How Much House Down Payment Do You Actually Need?
Quick Answer
- 1. You do not need 20% down. Conventional loans start at 3%, FHA at 3.5%, and VA/USDA at 0%.
- 2. Putting less than 20% down triggers PMI, which costs 0.5-1.5% of the loan amount per year.
- 3. Budget an additional 2-5% of the home price for closing costs on top of the down payment.
- 4. The median down payment for first-time buyers in 2025 was 8% (NAR data).
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Enter a home price to see down payment amounts at 3%, 5%, 10%, and 20% with estimated monthly payments.
Calculate My Down Payment FreeThe 20% Down Payment Myth
The biggest misconception in home buying is that you need 20% down. According to the National Association of Realtors, the median down payment for first-time homebuyers in 2025 was just 8%. For repeat buyers, it was 19% — but much of that comes from equity in a previous home.
The 20% figure is not a requirement. It is the threshold at which you avoid paying private mortgage insurance (PMI) on a conventional loan. Below 20%, you can still get approved — you just pay a monthly PMI premium until you build enough equity.
Down Payment Requirements by Loan Type
| Loan Type | Minimum Down | Credit Score Needed | PMI/MIP? |
|---|---|---|---|
| Conventional | 3-5% | 620+ | Yes, until 20% equity |
| FHA | 3.5% | 580+ (10% if 500-579) | Yes, for life of loan |
| VA | 0% | No minimum (lenders set own) | No PMI; VA funding fee |
| USDA | 0% | 640+ typical | Guarantee fee, similar to PMI |
How Down Payment Affects Your Monthly Cost
On a $400,000 home at 7% interest (30-year mortgage), here is how different down payments affect your monthly payment:
| Down Payment | Cash Needed | Loan Amount | Monthly P&I | Est. PMI | Total Monthly |
|---|---|---|---|---|---|
| 3% ($12,000) | $12,000 | $388,000 | $2,581 | $194 | $2,775 |
| 5% ($20,000) | $20,000 | $380,000 | $2,528 | $190 | $2,718 |
| 10% ($40,000) | $40,000 | $360,000 | $2,395 | $150 | $2,545 |
| 20% ($80,000) | $80,000 | $320,000 | $2,129 | $0 | $2,129 |
The difference between 3% and 20% down is $646/month and $68,000 in upfront cash. Use our down payment calculator to run your own numbers.
Understanding PMI
PMI is not wasted money — it is the cost of buying a home sooner with less cash. Think of it as a temporary fee that lets you enter the housing market years earlier than waiting to save 20%. The key facts:
- PMI typically costs 0.5-1.5% of the loan amount per year, paid monthly
- You can request PMI removal when you reach 20% equity
- Your servicer must automatically cancel PMI at 22% equity
- FHA mortgage insurance (MIP) lasts the entire loan life — refinancing to conventional is the only way to remove it
How to Save for a Down Payment Faster
- Set a specific target and timeline. If you want to buy in 2 years at 5% down on a $350,000 home, you need $17,500 plus roughly $10,000-$15,000 for closing costs. That is $1,350-$1,600/month in savings.
- Use a high-yield savings account. At 4-5% APY, a HYSA adds meaningful interest on your growing down payment fund. On $20,000 saved over 18 months, you earn roughly $750-$950 in interest.
- Explore down payment assistance programs. Over 2,000 programs exist nationwide offering grants, forgivable loans, or matched savings for qualifying buyers. Check your state housing finance agency.
- Consider gift funds. Most loan programs allow family members to gift down payment funds. A gift letter stating the money is not a loan is typically required.
The Bottom Line
The "right" down payment depends on your financial situation, not a one-size-fits-all rule. If you have excellent credit and stable income, 5-10% down with PMI can be smarter than waiting years to save 20% while rents and home prices rise. But if putting 3% down leaves you with no emergency savings, you are not ready to buy.
Use our free down payment calculator to see how different down payment percentages affect your monthly cost and total savings needed.
Frequently Asked Questions
How much down payment do I need to buy a house?
The minimum down payment depends on your loan type: Conventional loans require as little as 3% (first-time buyers) or 5% (repeat buyers). FHA loans require 3.5% with a credit score of 580+. VA loans and USDA loans offer 0% down payment for eligible borrowers. However, putting less than 20% down on a conventional loan triggers private mortgage insurance (PMI), which adds $50-$200+ per month to your payment. The traditional 20% down payment is not required but remains the threshold for avoiding PMI.
What is PMI and how much does it cost?
Private mortgage insurance (PMI) protects the lender if you default on a conventional loan with less than 20% down. PMI typically costs 0.5% to 1.5% of the loan amount annually, paid monthly. On a $300,000 loan, that is $125 to $375 per month. PMI can be removed once you reach 20% equity through payments or appreciation — your servicer must automatically cancel it at 22% equity. FHA loans have a similar fee called MIP (mortgage insurance premium) that lasts the life of the loan unless you refinance to a conventional loan.
Should I put 20% down or a smaller amount?
Putting 20% down avoids PMI, gets you a lower interest rate, and reduces your monthly payment. But it requires significantly more cash upfront — $60,000 on a $300,000 home. If saving 20% would delay your purchase by years in a rising market, a smaller down payment may be financially better despite the PMI cost. Run the math: compare total costs over 5-7 years for both scenarios, including PMI, rate differences, and the opportunity cost of tying up extra cash in a down payment versus investing it.
What are closing costs and how much should I budget?
Closing costs are fees charged by lenders, title companies, and government agencies to complete the home purchase. They typically run 2-5% of the home price. On a $350,000 home, expect $7,000 to $17,500 in closing costs on top of your down payment. Major components include: loan origination fee (0.5-1%), appraisal ($400-$700), title insurance ($1,000-$3,000), prepaid property taxes and insurance, and recording fees. Some costs are negotiable, and sellers sometimes agree to pay a portion of buyer closing costs as part of the deal.
Can I use gifted money for a down payment?
Yes, most loan programs allow gift funds for part or all of the down payment. Conventional loans require a gift letter stating the money is not a loan and does not need to be repaid. FHA loans allow 100% of the down payment from gift funds. VA and USDA loans also accept gifts. The gift must come from an acceptable source — family members, domestic partners, or certain non-profit organizations. Lenders will verify the gift with bank statements showing the transfer. You typically cannot use borrowed money disguised as a gift.
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