on your terms.
VA Loans
Available to eligible veterans, active-duty service members, and surviving spouses, VA loans are backed by the Department of Veterans Affairs and typically require no down payment at all. They also don't require PMI, though a funding fee usually applies.
USDA Loans
For buyers in eligible rural and some suburban areas who meet income limits, USDA loans offer 100% financing — no down payment required. These loans carry guarantee fees rather than traditional PMI.
Each loan type has its own eligibility rules, costs, and trade-offs. Our detailed comparison of FHA, VA, USDA, and conventional loans walks through those differences side by side.
3%
Minimum down payment on many conventional loans
Fannie Mae and Freddie Mac both back programs allowing first-time buyers to put as little as 3% down on a conventional mortgage.
~87%
Buyers who used financing to purchase a home
According to the National Association of Realtors' Profile of Home Buyers and Sellers, the vast majority of buyers finance their purchase rather than pay all cash.
$17,000+
Median down payment reported by first-time buyers
NAR survey data has consistently shown that first-time buyers put down considerably less than the often-cited 20% benchmark.
0%
Down payment required for VA and USDA loans
Eligible veterans and rural-area buyers can access zero-down mortgage programs backed by federal agencies.
Down Payment Assistance: Programs Most Buyers Don't Know About
A significant share of first-time buyers mistakenly believe they must save every dollar of the down payment themselves. In reality, hundreds of assistance programs exist across the country, many of them underused because buyers simply don't know to look.
These programs typically take one of three forms:
- Grants: Money that doesn't need to be repaid, often limited to lower- or moderate-income buyers
- Forgivable loans: Second loans that are forgiven — typically after you stay in the home for a set number of years
- Deferred-payment loans: Money lent at low or no interest that you repay when you sell, refinance, or pay off the first mortgage
State Housing Finance Agencies (HFAs) administer most of these programs. The U.S. Department of Housing and Urban Development (HUD) maintains a directory of state and local programs on its website. Eligibility often hinges on income limits, purchase price caps, geographic area, and first-time buyer status — though in many programs, "first-time buyer" simply means you haven't owned a home in the past three years.
If you're working on building the savings needed, our guide on emergency funds, sinking funds, and savings goals can help you think through how to structure your accounts while saving for a down payment.
This article is for general informational and educational purposes only and does not constitute financial, legal, or tax advice. Consult a qualified mortgage professional or financial adviser regarding your specific situation.