Down Payment
Your down payment is the chunk of cash you pay upfront when buying a home — and despite what your parents told you, it doesn’t have to be 20%. The median first-time buyer puts down about 6%–8%. Repeat buyers average around 17%.
On a $350,000 home, 20% down is $70,000. That’s a lot of cash sitting in one asset. Meanwhile, an FHA loan at 3.5% down requires just $12,250. The tradeoff? You’ll pay mortgage insurance and borrow more, which means higher monthly payments.
Down Payment by Loan Type
| Loan Type | Minimum Down | Amount on $350K Home | Mortgage Insurance? |
|---|---|---|---|
| Conventional | 3% (first-time) / 5% | $10,500 / $17,500 | PMI until 20% equity |
| FHA | 3.5% | $12,250 | MIP for life of loan |
| VA | 0% | $0 | No monthly MI |
| USDA | 0% | $0 | Guarantee fee (lower than FHA) |
| Jumbo | 10%–20% | $35,000–$70,000 | Varies by lender |
Where Down Payment Money Can Come From
Lenders care about the source. You can’t borrow your down payment on a credit card and pretend it’s savings. Acceptable sources include:
- Savings and checking accounts — must show 60 days of statements proving the money’s been there
- Gift funds — from family members, with a signed gift letter confirming it’s not a loan. FHA allows 100% of the down payment as a gift
- Down payment assistance programs — grants and forgivable loans from state/local housing agencies
- 401(k) or IRA withdrawals — possible but usually a bad idea due to taxes and penalties. First-time buyers can pull $10,000 from an IRA penalty-free
- Sale of another property — proceeds from selling your current home
What lenders won’t accept: borrowed money from friends, cash advances, unsourced deposits, or cryptocurrency (unless converted to USD with a paper trail at least 60 days old).
The 20% Down Myth
Putting 20% down avoids mortgage insurance. That’s its only real advantage. On a $350,000 home at 7% interest, PMI at 0.5% adds about $146/month. That’s real money — but it’s not $70,000 worth of real money.
If you can invest the difference between a 5% and 20% down payment ($52,500) and earn 8% annually in an index fund, that money grows to roughly $113,000 in 10 years. Your PMI over those 10 years costs about $17,500 total (and probably drops off in 5–7 years). The math often favors a smaller down payment.
Down payment requirements vary widely by loan type — see our FHA vs. Conventional comparison for specific minimums.
Real-World Example
A first-time buyer has $45,000 saved and is looking at a $350,000 home. A 20% down payment would be $70,000 — more than they have. With an FHA loan at 3.5% down, they need $12,250 plus closing costs. With a conventional loan at 5% down, they need $17,500 plus closing costs. They choose the 5% conventional option because PMI will drop off once they hit 20% equity, while FHA mortgage insurance lasts the entire loan. Their total cash needed: $17,500 down plus roughly $10,500 in closing costs equals $28,000, leaving a healthy $17,000 emergency reserve.
Run the Numbers
Use our affordability calculator to see how down payment applies to your specific situation. Plug in your numbers and compare scenarios before making any financial commitments.
Related Terms
Understanding down payment connects to several other concepts: PMI, Closing Costs, FHA Loan, and Conventional Loan. Each of these terms interacts with down payment in ways that affect your buying power, monthly costs, or investment returns.
Frequently Asked Questions
Should I put down as much as possible?
Not necessarily. You need emergency reserves after closing — at least 3–6 months of housing payments. Draining your savings for a bigger down payment and then hitting an unexpected $5,000 repair puts you in a dangerous spot. Find the balance between a comfortable monthly payment and keeping cash on hand. Run scenarios through our affordability calculator to see how different down payment amounts affect your monthly budget, and check the homebuying guide for the full financial prep checklist.
Is a 20% down payment always required?
No. Many buyers put down far less. FHA loans accept 3.5% with a 580+ score. Conventional loans go as low as 3% for qualified first-time buyers. VA and USDA loans require 0% down for eligible borrowers. Putting down less than 20% means paying mortgage insurance, but it gets you into a home years sooner than waiting to save 20%.
Can I use gift money for my down payment?
Yes, most loan programs accept gift funds from family members. FHA, VA, and conventional loans all allow gifts, though conventional loans may require the borrower to contribute a minimum amount from their own funds if the down payment is below 20%. Gift donors must provide a signed gift letter confirming no repayment is expected.