First-Time Home Buyer Down Payment: How Much Is Needed?

First-time home buyer down payments start at 3%

Concerned about your first-time home buyer down payment? Rest assured, the minimum down payment for a house is typically lower than the traditional 20%.

Most buyers only need 3-3.5% for conventional or FHA loans, which is $13,500-$15,750 on a $450,000 home. Down payment assistance may reduce this further.

So if saving for the down payment is a challenge, ask your mortgage lender what help is available.

In this article (Skip to…) 

• Average down payment
• Required down payment
• Deciding on your down payment
• Down payment assistance
• First time buyer loans
• FAQ

Understanding first-time home buyer down payment requirements

Homeownership can be a complex process for first-time home buyers, especially when it comes to understanding down payments. Let’s break down the key concepts to help you make informed decisions about your home loan.

What is a down payment?

A down payment is the initial amount of money you pay upfront when purchasing a new home. It is usually calculated as a percentage of the home’s total purchase price, with the remaining cost financed through a mortgage loan.

Example: When purchasing a $450,000 home, a 10% down payment would amount to $45,000 paid upfront. The remaining $405,000 would be financed through a home loan.

A down payment not only affects the amount you need to borrow but can also influence your interest rate, monthly payments, and whether you’ll need to pay mortgage insurance.

Sometimes, a bank will lend you the entire amount you need to buy a home. This is known as 100% financing. But most mortgage loans require some contribution from you, the borrower.

What’s the average down payment on a house for first-time home buyers?

Many first-time home buyers believe they need 20% down. But that’s far from true. In fact, according to data from the National Association of Realtors, the average down payment for first-time home buyers is just 8% (versus 19% for repeat buyers). On a $450,000 home, that comes out to a $27,000 down payment.

You’re allowed to put down even less. If you have a credit score of 620, you might qualify for a mortgage with just 3% down — or $13,500 out of pocket for a $450,000 home.

Thanks to the low-down-payment mortgages available today, many first-time home buyers find the process a lot more affordable than they initially thought. Yet, keep in mind that if you don’t put 20% down, you’ll have the additional cost of private mortgage insurance (PMI). We discuss this in more detail below.

How much do first-time home buyers have to put down?

The minimum down payment for a house as a first-time buyer will depend on the type of mortgage loan, but most buyers will need at least 3% to 3.5% down. Some home buyers can put zero percent down using a VA loan or USDA loan. But only certain borrowers will qualify for these mortgage programs.

Imagine you want to buy a new home for $450,000. Here’s how much you might have to put down as a first-time home buyer, depending on your qualifications:

To qualify for one of those zero-down first-time home buyer loans, you have to meet special requirements.

• For a VA loan, you need to be an eligible U.S. Armed Forces veteran or active-duty service member
• For a USDA loan, you must meet local income limits and also purchase a house in a qualified “rural area” — which usually means a population of 20,000 or less

But the other two loan types, conventional and FHA, are a lot easier to come by. You’ll still need to meet minimum credit score requirements as well as employment and income guidelines, just like any other home loan. But there are no “special” requirements to get a low-down-payment FHA or conventional loan as a first-time home buyer.

How much should you put down on a house as a first-time buyer?

Determining how much you should put down on a house as a first-time buyer involves involves weighing various factors, including your financial situation, loan options, and long-term goals.

While the traditional 20% down payment is often cited, it’s not the only option, nor is it always the best choice for everyone.

The amount you should put down depends on:

• Your savings and income
• The home’s purchase price
• Your credit score
• Available loan programs
• Local real estate market conditions
• Your debt-to-income ratio

Take a look at one example:

*The example above assumes a 30-year fixed-rate mortgage with a 6% interest rate.

As shown in the table, a bigger down payment means a smaller loan, lower monthly payments, and no PMI with 20% down—potentially saving $100+ per month. However, a smaller down payment has its own less obvious benefits too.

Pros of a smaller down payment

If you want to get into a house sooner, making a smaller down payment with your current savings can be a smart choice. Here’s why it can be a good idea:

• Keeps your emergency fund intact
• Leaves cash for home improvements
• Lets you start building equity sooner
• Opens access to down payment assistance programs
• Avoids potential price increases

Pros of a larger down payment

While a larger down payment requires more money upfront, it can offer significant benefits:

• Lower loan amount and monthly payments
• Potentially lower interest ratesLess interest paid overall
• No private mortgage insurance with 20% down
• More appealing to sellers in competitive markets

Remember, your mortgage isn’t fixed forever. Even if you put down less as a first-time buyer, you can often refinance later to remove mortgage insurance and lower your monthly payments.

How to lower your down payment as a first-time buyer

The minimum down payment for a house as a first-time buyer can feel like a major hurdle. However, there are several methods to help lower your first-time homebuyer down payment, making homeownership more accessible.

