Your down payment is the cash you bring to closing toward the purchase price of the home — the part you pay outright instead of borrowing. It's typically expressed as a percentage of the purchase price.
Down payment minimums vary widely by loan program: some conventional first-time-buyer programs go as low as 3%, FHA commonly starts at 3.5%, most other conventional buyers put down 5% or more, jumbo and second-home purchases usually require more, and VA and USDA can allow zero down for eligible borrowers.
How it works
On a $350,000 home, a 5% down payment is $17,500 and a 10% down payment is $35,000 — the loan amount shrinks dollar for dollar as the down payment grows. A larger down payment reduces your loan amount, which reduces your monthly principal-and-interest payment and, on conventional loans, can eliminate PMI once you reach roughly 20%.
Down payment funds can come from savings, an eligible gift from family, a down-payment assistance program, or proceeds from selling another property. Lenders will ask you to document the source — a sudden, unexplained deposit into your bank account right before closing is one of the most common things underwriters flag and ask about.
Don't treat the down payment as the only number that matters — closing costs are a separate, additional cash requirement on top of the down payment, and reserves (extra cash left over after closing) matter to both your comfort and, often, your loan approval.
When it matters to you
The down payment size matters for your rate, your PMI status, and your monthly payment all at once — it's one of the highest-leverage numbers in the entire transaction.
It matters just as much for your post-closing cash position: draining every dollar of savings to maximize the down payment can leave you without a cushion for the inevitable first-year surprises of homeownership.
Common mistakes
- Depositing a large, undocumented sum into a bank account right before applying, which can trigger extra underwriting questions and delay closing.
- Assuming 20% down is required when several programs allow meaningfully less for qualified buyers.
- Draining every available dollar into the down payment and having nothing left for moving costs, immediate repairs, or an emergency fund.
- Not asking about down-payment assistance programs that might apply in your area before assuming you need to save the entire amount alone.
FAQs
Do I need 20% down to buy a home?
No. Many conventional programs allow down payments well below 20%, and government-backed programs like FHA, VA, and USDA can require even less — sometimes zero. PMI typically applies below 20% down on conventional loans.
Can I use gift funds for my down payment?
Often yes, depending on the loan program. Lenders require documentation — typically a gift letter and proof the funds were actually transferred — to confirm the money isn't a hidden loan.
How much should I keep in reserves after my down payment?
A common guideline is 3-6 months of housing expenses left in savings after closing, though the exact amount that makes sense depends on your job stability and other financial obligations.