Minimum Down Payment for a House: What First-Time Buyers Actually Need in 2026
The published minimum is 3 percent. What you actually bring to closing is decided by the appraisal, the funding fee and the seller credit cap.
Short answer: the minimum down payment for a first-time buyer is 3 percent on a conventional loan, 3.5 percent on FHA with a credit score of 580 or higher, and zero on VA and USDA if you qualify. Those are the published floors and they are real. What almost nobody tells you is that every one of them is a percentage of the lesser of your purchase price or the appraised value, not of what you agreed to pay. Go over appraisal and the gap is cash on top of the minimum. The percentage is the part everyone quotes; the appraisal is the part that decides the number.
By Ken Byrne, NMLS #187129 · ALCOVA Mortgage LLC, NMLS #40508 · Updated September 2026
A first-time buyer usually arrives at this question with one number in mind and finds four, none of which is 20 percent. That part of the answer is easy and widely published. The harder part is that the down payment is not a standalone decision: it sets your mortgage insurance, whether that insurance ever ends, how much of your closing costs a seller is allowed to pay, and on a VA loan the size of the funding fee. Move the down payment and four other numbers move with it. This guide gives you the minimums, the rule they are actually calculated on, and what each extra dollar of down payment buys. If you want it run against a real price, Ken Byrne at JB Financing will do it the same day.
The minimum down payment by loan type in 2026
Four programs, four floors. Everything else is a variation on one of these.
| Loan type | Minimum down | Who it is for | On a $400,000 purchase |
|---|---|---|---|
| VA | 0 percent | Eligible service members, veterans and surviving spouses | $0 |
| USDA Guaranteed | 0 percent | Eligible rural areas, income at or under 115 percent of area median | $0 |
| Conventional 97 and HomeReady | 3 percent | Conventional 97 needs a first-time buyer; HomeReady needs income at or under 80 percent of area median | $12,000 |
| FHA, score 580 and above | 3.5 percent | Widest credit tolerance of the four | $14,000 |
| FHA, score 500 to 579 | 10 percent | Below 580 the cash requirement triples | $40,000 |
| Conventional, no mortgage insurance | 20 percent | Buyers who want to avoid mortgage insurance entirely | $80,000 |
VA and USDA zero down are from the Department of Veterans Affairs and USDA Rural Development. FHA tiers are from Mortgagee Letter 10-29 and Handbook 4000.1. Conventional 3 percent options are Fannie Mae 97 percent loan to value and HomeReady, and Freddie Mac Home Possible.
20 percent is not a requirement anywhere. It is the point at which private mortgage insurance stops being charged on a conventional loan. That is a real benefit and a real reason to consider it, but it has never been a minimum, and waiting to reach it is a decision with its own cost.
The number every minimum is actually taken on
This is the part that catches first-time buyers, and it catches them at the worst possible moment, which is after the appraisal comes back and two weeks before closing. Every program calculates its minimum on the lesser of the purchase price or the appraised value. Not on the price. On the lower of the two.
| Program | What the minimum is calculated on | Source |
|---|---|---|
| FHA | The adjusted value, defined as the lesser of purchase price less inducements, or the property value | Handbook 4000.1 glossary |
| Conventional | The property value, defined as the lower of the sales price or the current appraised value | Fannie Mae Selling Guide B2-1.2-01 |
| VA | No down payment required "as long as the sales price is not higher than the home’s appraised value" | Department of Veterans Affairs |
| Seller credits | The lower of the sales price or appraised value | Fannie Mae Selling Guide B3-4.1-02 |
Here is what that does to a real file. You are a first-time buyer, you offer $420,000 on a house listed at $400,000 because there are four offers, and you plan to use a 3 percent conventional loan. You have budgeted $12,600.
| If it appraises at $420,000 | If it appraises at $400,000 | |
|---|---|---|
| Value the loan is sized on | $420,000 | $400,000 |
| Maximum loan at 97 percent | $407,400 | $388,000 |
| Your cash down | $12,600 | $32,000 |
| What changed | Nothing | The appraisal, by $20,000 |
The appraisal gap is never financeable. There is no program that lends on a value the appraiser did not support. If you agree to pay more than the appraised value, the difference comes from you, in cash, in addition to the minimum. This is why an appraisal gap clause in a competitive offer is a cash commitment and should be sized against your savings rather than your enthusiasm.
