Insider’s experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our our partners, however, our opinions are our own. Terms apply to offers listed on this page.
- The cash you pay upfront when buying a home is your down payment.
- You might need as little as 3% up front for a conventional mortgage.
- Some government-backed mortgages, including VA and USDA loans, don’t require a down payment at all.
The down payment is a well-known hurdle to homeownership, but many would-be buyers don’t actually understand how much cash they’ll need to cover this cost. According to the Urban Institute, 39% of renters believe they’ll need to put more than 20% down to buy a home.
In reality, most buyers put down less than this. Repeat homebuyers typically put down 17%, while first-time homebuyers put just 7% down, the National Association of Realtors says.
A smaller down payment can make homeownership more achievable. Just how little can you put down? It depends on the type of mortgage you get.
What is a down payment?
A down payment is the portion of a home’s price that you pay with your own money. Your down payment is due at closing, when ownership of the home is officially transferred to you.
For example, if you buy a $200,000 house, you might decide to make a down payment of $20,000, which is equal to 10% of the purchase price. You’ll then take out a mortgage loan for the remaining $180,000.
The down payment you’ll need for each type of mortgage
There are two basic types of mortgages: conventional and government-backed.
A conventional mortgage is not insured or guaranteed by a government agency. A government-backed mortgage is secured by a federal agency that compensates your lender should you fail to make mortgage payments. The Federal Housing Administration, the Department of Veterans Affairs, and the Department of Agriculture are all government agencies that guarantee mortgages.
The minimum down payment required depends on whether you choose a conventional or government-backed loan, and which sub-category of loan you get.
Conventional mortgages
There are two types of conventional mortgages:
- Conforming loan. This is a mortgage that falls within the conforming loan limit set by the Federal Housing Finance Agency and meets the criteria to be purchased by Fannie Mae or Freddie Mac. In 2022, the conforming loan limit is just under $650,000 in most parts of the US, and in 2023 it’s just under $730,000. Down payments on these mortgages can go as low as 3% of the home’s purchase price, though your lender may require you to put down 5% or more if you aren’t a first-time or low-income homebuyer.
- Nonconforming loan. When a mortgage falls outside the FHFA’s loan limits or doesn’t meet other criteria to be purchased by Fannie Mae or Freddie Mac, it’s known as a nonconforming mortgage. The most common type of nonconforming mortgage is a jumbo loan. Jumbo loans come with higher limits that vary by lender, sometimes up to $2 or $3 million. These mortgages typically require larger down payments, often 10% or 20%.
Government-backed mortgages
There are three types of government-backed mortgages:
- FHA loan. This loan has more lenient requirements than a conventional mortgage. You’ll need a 3.5% down payment if you have a credit score of 580 or higher, and a 10% down payment with a score between 500 and 579.
- VA loan. This mortgage is for military families. You don’t need any down payment for a VA loan.
- USDA loan. This loan for low-to-middle income buyers in rural and suburban areas doesn’t require any down payment.
3 reasons to save for a larger down payment
If you have the minimum down payment required to buy a house, you might decide you’re ready to get the ball rolling. But you also may want to consider saving even more for a down payment. Here are some advantages of paying more up front:
- Lower interest rate. Lenders reward a higher down payment with a lower interest rate. This could save you tens of thousands of dollars over the years.
- Lower monthly payments. When you take out a 30-year mortgage, for example, the amount you borrow is spread out into monthly payments for 30 years. The less you borrow, the less money you’ll pay every month.
- Less or no mortgage insurance. If you put 20% down on a conventional mortgage, you won’t have to pay for private mortgage insurance (PMI). PMI typically costs between $30 and $70 per month for every $100,000 borrowed, according to Freddie Mac. Other types of mortgages require different kinds of insurance that cost a percentage of your loan, so the less you borrow, the less you’ll pay for insurance.
Having a bigger down payment can be really helpful if you’re looking to save money over the long run. But buying sooner with a smaller down payment has benefits, too. It just depends on what makes the most sense for you.
Mortgage calculator
Use our free mortgage calculator to see how a smaller or larger down payment will affect your monthly payments.
Mortgage Calculator
$1,161
Your estimated monthly payment
- Paying a 25% higher down payment would save you $8,916.08 on interest charges
- Lowering the interest rate by 1% would save you $51,562.03
- Paying an additional $500 each month would reduce the loan length by 146 months
You’ll also see how the amount you put down will affect how much you spend over the entire life of your mortgage.
