How Much Down Payment Do You Need for a House? Complete Guide by Loan Type

Updated April 16, 2026

How Much Down Payment Do You Need for a House? Complete Guide by Loan Type

Down Payment Minimums by Loan Type

VA and USDA loans require zero down payment, making them the lowest-barrier options for eligible borrowers. FHA loans require 3.5% down with a 580+ credit score, or 10% down for scores between 500 and 579. Conventional loans require as little as 3% down through Fannie Mae's HomeReady or Freddie Mac's Home Possible programs for income-qualified borrowers, or 5% for standard conventional loans. Jumbo loans typically require 10% to 20% down depending on the lender and loan amount. Investment properties require 15% to 25% down for conventional financing, with the percentage increasing for multi-unit properties.

The 20% Down Payment Myth

The idea that you need 20% down to buy a home is one of the most persistent myths in real estate. While 20% down eliminates private mortgage insurance and gets you the best rates, the median down payment for first-time buyers is actually around 6% to 8%. Waiting to save 20% on a $350,000 home means accumulating $70,000 - a goal that takes many years, during which home prices may rise faster than you can save. The math often favors buying with a smaller down payment and accepting PMI, especially when home appreciation exceeds the cost of mortgage insurance. PMI on a conventional loan can be removed once you reach 20% equity through a combination of payments and appreciation.

How Down Payment Size Affects Your Monthly Costs

On a $350,000 home with a 6.5% interest rate, putting 5% down ($17,500) results in a $2,100 principal and interest payment plus approximately $140 in PMI. Putting 10% down ($35,000) drops the P&I to $1,990 and PMI to about $95. At 20% down ($70,000), P&I falls to $1,770 with no PMI. The total monthly difference between 5% and 20% down is roughly $470, but you have tied up an additional $52,500 in the home. Whether that trade-off makes sense depends on what else you could do with the money - if you have high-interest debt, saving an emergency fund, or investment opportunities, a smaller down payment may be more strategically sound.

Sources of Down Payment Funds

Lenders accept down payment funds from a variety of sources beyond personal savings. Gift funds from relatives are permitted on most loan programs, though the donor must provide a signed gift letter confirming the money is not a loan. Retirement account withdrawals from 401(k) plans or IRAs can be used, though tax and penalty implications vary. Down payment assistance programs offered by states, cities, and nonprofits can cover part or all of the down payment. Some employers offer homebuyer assistance as a benefit, and community land trusts provide reduced-cost homeownership in certain areas. One source that is generally NOT acceptable is borrowed money from unsecured loans or credit cards.

The Strategic Case for Putting Less Down

Financial advisors are increasingly arguing against putting 20% down when rates are moderate and home prices are appreciating. Your return on equity in a home is leveraged - if you put 10% down on a $350,000 home and it appreciates 4% ($14,000), your return on the $35,000 invested is 40%. If you had put 20% down ($70,000), the same $14,000 appreciation represents only a 20% return. Keeping more cash liquid also provides a safety buffer for unexpected expenses, home repairs, and financial emergencies. The PMI cost of a smaller down payment is often less than 0.5% per year on the amount not put down - a modest insurance premium for maintaining greater financial flexibility.

Know your down payment amount? Use Rate Direct to compare rates at your exact loan-to-value ratio and find the lender offering the best deal for your situation.

Today's mortgage rates

Conventional

5.625% (5.754% APR)

FHA

5.250% (5.370% APR)

5.125% (5.239% APR)

Conventional: 80% LTV, 780 FICO. FHA: 96.5% LTV, 680 FICO. VA: 100% LTV, 700 FICO. 30-year fixed, primary residence. Your rate may vary.

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