How Much Deposit Do You Need for a House?

The 20% Down Payment Myth

If you have been putting off buying a home because you think you need 20% down, you are not alone. A survey by the National Association of Realtors found that the majority of prospective buyers overestimate how much they need for a down payment. The truth is that the 20% figure is a holdover from decades past, and today there are multiple loan programs that allow you to buy a home with far less money upfront.

The amount you need for a down payment depends on the type of mortgage you choose, your credit score, the property you are buying, and whether you are a first-time buyer or a repeat purchaser. Let me walk you through the actual minimums for each major loan type.

FHA Loans: 3.5% Down

FHA loans are backed by the Federal Housing Administration and are one of the most popular options for first-time home buyers. The minimum down payment is just 3.5% of the purchase price, provided you have a credit score of 580 or higher. If your score is between 500 and 579, you will need to put 10% down.

On a $350,000 home, a 3.5% down payment comes to $12,250. FHA loans also allow your entire down payment to come from gift funds from a family member, employer, or approved down payment assistance program. The trade-off is that FHA loans require both an upfront mortgage insurance premium (1.75% of the loan amount) and annual mortgage insurance for the life of the loan in most cases.

VA Loans: 0% Down

VA loans are available to eligible veterans, active-duty service members, and surviving spouses. They offer what is arguably the best deal in mortgage lending: zero down payment required. You can finance 100% of the home price with no monthly mortgage insurance.

VA loans do have a one-time funding fee that ranges from 1.25% to 3.3% of the loan amount depending on your service history and whether you have used the benefit before. This fee can be rolled into the loan. Veterans with service-connected disabilities are exempt from the funding fee entirely. There is no minimum credit score set by the VA, though most lenders require at least 580 to 620.

USDA Loans: 0% Down

USDA loans are backed by the U.S. Department of Agriculture and are designed for moderate-income buyers in eligible rural and suburban areas. Like VA loans, USDA loans require no down payment at all.

The catch is that both the property and the borrower must meet eligibility requirements. The home must be in a USDA-designated rural area (which includes many suburban communities outside of major cities), and your household income cannot exceed 115% of the area median income. USDA loans carry a 1% upfront guarantee fee and a 0.35% annual fee, both of which are significantly lower than FHA mortgage insurance.

Conventional Loans: 3% to 5% Down

Conventional loans are not backed by a government agency, and their minimum down payment depends on the specific program. For first-time buyers, several conventional programs allow as little as 3% down. For repeat buyers, the typical minimum is 5%.

If you put less than 20% down on a conventional loan, you will pay private mortgage insurance (PMI). Unlike FHA mortgage insurance, PMI on a conventional loan can be removed once you reach 20% equity in the home, either through payments or appreciation. This is a significant advantage over FHA for borrowers who plan to build equity relatively quickly.

Conventional loans also tend to offer the best rates for borrowers with strong credit scores (typically 720 and above). If you have excellent credit but limited savings, a 3% down conventional loan can be a better long-term deal than FHA because of the removable mortgage insurance.

Jumbo Loans: 10% to 20% Down

Jumbo loans exceed the conforming loan limits set by the Federal Housing Finance Agency. If you need to borrow more than the conforming limit for your area, you will typically need a down payment of 10% to 20%.

Jumbo loans have stricter qualification requirements across the board, including higher credit score minimums (often 700+), lower debt-to-income ratios, and larger cash reserves after closing. Some jumbo programs allow as little as 10% down with strong compensating factors, but 15% to 20% is more common.

Down Payment Comparison at a Glance

Beyond the Down Payment: Other Upfront Costs

Your down payment is not the only cash you will need at closing. You should also budget for:

• Closing costs: Typically 2% to 5% of the loan amount, covering lender fees, title insurance, appraisal, and prepaid items like taxes and insurance.
• Earnest money deposit: Usually 1% to 3% of the purchase price, submitted with your offer. This is applied toward your down payment at closing.
• Home inspection: Typically $400 to $700, paid out of pocket before closing.
• Cash reserves: Some loan programs require you to have several months of mortgage payments in the bank after closing.

Tips to Build Your Down Payment Faster

If you are working toward a down payment goal, these strategies can help you get there sooner:

• Set up automatic transfers to a dedicated savings account
• Research down payment assistance programs in Massachusetts
• Ask family members about gift funds (most loan programs allow them)
• Consider a lower down payment option and invest the difference
• Look into employer-sponsored homeownership programs

Finding the Right Balance

A larger down payment lowers your monthly payment and may get you a better interest rate. But putting down the absolute minimum and keeping cash in reserve is not necessarily a bad strategy either. The right answer depends on your complete financial picture, your risk tolerance, and your long-term goals.

One of the most valuable conversations you can have is with a loan officer who can run the numbers for multiple scenarios. I work with buyers every day who are surprised to learn how affordable homeownership can be with the right program. Whether you have 3% saved or 20%, there is likely a path to owning your home sooner than you think.