Related Post
Insider’s experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our our partners, however, our opinions are our own. Terms apply to offers listed on this page.
- The cash you pay upfront when buying a home is your down payment.
- You might need as little as 3% up front for a conventional mortgage.
- Some government-backed mortgages, including VA and USDA loans, don’t require a down payment at all.
The down payment is a well-known hurdle to homeownership, but many would-be buyers don’t actually understand how much cash they’ll need to cover this cost. According to the Urban Institute, 39% of renters believe they’ll need to put more than 20% down to buy a home.
In reality, most buyers put down less than this. Repeat homebuyers typically put down 17%, while first-time homebuyers put just 7% down, the National Association of Realtors says.
A smaller down payment can make homeownership more achievable. Just how little can you put down? It depends on the type of mortgage you get.
What is a down payment?
A down payment is the portion of a home’s price that you pay with your own money. Your down payment is due at closing, when ownership of the home is officially transferred to you.
For example, if you buy a $200,000 house, you might decide to make a down payment of $20,000, which is equal to 10% of the purchase price. You’ll then take out a mortgage loan for the remaining $180,000.
The down payment you’ll need for each type of mortgage
There are two basic types of mortgages: conventional and government-backed.
A conventional mortgage is not insured or guaranteed by a government agency. A government-backed mortgage is secured by a federal agency that compensates your lender should you fail to make mortgage payments. The Federal Housing Administration, the Department of Veterans Affairs, and the Department of Agriculture are all government agencies that guarantee mortgages.
The minimum down payment required depends on whether you choose a conventional or government-backed loan, and which sub-category of loan you get.
Conventional mortgages
There are two types of conventional mortgages:
- Conforming loan. This is a mortgage that falls within the conforming loan limit set by the Federal Housing Finance Agency and meets the criteria to be purchased by Fannie Mae or Freddie Mac. In 2022, the conforming loan limit is just under $650,000 in most parts of the US, and in 2023 it’s just under $730,000. Down payments on these mortgages can go as low as 3% of the home’s purchase price, though your lender may require you to put down 5% or more if you aren’t a first-time or low-income homebuyer.
- Nonconforming loan. When a mortgage falls outside the FHFA’s loan limits or doesn’t meet other criteria to be purchased by Fannie Mae or Freddie Mac, it’s known as a nonconforming mortgage. The most common type of nonconforming mortgage is a jumbo loan. Jumbo loans come with higher limits that vary by lender, sometimes up to $2 or $3 million. These mortgages typically require larger down payments, often 10% or 20%.
Government-backed mortgages
There are three types of government-backed mortgages:
- FHA loan. This loan has more lenient requirements than a conventional mortgage. You’ll need a 3.5% down payment if you have a credit score of 580 or higher, and a 10% down payment with a score between 500 and 579.
- VA loan. This mortgage is for military families. You don’t need any down payment for a VA loan.
- USDA loan. This loan for low-to-middle income buyers in rural and suburban areas doesn’t require any down payment.
3 reasons to save for a larger down payment
If you have the minimum down payment required to buy a house, you might decide you’re ready to get the ball rolling. But you also may want to consider saving even more for a down payment. Here are some advantages of paying more up front:
- Lower interest rate. Lenders reward a higher down payment with a lower interest rate. This could save you tens of thousands of dollars over the years.
- Lower monthly payments. When you take out a 30-year mortgage, for example, the amount you borrow is spread out into monthly payments for 30 years. The less you borrow, the less money you’ll pay every month.
- Less or no mortgage insurance. If you put 20% down on a conventional mortgage, you won’t have to pay for private mortgage insurance (PMI). PMI typically costs between $30 and $70 per month for every $100,000 borrowed, according to Freddie Mac. Other types of mortgages require different kinds of insurance that cost a percentage of your loan, so the less you borrow, the less you’ll pay for insurance.
Having a bigger down payment can be really helpful if you’re looking to save money over the long run. But buying sooner with a smaller down payment has benefits, too. It just depends on what makes the most sense for you.
Mortgage calculator
Use our free mortgage calculator to see how a smaller or larger down payment will affect your monthly payments.
Mortgage Calculator
$1,161
Your estimated monthly payment
- Paying a 25% higher down payment would save you $8,916.08 on interest charges
- Lowering the interest rate by 1% would save you $51,562.03
- Paying an additional $500 each month would reduce the loan length by 146 months
You’ll also see how the amount you put down will affect how much you spend over the entire life of your mortgage.
