First-time home buyers can put down as little as 3% with a conventional loan (HomeReady or Home Possible programs), 3.5% with an FHA loan (580+ credit score), or $0 with VA loans (eligible military) or USDA loans (qualifying rural areas). Your minimum depends on loan type, credit score, and income.
The 20% down payment rule is a myth that has kept renters out of homes for decades. Today, conventional loans start at 3% down. Government-backed programs go to zero.
So why do national headlines keep reporting record-high upfront costs? Because buyers choose to put more down in competitive markets, not because they have to. According to the National Association of Realtors, the median down payment for first-time buyers in 2023 was 8%, while repeat buyers averaged 19%. But the minimum required is much lower for both groups.
This guide covers what you actually need for each loan type, how your credit score affects those numbers, what assistance programs exist, and when putting more down actually makes financial sense.
What “Down Payment” Actually Means — and Why It Matters
Your down payment is the percentage of the home’s purchase price you pay in cash at closing. The rest is covered by your mortgage.
On a $350,000 home:
- 3% down = $10,500
- 10% down = $35,000
- 20% down = $70,000
The size of your down payment affects three things directly:
- Your monthly mortgage payment — less down means a bigger loan and higher monthly costs
- Whether you pay private mortgage insurance (PMI), required on conventional loans below 20% equity
- Your interest rate — lenders sometimes offer slightly better rates with larger down payments
Putting down less isn’t inherently worse. It depends on your market, your timeline, and what you’d do with the cash you’d otherwise tie up in the home.
Down Payment Requirements by Loan Type
This is the practical breakdown most buyers actually need:
| Loan Type | Minimum Down | Credit Score Minimum | Mortgage Insurance |
|---|---|---|---|
| Conventional (HomeReady/Home Possible) | 3% | 620 | PMI required until 20% equity |
| FHA | 3.5% (580+ score) / 10% (500–579) | 500 | MIP for life of loan (unless refinanced) |
| VA | 0% | No official minimum | None (funding fee applies) |
| USDA | 0% | Typically 640 | Annual guarantee fee |
| Jumbo | Varies — often 10–20% | Typically 700+ | Varies by lender |
Conventional loans (backed by Fannie Mae and Freddie Mac) are the most common. The HomeReady and Home Possible programs allow 3% down for buyers who meet income limits and complete a homebuyer education course.
FHA loans are run by the Federal Housing Administration and are designed for buyers with lower credit scores. The trade-off is that mortgage insurance premiums (MIP) last the life of the loan — unlike PMI on conventional loans, which drops off at 20% equity.
VA loans are available to eligible active-duty military, veterans, and surviving spouses. There’s no down payment and no ongoing mortgage insurance, though a one-time funding fee applies. The fee ranges from 1.25% to 3.3% of the loan amount d, depending on your service history, down payment, and whether it’s your first VA loan.
USDA loans are available in designated rural and some suburban areas. No down payment is required if your income falls within program limits. Check the USDA’s eligibility map at usda.gov.
Jumbo loans exceed the conforming loan limits set by the Federal Housing Finance Agency (in 2025, $766,550 in most areas, higher in high-cost markets). Lenders set their own minimums, typically 10–20% down.
How Your Credit Score Affects Your Down Payment
Your credit score determines which loan programs you qualify for — and that directly changes how much you need upfront.
- 760+ — Best rates on conventional loans; 3% down available
- 680–759 — Good options; slightly higher PMI costs
- 620–679 — Conventional possible, but FHA may be cheaper overall
- 580–619 — FHA at 3.5% down; conventional options limited
- 500–579 — FHA at 10% down; most other programs unavailable
- Below 500 — Very limited options; most programs require rebuilding first
One important nuance: a higher credit score doesn’t just affect your rate. It can determine whether PMI is cheaper on a conventional loan or whether an FHA loan’s lifetime MIP costs you more over time. Run both scenarios before deciding.
PMI costs in practice: On a $300,000 loan, PMI typically costs $75–$375/month, depending on your credit score and down payment. It cancels automatically when you reach 20% equity (22% by law under the Homeowners Protection Act), or you can request cancellation at 20%.
The Real Cost of Putting Down Less vs. More
Putting 3% down on a $350,000 home instead of 20% means:
- You keep $59,500 in cash instead of putting it into the property
- Your loan is $59,500 larger, meaning higher monthly payments
- You pay PMI — roughly $100–$200/month until you hit 20% equity
- You start building equity more slowly
Whether that trade-off makes sense depends on what else you’d do with that $59,500. If you’d earn a meaningful return investing it, or if you need the liquidity as an emergency fund, smaller down payments can make sense. If you’d leave it in a low-yield savings account, putting more down might win mathematically.
There’s no universal right answer — only the right answer for your financial picture.
Closing Costs: The Expense Most Buyers Underestimate
Down payment is not the only upfront cost. Closing costs — lender fees, title insurance, appraisal, prepaid taxes, and insurance — typically run 2%–5% of the purchase price.
On a $350,000 home, that’s $7,000–$17,500 on top of your down payment.
Budget for both. Many buyers are blindsided by closing costs after focusing entirely on saving for their down payment.
Some ways to reduce closing costs:
- Negotiate seller concessions (seller pays some costs at closing)
- Ask lenders for a lender credit in exchange for a slightly higher rate
- Shop multiple lenders — fees vary significantly
Down Payment Assistance: What Actually Exists
Down payment assistance (DPA) programs are real and underused. According to Down Payment Resource, thousands of programs exist across the US — run by states, counties, municipalities, and nonprofits.
