The typical down payment on a house depends heavily on whether you’re a first-time or repeat buyer. First-time buyers put down a median of 8%, while repeat buyers put down roughly 19%, according to the National Association of Realtors. That 8% figure, reported for 2023, was actually the highest for first-time buyers since 1997, reflecting rising home prices and a competitive market. On a $400,000 home, 8% translates to $32,000.
Minimum Down Payments by Loan Type
What you’re required to put down varies by the type of mortgage you use. Conventional loans backed by Fannie Mae or Freddie Mac allow down payments as low as 3% for qualified first-time buyers. Other conventional loans may require 5% or more. On a $350,000 home, a 3% down payment is $10,500, while 5% is $17,500.
FHA loans, which are insured by the Federal Housing Administration, require as little as 3.5% down if your credit score is 580 or higher. Borrowers with scores between 500 and 579 typically need 10% down. VA loans, available to eligible military service members and veterans, and USDA loans, designed for buyers in qualifying rural areas, both offer zero-down-payment options. These government-backed programs exist specifically to lower the barrier to homeownership, though each comes with its own eligibility rules and fees.
Why 20% Still Matters
You’ve probably heard that 20% is the “standard” down payment. Most buyers don’t actually put that much down, but the 20% threshold still carries real financial weight. When you put down less than 20% on a conventional loan, your lender will require private mortgage insurance, commonly called PMI. This protects the lender if you default, and you pay for it.
PMI typically costs between 0.58% and 1.86% of your total loan amount per year. On a $300,000 mortgage, that works out to roughly $145 to $465 per month added to your payment. The exact rate depends on your credit score, loan amount, and how much you put down.
The good news is PMI isn’t permanent. Once you’ve paid your loan balance down to 80% of the home’s original purchase price, you can request that your servicer remove it. At 78% of the original value, your servicer is generally required to cancel it automatically. To qualify for removal, you typically need a clean recent payment history, with no payments 30 or more days late in the past year and none 60 or more days late in the past two years.
FHA loans handle mortgage insurance differently. They charge an upfront premium plus an annual premium, and depending on your down payment and loan term, that annual premium may last the entire life of the loan rather than dropping off at 80%.
How Your Down Payment Affects Your Interest Rate
A larger down payment doesn’t just reduce your loan balance. It can also get you a lower interest rate. Lenders use your loan-to-value ratio (the percentage of the home’s value you’re borrowing) to gauge risk. A borrower putting 20% down is borrowing 80% of the home’s value, which lenders consider less risky than someone borrowing 97%. Lower risk often means a lower rate, and even a small rate difference compounds significantly over 30 years.
For example, the difference between a 6.5% and a 7% rate on a $320,000 mortgage adds up to roughly $40,000 in extra interest over the life of the loan. That doesn’t mean you should drain your savings to hit 20%, but it’s worth understanding that your down payment size ripples through your mortgage costs in multiple ways: the loan amount itself, PMI, and the rate you’re offered.
Down Payment Assistance Programs
If saving for a down payment feels out of reach, there are programs designed to help. More than 2,000 down payment assistance programs operate across the country, offered by state and local housing agencies, nonprofits, and even some lenders directly. They come in several forms.
- Grants provide a one-time cash sum that doesn’t have to be repaid. If you qualify, you can apply the money toward your down payment or closing costs.
- Forgivable loans function as a second mortgage, but portions of the balance are forgiven over time. If you stay in the home for the required period (often five to fifteen years), you owe nothing. Sell or move early, and you’ll repay a prorated amount.
- Deferred-payment loans don’t charge interest and don’t require monthly payments. You repay the full amount when the loan term ends, when you sell the home, or when you refinance.
- Low-interest loans work like a traditional second mortgage but at a below-market rate. You’ll make monthly payments on this loan alongside your primary mortgage.
- Matched savings accounts (sometimes called Individual Development Accounts) match your savings contributions with public or private funds, helping you build your down payment faster.
Some major mortgage lenders also offer their own grant programs for eligible borrowers. These programs often target first-time buyers, buyers in certain income brackets, or buyers purchasing in specific communities. Eligibility requirements vary, so checking with your state housing finance agency is the best starting point.
Choosing the Right Amount
There’s no single correct down payment. The right number depends on your savings, your monthly budget, and how much you want to borrow. Putting more down means a smaller loan, lower monthly payments, and potentially better terms. Putting less down lets you buy sooner and keep more cash in reserve for repairs, moving costs, or emergencies.
A useful exercise: calculate your monthly payment at a few different down payment levels using an online mortgage calculator. Compare the total cost over the life of the loan, including PMI if applicable. Then check whether you’d still have three to six months of expenses in savings after closing. Stretching to hit 20% down but emptying your emergency fund can leave you in a tight spot if something breaks in the first year of homeownership.
Most buyers land somewhere between 3% and 20%, with first-time buyers clustering near the lower end. The median of 8% reflects a practical middle ground: enough to keep payments manageable and show lenders you’re financially stable, without requiring years of additional saving in a market where prices keep moving.