How Much Down Payment Do You Need to Buy a House?

One of the most persistent myths in American real estate is that you must save a 20% down payment to buy a home. While putting down 20% offers substantial advantages—such as avoiding Private Mortgage Insurance (PMI) and securing lower monthly payments—millions of Americans buy homes every year with substantially less.

In reality, according to federal lending standards, eligible borrowers can qualify for government-backed and conventional mortgages with as little as 0% to 3.5% down.

Your minimum down payment depends on the mortgage loan type you choose:

Conventional Loans (Fannie Mae & Freddie Mac):

First-Time Homebuyers:* Minimum 3% down through specialized programs such as Fannie Mae HomeReady® and Freddie Mac Home Possible®. Standard Conventional:* Minimum 5% down for most other primary residence purchases. Requires:* Conventional PMI if down payment is below 20%.

2. FHA Loans (Federal Housing Administration): * Minimum 3.5% down for borrowers with a credit score of 580 or higher. * 10% down required if credit score is between 500 and 579. * Popular among first-time buyers and those with modest credit histories or non-traditional income.

3. VA Loans (Department of Veterans Affairs): * 0% down payment required for qualifying active-duty military service members, veterans, and eligible surviving spouses. * No monthly mortgage insurance (a one-time VA funding fee applies, which can be financed into the loan).

4. USDA Loans (U.S. Department of Agriculture): * 0% down payment for qualifying low-to-moderate-income buyers purchasing homes in designated rural and suburban census tracts.

To illustrate how your down payment affects your initial cash outlay and loan balance, examine a typical $350,000 home purchase:

Notice that increasing your down payment from 3% to 20% requires saving an extra $59,500 in cash, but reduces your combined monthly payment by over $550 each month ($376 in principal and interest plus roughly $200 in eliminated PMI).

If you put down less than 20% on a conventional mortgage, your lender will charge PMI. Here is how PMI rules operate:

Cost of PMI: Typically between 0.3% and 1.5% of your original loan balance per year. On a $300,000 loan, that equals $900 to $4,500 per year ($75 to $375 per month).

Conventional Cancellation Rules: Under the federal Homeowners Protection Act of 1998, you have the legal right to request PMI cancellation once your loan balance reaches 80% of your home's original appraised value (provided you have a good payment history). The lender is legally mandated to automatically terminate PMI once your balance reaches 78% LTV.

The FHA Exception: On FHA loans, the mortgage insurance rules differ significantly. If you put down less than 10%, the annual Mortgage Insurance Premium (MIP) cannot be cancelled and remains for the entire loan term unless you refinance into a conventional loan once you have accrued sufficient equity.

Your down payment is not the only upfront cash you need at closing. Homebuyers must also budget for:

Closing Costs: Lender origination charges, appraisal fees, title insurance, recording taxes, and prepaid escrow deposits typically total 2% to 5% of the loan amount. On a $350,000 purchase, closing costs can add $7,000 to $15,000 to your cash requirements.

Emergency Cash Reserves: Lenders often prefer to see 2 to 6 months of housing payments remaining in your bank accounts after closing to ensure you can handle unexpected expenses.

Use our Down Payment Calculator to see your exact dollar requirement and track your savings progress.

2. Explore official down payment assistance resources through the Consumer Financial Protection Bureau (CFPB) Down Payment Guide ↗. 3. Review conventional low-down-payment guidelines at Fannie Mae ↗.