Common structures include:
- Forgivable loans — become grants if you stay in the home for a set period (typically 5–10 years)
- Deferred loans — no payments until you sell, refinance, or pay off the mortgage
- Grants — money you don’t repay at all
Some programs are income-limited. Others are geographic. Many require completing a HUD-approved homebuyer education course.
Specialized programs exist for:
- Teachers, firefighters, police officers, and healthcare workers (Good Neighbor Next Door via HUD offers up to 50% discounts on select homes)
- Veterans (beyond VA loans — state-level programs vary)
- Buyers in targeted census tracts or rural areas
How to find programs in your area:
- Down Payment Resource (downpaymentresource.com)
- Your state’s housing finance agency
- HUD-approved housing counselors (find one at hud.gov)
Don’t assume you don’t qualify before checking. Many buyers earning moderate incomes discover they’re eligible for assistance they didn’t know existed.
How Location Changes What You Need
National averages don’t tell you much. What matters is your specific market.
In high-cost metro areas — San Jose, San Francisco, New York — median home prices can exceed $1 million, meaning even a 3% down payment requires $30,000+. Buyers in these markets often put down more to compete in multiple-offer situations.
In the Midwest and parts of the South, median home prices in many cities fall below $250,000. A 3% down payment is under $7,500.
The practical takeaway: research median home prices in your specific target neighborhoods, not state or national averages. Then calculate what 3%, 5%, and 10% actually mean in dollar terms for your price range. That’s your real savings target.
Competitive markets also change strategy. In cities where homes receive multiple offers, sellers sometimes favor buyers with larger down payments because they signal financial strength. A higher down payment won’t always win a bidding war, but it can help your offer look more solid.
When to Wait vs. When to Buy With Less Down
This is the question that actually matters for most buyers, and the answer depends on your market.
Arguments for buying sooner with less down:
- Home prices in your target area are rising faster than you can save
- You’re spending more on rent than you would on a mortgage
- You’ve found a home that meets your needs in a competitive market
- You have a stable income and an emergency fund separate from the down payment
Arguments for waiting and saving more:
- You’d need to pay high PMI on a conventional loan (weak credit score)
- Your market is flat or declining — time isn’t working against you
- You’d be buying at the edge of your budget with no financial cushion
- You could realistically save 20% within 18–24 months
The worst outcome is stretching to buy with a minimal down payment and then facing job loss, repairs, or rising rates with no financial buffer. The second worst outcome is waiting years to save 20% in a market that appreciated 30% while you waited.
Neither path is automatically right.
Practical Steps to Build Your Down Payment
Instead of generic advice, here’s a concrete approach:
- Set a real savings target — Pick a price range, calculate 5% plus 3% for closing costs. That’s your minimum. Write the number down.
- Open a dedicated account — Separate from your emergency fund. High-yield savings accounts currently offer meaningful returns; don’t leave this money in a checking account.
- Treat it like a bill — Automate a fixed monthly transfer on payday. Remove the decision from the equation.
- Identify windfalls — Tax refunds, bonuses, gifts. Have a plan for where they go before they arrive.
- Check gift fund rules — Most loan programs allow family members to gift funds for a down payment. Get documentation requirements from your lender early.
- Track your timeline — If your savings rate means you’ll hit your target in 18 months, great. If it’s 5 years, something has to change — either the target, the savings rate, or the market.
FAQs
What is the minimum down payment for first-time home buyers in 2025? As low as 3% on conventional loans through programs like HomeReady and Home Possible, 3.5% on FHA loans (with a 580+ credit score), or $0 on VA loans (for eligible military borrowers) and USDA loans (in qualifying rural areas). The right minimum depends on which loan you qualify for.
Can I buy a house with bad credit in 2025? FHA loans accept credit scores as low as 500 with a 10% down payment, or 580 with 3.5% down. Scores below 500 make financing very difficult through standard channels. If your score is low, check whether a few months of credit repair would qualify you for better terms — it often changes the math significantly.
How much should I budget for closing costs? Plan for 2%–5% of the purchase price on top of your down payment. On a $350,000 home, that’s $7,000–$17,500. Get a Loan Estimate from each lender you shop — by law, they must provide one within three business days of your application, and it itemizes all projected costs.
Are down payment assistance programs legitimate? Yes, most are run by state and local housing agencies, HUD-approved nonprofits, or employers. Avoid any third party that charges upfront fees to connect you with programs — legitimate programs are free to apply for. Start at your state’s housing finance agency or hud.gov.
Should I wait to save 20% or buy with less? In appreciating markets, waiting to reach 20% often costs more in missed equity than you’d save on PMI. In flat or declining markets, waiting is lower risk. Run the numbers for your specific market using real home price data, not general advice.
What happens if home prices fall after I buy? You could end up “underwater” — owing more than the home is worth — which is a real risk, particularly with low down payments in the first few years. This matters mainly if you need to sell. Long-term owners have historically recovered from price dips, but if there’s a reasonable chance you’ll need to move within 2–3 years, a larger down payment provides a cushion.
Do down payment requirements differ for investment properties? Yes, significantly. Investment properties typically require 15–25% down on conventional loans, and most government-backed programs (FHA, VA, USDA) are for primary residences only.
