Understanding Down Payments
How down payment size influences loan program eligibility, mortgage insurance, monthly payment, and total interest.
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A larger down payment lowers your loan-to-value, which can reduce or eliminate mortgage insurance, improve pricing, and lower your monthly payment. Program minimums vary widely — from 0% for VA-eligible borrowers to conventional and jumbo options with different tiers.
Key takeaways
- A 20% down payment typically avoids private mortgage insurance on conventional loans.
- Smaller down payments preserve cash for reserves and closing costs.
- Gift funds, grants, and down-payment assistance may be available on certain programs.
How down payment interacts with LTV
Loan-to-value is the loan amount divided by the property value. Lower LTV generally means less risk to the lender and, often, better pricing.
Program minimums, at a glance
Minimums differ by program and property use.
- VA: potentially 0% for eligible borrowers
- USDA: potentially 0% in eligible rural areas
- FHA: as low as 3.5% with qualifying credit
- Conventional: as low as 3% on eligible profiles
- Jumbo and investor loans: typically higher
Important limitations
- Mortgage guidelines, eligibility, loan limits, rates, fees, and program availability may change and can vary by lender, investor, property, occupancy, state, and borrower profile.
- This article is educational and does not constitute a commitment to lend, a rate quote, or personalized financial advice.
Frequently asked questions
- Can I use gift funds?
- Many programs allow gift funds from eligible sources with proper documentation. Sourcing and paper-trail requirements apply.
- What is PMI?
- Private mortgage insurance is generally required on conventional loans with less than 20% down and is typically removable once sufficient equity is built.
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