How Much Down Payment Do You Really Need?
Most buyers don't need 20%. Putting less down usually means paying mortgage insurance, but it can get you into a home years sooner. Here is what the minimums look like on a $350,000 home:
| Loan type | Minimum down | On a $350,000 home | Who qualifies |
|---|
| VA | 0% | $0 | Eligible veterans, service members and some surviving spouses |
| USDA | 0% | $0 | Eligible rural and suburban areas, with income limits |
| Conventional | 3% | $10,500 | Qualifying buyers, often first-time or income-based programs |
| FHA | 3.5% | $12,250 | 580+ credit score |
| Conventional (no mortgage insurance) | 20% | $70,000 | Any qualified buyer |
Minimums depend on the lender, credit, property and program and are available only where each lender's guidelines allow. Closing costs are separate from the down payment.
8 Ways to Come Up With Your Down Payment
- Choose a low or no down payment loan. VA and USDA allow 0% down, and conventional and FHA start at 3% to 3.5%. Picking the right program can cut the amount you need by tens of thousands.
- Use down payment assistance. Grants and forgivable or repayable second loans can cover 3.5% to 5% of the price, and many don't require you to be a first-time buyer. See down payment assistance programs.
- Get a gift from family. FHA, VA, USDA and conventional loans all allow gift funds, and on a one-unit primary home a gift can cover the whole down payment. You'll need a signed gift letter and a paper trail showing the money moving from the giver's account to yours.
- Ask the seller to pay your closing costs. A seller can't pay your down payment, but seller credits can cover closing costs, so more of your savings can go toward the down payment.
- Tap retirement savings carefully. A 401(k) loan is repaid to yourself through payroll. First-time buyers can take up to $10,000 (a lifetime limit) from an IRA without the 10% early withdrawal penalty, though income tax may still apply. Talk with a tax professional first.
- Check your employer. Some employers, hospitals, universities and unions offer homebuyer grants or forgivable loans as a benefit.
- Use equity from your current home. Already own? A Buy Before You Sell program can unlock your equity for the next down payment, so you can make an offer without a sale contingency.
- Automate a savings plan. Set a target from the table above, move a fixed amount into a high-yield savings account each payday, and put tax refunds and bonuses toward the goal.
Down Payment Strategies Compared
| Strategy | Pay it back? | Best for | Watch out for |
|---|
| Down payment assistance | Grant: no. Second loan: sometimes | Buyers within income limits | Income and price caps; some need a buyer course |
| Family gift | No | Buyers with family support | Gift letter and a clear paper trail |
| Seller credit | No | Freeing up cash for the down payment | Covers closing costs only, within loan limits |
| 401(k) loan | Yes, to yourself | Buyers with retirement savings | Owed back if you leave your job |
| IRA withdrawal | No | First-time buyers | $10,000 lifetime penalty-free limit; taxes may apply |
| Home equity (Buy Before You Sell) | Yes, when your home sells | Current homeowners moving up | Program fees and eligibility |
What Lenders Need to See
- Seasoned funds. Money in your accounts for about 60 days is the easiest to document.
- Large deposits explained. Any deposit that isn't from your paycheck will need a source, such as a gift letter or a sale receipt.
- No cash. Cash kept at home is hard to document. Deposit it early so it can season.
- Reserves. Some loans want a cushion left over after closing, so don't plan to empty every account.
Down Payment Questions
What is the minimum down payment for a house?
VA and USDA loans allow 0% down for eligible buyers. Conventional loans start at 3% for qualifying buyers, and FHA requires 3.5% with a 580 or higher credit score.
Do I need 20% down to buy a house?
No. 20% down on a conventional loan avoids mortgage insurance, but most loans allow much less. Many buyers put down 3% to 5%.
Can a gift cover my entire down payment?
Often, yes. FHA, VA and USDA allow gift funds for the down payment, and conventional loans allow a gift to cover the full down payment on a one-unit primary home. You'll need a gift letter and proof of the transfer.
Can the seller pay my down payment?
No. A seller can pay some of your closing costs, within limits set by your loan type, but the down payment has to come from you, a gift or an approved assistance program.
Can I use my 401(k) for a down payment?
Yes. Most buyers take a 401(k) loan, which they repay to their own account through payroll. Withdrawals may be taxed and penalized, so check with your plan administrator and a tax professional first.
Find out how much you actually need. See what you can afford, check which programs fit, and compare 30+ lenders with one application and one credit pull.
Mortgage products are originated by PBT Bancorp, NMLS #257781. Dan Frio | NMLS #246527 | PBT Bancorp | NMLS #257781. Not a commitment to lend. Programs are available only where each lender's guidelines allow, and all loans are subject to credit approval and underwriting. This page is general information, not tax or financial advice.
