How much down payment do you need to buy a home?

What are the minimums by loan type?

Individual lenders can require more than the program minimum. Details are in FHA loans, conventional loans, VA loans and USDA loans.

What does each percentage cost?

The CFPB notes that low-down-payment options usually come at increased cost. Closing costs are separate. The CFPB says they typically range from 2% to 5% of the purchase price, not including the down payment. This example is not a quote. It uses a $400,000 home.

Loan amounts are before any financed fees. For FHA and VA, the upfront premium or funding fee is calculated on the loan after your down payment. A $400,000 FHA home with 3.5% down has a $386,000 base loan and an upfront premium of $6,755, which can be financed (1.75%, HUD). On a first-time VA loan with under 5% down the funding fee is 2.15%, and with 10% down it is 1.25%, calculated on the loan amount (VA). Add savings for moving, utilities, furnishing and repairs. The CFPB suggests an emergency cushion of roughly three to six months of expenses.

What happens if you put down less than 20%?

Fannie Mae’s mortgage insurance coverage table begins at a loan-to-value ratio of 80.01%. Below a 20% down payment, a conventional loan therefore generally carries private mortgage insurance. See private mortgage insurance. FHA loans carry their own premiums: 1.75% upfront plus an annual premium, which lasts for the loan term when the starting loan-to-value ratio is above 90%. VA loans do not have monthly mortgage insurance; the VA says the program does not require it.

The CFPB’s guidance on thresholds: you can often save money with at least 10% down, and the most with at least 20%. Lenders typically price loans in 5% increments, so being just short of a threshold usually earns no savings. Compare lender quotes at several down payment levels before deciding.

Where can down payment money come from?

• Savings. The most common source.
• Gifts. Fannie Mae allows gift funds for the down payment, closing costs or reserves. For a one-unit principal residence the whole amount can come from a gift, even above 80% loan-to-value. A signed gift letter is required, and donors must be relatives or people with a familial-like relationship. For FHA, acceptable donors include family members, an employer or labor union, a close friend with a documented interest, a charity, or a government homeownership program, and cash on hand is not an acceptable source of donor funds.
• Seller credits. On VA loans the seller can offer credits, but the VA limits seller’s concessions to 4% of the home’s reasonable value.
• Assistance programs. The CFPB says special programs exist for veterans and service members, rural residents and some first-time buyers, and a HUD-certified housing counselor can explain local programs.

A gift of equity, where a family seller credits part of the home’s value, is a separate arrangement; Fannie Mae notes it may not be used for financial reserves. See mortgage preapproval and closing costs explained.

Where states differ

The minimums above are national. States differ in the down payment assistance they offer, usually run by a state housing finance agency with its own income limits, and in closing costs that add to the cash you bring. See Texas and California first-time buyer programs, and closing costs in Texas and California.