“Before you write an offer over list, let me show you what the cash looks like if the appraisal comes in under. It takes ten minutes and it is the number that decides whether you can actually close.”
Arslan Jamil, Broker Associate
Loans originated by Ken Byrne, NMLS ID# 187129 · ALCOVA Mortgage LLC, NMLS ID# 40508. Equal Housing Lender.
There are two different doors at 3 percent down
Most articles say conventional loans go to 3 percent down and leave it there. There are actually two separate products at that level with almost opposite eligibility rules, and which one you use changes your mortgage insurance and your pricing.
| Conventional 97 standard | HomeReady and Home Possible | |
|---|---|---|
| Minimum down | 3 percent | 3 percent |
| First-time buyer required? | Yes, at least one borrower | No |
| Income limit | None | At or under 80 percent of area median income |
| Occupancy | One-unit principal residence | Principal residence |
| Loan type | Fixed rate, maximum 30 year term | Fixed rate |
| Extra benefit | None | Reduced mortgage insurance coverage and pricing |
Fannie Mae 97 percent loan to value options and HomeReady product pages, and Freddie Mac Home Possible. Home Possible allows up to 105 percent total loan to value with an eligible Affordable Second. Homeownership education is required where all occupying borrowers are first-time buyers above 95 percent loan to value.
The split matters because the two rules point in opposite directions. If you are a first-time buyer earning above your area median, the standard 97 percent option is the door that is open to you and the income-based ones are not. If you are a repeat buyer earning under 80 percent of area median, it is the other way round. A surprising number of buyers qualify for one and are quoted the other. Our wider guide to how much down payment you need across the DMV covers the regional numbers in more detail.
There is money attached to one of these doors. Fannie Mae offers a $2,500 borrower credit for very low-income first-time buyers on HomeReady loans, usable toward the down payment or closing costs, for whole loans purchased on or after March 1, 2025 through February 28, 2027. On a 3 percent down purchase at $400,000 that credit is more than a fifth of the entire down payment.
Moving from 5 percent down to 10 percent down doubles the closing costs a seller is allowed to pay for you, from 3 percent to 6 percent.
Zero down is not zero cost
The two no-down-payment programs are genuinely no down payment. They are not free, and on a VA loan the fee is sized by exactly the thing you skipped.
| VA purchase loan | Down payment under 5 percent | Down payment 5 to under 10 percent | Down payment 10 percent or more |
|---|---|---|---|
| First use | 2.15 percent | 1.50 percent | 1.25 percent |
| Subsequent use | 3.30 percent | 1.50 percent | 1.25 percent |
Department of Veterans Affairs funding fee schedule, rates effective for loans closed on or after April 7, 2023. The fee is waived entirely for veterans receiving or entitled to VA compensation for a service-connected disability, for certain surviving spouses, and for active-duty Purple Heart recipients.
Read the subsequent-use row carefully, because it is the most expensive line in the table and the least discussed. A repeat VA borrower putting nothing down pays 3.30 percent. The same borrower putting 5 percent down pays 1.50 percent. On a $500,000 purchase that is a funding fee of $16,500 against $7,125, a difference of $9,375. The $25,000 down payment costs $25,000 and returns $9,375 of it immediately. Our breakdown of the VA funding fee works through the exemptions.
USDA has a ceiling instead of a fee cliff. The Guaranteed program requires no down payment and sets no credit score minimum of its own, but household income cannot exceed 115 percent of the area median and the property has to sit in an eligible rural area. It is 30 year fixed only. The map is narrower than most buyers expect near a metro and wider than they expect 40 minutes out.
Eligibility is by address rather than by county, and the boundaries do not follow anything intuitive. If you are open on location, checking the map before you set a search area is worth doing, because a zero down loan changes the affordability arithmetic more than a rate quote does. We keep a working list of the USDA eligible areas in Virginia.
What each extra dollar of down payment actually buys
The down payment is not just the amount you avoid borrowing. It sits at the center of four other rules, and three of them have hard thresholds rather than gradients.
It decides whether your mortgage insurance ever ends
On a conventional loan, private mortgage insurance must be canceled on request at 80 percent loan to value and terminated automatically at 78 percent, under the Homeowners Protection Act. On an FHA loan the annual premium runs for the full mortgage term at any loan to value above 90 percent. Put 10 percent down on FHA and it stops after 11 years. Put 9.9 percent down and it never stops. There is nothing in between.
