Down payment

How much should you put down?

Educational guide · Updated 2026

The "20% down" figure is so widely repeated that many people think it's required. It isn't. Plenty of buyers put down far less. But how much you put down does involve real tradeoffs worth understanding.

Down payment by loan type

On a $350,000 home: FHA requires 3.5% = $12,250. Conventional with 3% = $10,500 (but PMI applies until 20% equity). VA and USDA = $0 down if you qualify. 20% conventional = $70,000 down, no PMI. The right amount depends on your cash position, monthly budget, and how long you plan to stay.

What a bigger down payment gets you

Putting down more reduces your loan amount, which lowers your monthly payment and the total interest you'll pay. At 20% down on a conventional loan, you also avoid private mortgage insurance (PMI) entirely. A larger down payment can also make your offer more competitive.

What a smaller down payment preserves

Putting down less keeps more cash in your pocket — for an emergency fund, moving costs, immediate repairs, or simply not draining your savings. For many buyers, keeping a healthy cash cushion is worth more than the monthly savings a larger down payment would bring. Being "house rich and cash poor" is a real risk.

The PMI question

If you put down less than 20% on a conventional loan, you'll pay PMI — but it isn't permanent. It can typically be cancelled once you reach about 20% equity. So a smaller down payment with temporary PMI is a legitimate strategy, not a mistake, especially if it lets you keep an emergency fund intact.

There's no single right answer

The best down payment balances a comfortable monthly payment against keeping enough cash in reserve. For some buyers that's 20%; for many it's less. Running the actual numbers for your situation beats following a rule of thumb.

The 20% myth — where it came from

The idea that you need 20% down to buy a home is one of the most persistent misconceptions in real estate. It comes from the fact that 20% is the threshold at which conventional loan PMI stops. But 20% is not a requirement — it's a threshold, and most buyers don't hit it. According to NAR data, the median down payment for first-time buyers has historically been 6–7%.

Down payment by loan type

FHA loans: 3.5% minimum with a 580+ credit score. 10% minimum with a 500–579 score. FHA is the most accessible loan for buyers with limited credit history or savings, though mortgage insurance is required for the life of the loan if you put less than 10% down.

Conventional loans (Fannie Mae/Freddie Mac): 3% minimum through programs like HomeReady and Home Possible, designed for low-to-moderate income buyers. Standard conventional loans require 5% minimum. PMI applies until 20% equity is reached, at which point it's removed — unlike FHA.

VA loans: 0% down for eligible veterans, active service members, and surviving spouses. No PMI, competitive rates, and no minimum credit score set by VA (lenders set their own minimums). One of the strongest loan products available.

USDA loans: 0% down for eligible buyers in qualifying rural and suburban areas. Income limits apply. Geographic restrictions apply — check the USDA eligibility map for your target area.

The real cost of a smaller down payment

Putting 3–5% down means a higher loan balance, a higher monthly payment, and PMI. On a $350,000 home with 3% down ($10,500), your loan is $339,500. At 7%, your P&I payment is $2,260/month. Add PMI of roughly $140/month and your total is $2,400. Compare this to 10% down ($35,000): loan of $315,000, P&I of $2,095, PMI of roughly $100 = $2,195/month. The $24,500 more in down payment saves $205/month — a 10-year break-even on cash used.

Down payment assistance programs

Many first-time buyers qualify for down payment assistance they don't know about. These programs — offered through state housing finance agencies, local governments, and nonprofits — can provide grants, forgivable loans, or deferred loans to cover some or all of the down payment. Income limits and property price caps apply. A HUD-approved housing counselor can identify programs available in your area.

What about closing costs?

Down payment planning often ignores closing costs — typically 2–5% of the purchase price, due at closing. On a $350,000 home, closing costs of 3% = $10,500. You need to budget for both your down payment and closing costs separately. Some programs help with closing costs as well as down payment.

Frequently asked questions

Is 20% down always better?

Not necessarily. Putting 20% down avoids PMI but ties up cash that could be your emergency fund. Many buyers find a smaller down payment with PMI is smarter than depleting savings.

Can I use gift money for a down payment?

Yes, for most loan types. Lenders typically require a gift letter confirming the money is a gift, not a loan. Rules vary by loan program.

Does a larger down payment guarantee loan approval?

No. Approval depends on credit score, income, DTI, and property type — not just down payment size.

This article is educational and general in nature. Specifics vary by lender, loan program, and location. Confirm details with a licensed professional.