Down Payment Guide: How Much You Really Need to Buy a House

The 20% myth

If you remember one fact about down payments, remember this: 20% is not required, has not been required for decades, and is not even the median in the United States. The median down payment for all homebuyers in 2024 was around 14%, and for first-time buyers it was 8%. The 20% figure persists because it's the threshold above which PMI is not required on a conventional loan — a useful number, but not a buy-in price.

Minimum down payment by loan type

• Conventional: 3% (first-time buyer) or 5% (non-first-time).
• FHA: 3.5% with a 580+ credit score; 10% with 500–579.
• VA: 0% with full entitlement.
• USDA: 0% for eligible rural properties under income limits.
• Jumbo: 5–20% depending on lender and loan amount.

These are minimums. Borrowers regularly put down more for better pricing, smaller monthly payments, or to avoid PMI. The right amount depends on your reserves, your other financial goals, and how long you'll keep the loan.

The case for putting less down

Cash reserves are insurance. Putting 5% down instead of 20% on a $400,000 home keeps $60,000 in your accounts that could go toward emergencies, repairs, investments, or paying down higher-interest debt. PMI on the extra borrowed amount is typically $150–$250/month — annoying but recoverable.

Inflation favors locking in a fixed-rate mortgage and keeping cash available. If you assume 3% inflation, every year you wait to deploy $60,000 makes that $60,000 worth less in real terms. Buying earlier with less down can beat saving longer for a 20% down payment in rising-price environments.

The case for putting more down

More down means lower monthly payment, no PMI (at 20%+), better rate pricing, and lower lifetime interest. On a $400,000 home, going from 5% down to 20% down saves about $300/month in PMI and reduces total interest by tens of thousands over the loan's life.

It also lowers default risk. If home values dip 10%, the 5%-down borrower is underwater and the 20%-down borrower isn't. That matters for refinancing and for selling.

Sources of down payment funds

Savings: the cleanest source. Most lenders want to see funds 'seasoned' for 60 days, meaning sitting in your account stable for at least two months.

Gift funds: allowed on conventional, FHA, VA, and USDA. Requires a signed gift letter from immediate family stating the funds are a gift, not a loan, plus a paper trail showing the funds entering your account. FHA additionally permits gifts from charities and government DPA programs.

401(k) loan or withdrawal: allowed but generally not recommended unless you have no alternative. A 401(k) loan must be repaid; a withdrawal triggers tax and a 10% penalty if you're under 59½. First-time buyers can withdraw up to $10,000 from an IRA penalty-free.

Down payment assistance (DPA): state and local programs offer grants or low-interest second mortgages. There are hundreds of DPA programs. Your loan officer should run an eligibility check.

Down payment assistance programs

DPA programs come in three flavors: grants (free money, no repayment), forgivable seconds (repaid only if you sell or refinance within a set period), and silent seconds (no payment, paid off at sale or refi). Most are income-restricted and first-time-buyer-restricted.

FHA is the most DPA-friendly product. Many DPA programs are designed to layer with FHA. Conventional loans accept many DPA programs but with stricter rules.

The HUD.gov housing counselor finder and your state housing finance agency are the best starting points to identify what's available locally.

Down payment vs. closing costs

Don't confuse the two. A 3.5% FHA down payment on a $400,000 home is $14,000. Closing costs add another $10,000–$15,000. Plan for both. Seller concessions are the single best tool to offset closing costs — write them into the purchase contract whenever the market allows.

How down payment affects monthly payment

Run your specific number through the payment calculator. A useful mental model: each 5% you put down lowers the loan by 5% of the price, lowers your P&I by roughly the same proportion, and at 20% removes PMI entirely. The PMI removal alone is often the biggest swing on the monthly payment.