Mortgagee Letter 2023-05 for the FHA annual premium duration, and 12 U.S.C. 4902 for conventional cancellation and termination.
It doubles what the seller is allowed to pay for you
Interested party contributions, which is the industry term for seller credits toward your closing costs, are capped by loan to value. Above 90 percent the cap is 3 percent of the value. Between 75.01 and 90 percent it is 6 percent. At or below 75 percent it is 9 percent.
| Down payment on a $500,000 purchase | Loan to value | Seller credit cap | Maximum credit |
|---|---|---|---|
| $15,000, 3 percent | 97 percent | 3 percent | $15,000 |
| $25,000, 5 percent | 95 percent | 3 percent | $15,000 |
| $50,000, 10 percent | 90 percent | 6 percent | $30,000 |
| $125,000, 25 percent | 75 percent | 9 percent | $45,000 |
Fannie Mae Selling Guide B3-4.1-02. Percentages are calculated on the lower of the sales price or the appraised value. Investment property is capped at 2 percent at all loan to value ratios.
That 5 percent to 10 percent step is the one to look at. An extra $25,000 of down payment unlocks an extra $15,000 of seller credit you were not previously allowed to accept. Whether the seller agrees to pay it is a negotiation, but until you cross 90 percent you cannot even ask.
It changes your pricing before your credit score does
Conventional loans are priced with loan level price adjustments, a published matrix that runs from 0.000 to 2.875 percent and is set by a grid of credit score against loan to value. Moving your down payment moves you across the grid. First-time buyers at or under area median income, and HomeReady borrowers, have these adjustments waived, which is frequently worth more than a better rate quote from another lender.
How much should you actually put down?
Arslan Jamil, Broker Associate
There is a right answer for your file and it is rarely the largest number you can manage. I will run 3, 5, 10 and 20 percent side by side with the mortgage insurance, the seller credit cap and the five-year cost, so you can see where the money stops working harder.
Loans originated by Ken Byrne, NMLS ID# 187129 · ALCOVA Mortgage LLC, NMLS ID# 40508. Equal Housing Lender.
What first-time buyers actually put down
The floors are 3 and 3.5 percent. The behavior is different, and it is worth knowing because it tells you what a normal file looks like rather than a minimum one.
| FHA, fiscal year 2025 | Figure |
|---|---|
| Share of purchase loans to first-time buyers | 83.03 percent |
| Average credit score | 679 |
| Average loan amount | $313,473 |
| Average loan to value | 94.74 percent |
| Implied average down payment | About 5.3 percent |
Federal Housing Administration annual report to Congress, fiscal year 2025.
The average FHA borrower is not at the 3.5 percent minimum. They are at about 5.3 percent, with a credit score well above the 580 threshold. The minimum is a floor for the cases that need it, not a description of the typical file, and quoting it back to yourself as a target can leave you closing with no reserves. Lenders look at what is left after closing as well as what you bring to it.
Where the down payment is allowed to come from
The money does not all have to be yours, and for a first-time buyer it frequently is not. What matters is that every dollar can be sourced and documented.
| Source | Generally allowed? | What underwriting will want |
|---|---|---|
| Your own seasoned savings | Yes | Two months of statements, no unexplained deposits |
| A gift from family | Yes | A signed gift letter and a trail from the donor account |
| Down payment assistance | Yes, program by program | Program approval and, usually, a second lien recorded at closing |
| A retirement account loan or withdrawal | Yes | Documentation of the terms, and the repayment counted as a debt if applicable |
| Proceeds from selling something | Yes | Proof of ownership and of the sale |
| An unsecured personal loan | No | Borrowed funds that are not secured by an asset are not eligible |
Assistance is not one thing. Some down payment assistance is a true grant that is never repaid, some is a forgivable second that burns off over a covenant period, and some is a fully amortizing second mortgage with a monthly payment attached. All three get called assistance. Only the first is free, and the difference is worth confirming before you plan around it.
Programs are state and local, so the right list depends entirely on where you are buying. Our breakdown of the Virginia down payment assistance programs covers the grants, the seconds and which can be combined.
One more thing, since it comes up constantly. If a conventional loan is where you are likely to land, the mortgage insurance is temporary by law and the exit is worth planning for from the start rather than discovering later. We cover the timing in our guide to when you can remove PMI.
The product pages are the place to go for the rest of the detail, because the underwriting differences between these loans are larger than the down payment differences and they are what decide which one you can actually use. Start with conventional loans if your credit is strong and your income is documented in the ordinary way.
