Lesson
What a down payment is
- Published:
- October 12, 2026
- Review status:
- Needs verification — carefully written, not yet checked by a qualified professional
Needs verification
- Current minimum down payment percentages for specific loan programs, which can change and depend on lender and borrower qualifications.
We left these specific numbers out until they're checked against current official sources.
AThe super simple explanation
A reduces how much you need to borrow for a mortgage.
Common down payments range from 3% to 20% of the home's price, depending on the loan type.
A bigger usually means a smaller loan, lower monthly payments, and possibly no need for mortgage insurance.
money often comes from savings, though some programs allow gifts or assistance.
BWhy does this even matter?
- The size of your down payment directly affects your monthly payment, total interest paid, and whether you'll pay for mortgage insurance.
- Saving for a down payment is often the biggest hurdle for first-time homebuyers.
- Understanding down payment options can open up paths to buying sooner than you might expect.
COkay, how does it work?
Based on the loan program and home price, determine how much you need to save.
DShow me an example
A 10% down payment
On a $250,000 home, Alicia puts down $25,000 and borrows $225,000.
Because it's less than 20%, she also pays for PMI until she builds enough equity.
Illustrative example with made-up people and numbers — not current rates or rules.
EWords you should know
- Down payment
- The part of a home's price you pay upfront; the rest is usually borrowed.
- Private mortgage insurance (PMI)
- Insurance often required on conventional loans with less than 20% down, protecting the lender if the borrower defaults.
- Gift letter
- A document confirming that down payment funds given by a family member or other source are a gift, not a loan.
- Down payment assistance
- Programs, often from states, cities, or nonprofits, that help qualifying buyers cover some or all of a down payment.
FCommon mistakes
- Assuming you need 20% down to buy any home.
- Draining all savings for a larger down payment and having nothing left for moving or repairs.
- Not researching down payment assistance programs that might be available locally.
- Forgetting that gift funds usually require documentation for the lender.
GThings to know
- FHA, VA, and USDA loans have different down payment rules than conventional loans, and VA and USDA loans may allow qualifying buyers to put no money down.
- Early withdrawals from certain retirement accounts for a first home purchase may have special tax rules — check IRS guidance before doing this.
- Down payment assistance programs vary by state and locality and often have income or first-time buyer requirements.
- A larger down payment reduces your loan amount and can help you qualify for a better interest rate.
HQuick recap
- A down payment is the upfront cash portion of a home purchase, with a mortgage covering the rest.
- Down payment requirements vary by loan type, from 0% for some government-backed loans to 20% or more.
- Putting down less than 20% on a conventional loan usually means paying for PMI.
- Down payment funds can come from savings, gifts, or assistance programs, each with specific documentation needs.
IQuestions people are too embarrassed to ask
JQuiz me
Totally optional. Nobody's grading you.
KWhat next?
- 1.Research down payment requirements for loan programs you might qualify for.
- 2.Check whether your state or city offers down payment assistance programs.
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