What Is a Down Payment?

Definition

The down payment is the portion of the purchase price you pay in cash. Everything else is financed. It is the single largest lever on your loan size and monthly payment.

Typical minimums

Minimums vary by loan program and change over time.

• Conventional loans: as low as 3% for qualified buyers
• FHA loans: 3.5% with an eligible credit score
• VA and USDA loans: 0% for eligible borrowers
• 20% avoids private mortgage insurance on conventional loans

Bigger is not automatically better

A larger down payment lowers the loan, the monthly payment, and the total interest — but it converts liquid savings into illiquid equity. If putting 20% down leaves you with no emergency fund, a smaller down payment plus PMI is often the safer position.

Keep reading

• What Is PMI?

  Private mortgage insurance: who pays it, how much it costs, and how to remove it.

• How Much Money Do I Need to Buy a Home?

  Cash to close, reserves, and the costs that arrive right after closing.