If you are or have been in the military, run the VA comparison before anything else. A zero down loan with no monthly mortgage insurance at all is a different product from everything above, and the funding fee is the only thing you are trading for it. Details are on our VA loans page.
Frequently asked questions
What is the minimum down payment for a house for a first-time buyer?
Three percent on a conventional loan through Fannie Mae 97 percent, HomeReady or Freddie Mac Home Possible, and 3.5 percent on FHA with a credit score of 580 or higher. If you are eligible for a VA or USDA loan the minimum is zero. Those percentages are calculated on the lesser of the purchase price or the appraised value.
What is the minimum down payment on a house?
It depends on the loan rather than the house. Zero on VA and USDA for eligible buyers, 3 percent on conventional, 3.5 percent on FHA above a 580 credit score and 10 percent on FHA between 500 and 579. Twenty percent is not a minimum anywhere; it is the level at which conventional mortgage insurance is no longer charged.
What is the minimum down payment for a conventional loan?
Three percent for a one-unit primary residence. The standard 97 percent option requires at least one borrower to be a first-time buyer and has no income limit. HomeReady and Home Possible have no first-time buyer requirement but cap income at 80 percent of the area median.
How much down payment do you need for a 500k house?
At 3 percent conventional it is $15,000, at 3.5 percent FHA it is $17,500, at 5 percent it is $25,000 and at 20 percent it is $100,000. All of those assume the property appraises at or above $500,000. If it appraises lower, you add the entire difference in cash.
Does a first-time home buyer need a down payment?
Not always. VA and USDA loans require none if you meet their eligibility rules, and down payment assistance can cover most or all of the minimum on a conventional or FHA loan. What you always need is closing costs and some funds left over afterward, which is a separate number from the down payment.
Is it better to put 5 percent or 10 percent down?
Ten percent crosses two thresholds that 5 percent does not. It moves you to 90 percent loan to value, which doubles the seller credit cap from 3 percent to 6 percent, and on an FHA loan it is the point at which the annual mortgage insurance premium stops after 11 years instead of running for the full term. Below those thresholds the extra dollars mostly just reduce the balance.
Can the whole down payment be a gift?
On most first-time buyer programs, yes, provided the gift is documented with a signed letter from the donor and a paper trail showing the funds leaving the donor account and arriving in yours. Underwriting is less interested in whose money it was than in being able to prove it was not borrowed.
Do I have to pay mortgage insurance if I put less than 20 percent down?
On a conventional loan yes, until you reach 80 percent loan to value, at which point you can request cancellation, with automatic termination at 78 percent. On FHA there is an annual premium at every down payment level, and above 90 percent loan to value it lasts the full mortgage term. A VA loan has no monthly mortgage insurance at all.
Does a bigger down payment get me a better interest rate?
Usually yes on a conventional loan, because pricing adjustments are set on a grid of credit score against loan to value. The exception is that those adjustments are waived for first-time buyers at or under their area median income and for HomeReady borrowers, so for some buyers a small down payment carries no rate penalty at all.
How much money should I have left after the down payment?
There is no universal rule, but closing costs are a separate line from the down payment and most lenders want to see funds remaining afterward. Planning to arrive at closing with nothing left is the most common way a file that qualified on paper becomes uncomfortable in month one.
“Give me a price range and roughly what you have saved, and I will send back what each down payment level actually costs you, including the mortgage insurance and the seller credit you would be allowed to ask for.”
Arslan Jamil, Broker Associate
Loans originated by Ken Byrne, NMLS ID# 187129 · ALCOVA Mortgage LLC, NMLS ID# 40508. Equal Housing Lender.
This article is general information, not financial or legal advice and not a commitment to lend or an offer of credit. Loan limits, program rules, premium schedules and rates change, and individual eligibility depends on a full review of your credit, income, assets and the property. Every figure here is an illustration, not a quote, built from published sources and a weekly survey average rather than underwriting decisions. Insurance and mortgage insurance amounts are planning estimates. Confirm anything you plan to act on with a licensed mortgage professional. Program minimums, mortgage insurance rules, funding fees and contribution limits cited here are published by HUD, the Department of Veterans Affairs, USDA, Fannie Mae and Freddie Mac and change periodically. Income and area median limits are set locally and revised annually. Confirm current figures and your own eligibility before relying on them.
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