Mortgage & Home Loans

What is Down Payment?

A down payment is the cash you pay upfront at closing. The rest of the purchase price is covered by your mortgage. The size of your down payment determines your loan-to-value (LTV) ratio—a key factor lenders use to assess risk. Put down 20% or more and you can avoid private mortgage insurance (PMI).

Federal programs offer lower minimums. FHA loans allow as little as 3.5% down with a credit score of 580+. VA and USDA loans require 0% down for eligible borrowers.

A smaller down payment gets you in the door faster, but it means a larger loan balance and higher monthly payments. Over 30 years, that difference adds up to tens of thousands in extra interest.

Quick Facts

Conventional Preferred20% of purchase price

FHA Minimum Down3.5% (with credit score 580+)

VA & USDA Minimum0% down payment required

PMI Trigger LevelRequired for down payments under 20%

PRACTICAL EXAMPLE

On a $350,000 home, a conventional 20% down payment means bringing $70,000 to closing. Choose an FHA loan with 3.5% down and you only need $12,250 upfront—but you'll borrow $337,750 and pay monthly mortgage insurance on top.

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RELATED TERMS

Learn More Key Concepts

MortgageA loan secured by real estate that you pay back in regular installments over a set term.

PrincipalThe original amount of money borrowed on a mortgage loan, or the outstanding balance remaining unpaid.

PMIInsurance required on conventional loans when the down payment is less than 20%, protecting the lender against borrower default.

LTV RatioA lending risk assessment ratio calculated by dividing the outstanding loan balance by the property's appraised value.

Closing CostsThe fees and expenses paid at the end of a real estate transaction to finalize the mortgage and transfer property ownership.

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