First-time homebuyer down payment assistance programs

If you’re a first-time home buyer, you might not have to cover the first time home buyer down payment yourself. First-time buyers can apply for grants or low-interest second mortgages — called down payment assistance programs (DPAs) — to help with their upfront contribution.

Some down payment assistance loans may also help cover closing costs, further reducing your out-of-pocket expenses.

Types of down payment assistance include:

• Grants: Funds that don’t require repayment
• Forgivable loans: Second mortgage loans that may be forgiven over time
• Low-interest loans: Affordable second mortgage options to complement your first mortgage loan
• Deferred-payment loans: Loans with payments postponed until you sell or refinance

Each down payment assistance program has slightly different guidelines. But it’s common for these programs to prefer first-time home buyers, borrowers with low- to moderate-income, and buyers in targeted “development areas.”

Number of down payment assistance programs by state

There are more than 1,600 of these DPAs nationwide. Many of these programs are run by nonprofits or local governments. Qualified buyers can receive anywhere from $5,000 to close to $35,000 toward their first time home buyer down payment and/or closing cost assistance.

Source: Down Payment Resource and The Urban Institute

First-time home buyer low or no down payment mortgages

As a first-time home buyer, you can choose how much money you want to put down towards the home’s purchase price. The down payment can be as large as you wish, or as small — so long as you make the minimum investment required by your mortgage lender and loan program.

1. FHA loans: 3.5% down payment

FHA loans require just 3.5% down, making them popular with first-time buyers, especially those with lower credit scores.

• Min. down payment: 3.5% (credit score 580+), 10% for scores 500-579
• Requires mortgage insurance, increasing monthly payments
• Suitable for single-family homes, condos, and multi-units
• Mortgage insurance is for the life of the loan

2. VA loans: 0% down payment

VA loans, guaranteed by the Department of Veterans Affairs, offer excellent benefits for American service members, veterans, and surviving spouses.

• No down payment required
• No private mortgage insurance (PMI)
• Competitive interest rates
• More flexible credit score requirements
• Eligibility based on military service

3. USDA loans: 0% down payment 

USDA loans are for rural or suburban areas, offering 100% financing with low mortgage insurance.

• Min. down payment: 0%
• Available in USDA-defined rural areas
• Income limits typically up to 115% of area median
• Lower mortgage insurance than FHA loans

4. Conventional 97 loans: 3% down payment

Offered by Fannie Mae and Freddie Mac, the Conventional 97 is a conventional mortgage tailored for first-time home buyers.

• Minimum down payment of 3%
• At least one borrower must be a first-time home buyer
• Private mortgage insurance is required but can be canceled once 20% equity is reached
• Often have stricter credit score and debt-to-income ratio requirements than FHA loans

5. HomeReady and Home Possible mortgage: 3% down payment

The HomeReady and Home Possible mortgages are two other conventional loan programs with 3% down payment requirements. While HomeReady is backed by Fannie Mae and Home Possible by Freddie Mac, they are both designed for lower-income and multigenerational households. But all home buyers are welcome to apply.

These programs provide discounted rates, reduced mortgage insurance, and allow you to use household income (including boarders) to meet requirements. A homebuyer education course is typically required during the application process.

First-time home buyer down payment calculator

Determining the right first-time home buyer down payment can be tricky. Our calculator can help you understand how different down payment amounts affect your mortgage loan, monthly payments, and overall costs.

Click here to access our down payment calculator.

Use this tool to:

• Estimate monthly mortgage payments based on various down payment amounts
• See how mortgage insurance impacts your costs
• Compare different loan programs and their down payment requirements

Make informed decisions about your home purchase by exploring different scenarios with our user-friendly down payment calculator.

Other home buying costs to consider

A down payment isn’t the only out-of-pocket cost for first-time home buyers. You also need to pay for closing costs.

• Closing costs cover all the fees associated with setting up your loan — from the lender’s fees to the appraisal, credit report, title fees, and more
• Closing costs are typically around 2% to 5% of the loan amount. (Although, it’s rare for them to be as high as 5% unless the loan is quite small)
• This means you should budget for at least 3% to 4% of the loan amount in cash, on top of your down payment budget

Down payment and closing costs example

For example, say you’re buying a home with a sales price of $400,000 and plan to make a 5% down payment. You should include around 4% for closing costs in your estimate to make sure you’ve saved enough for your total out-of-pocket cost.

• Home price: $400,000
• 5% down payment: $20,000
• Loan amount: $380,000
• 4% for closing costs: $15,200
• Total savings needed: $35,200

It’s important to budget for closing costs when you’re planning to buy a home. Otherwise, your down payment savings could take a big hit when you realize you need to use them to pay for closing costs, too.

However, as we explore below, there are a variety of programs to assist first-time buyers with down payments, closing costs, and financing.

First-time home buyer down payment FAQ

Find a low first time home buyer down payment 

First-time home buyers have lots of options when it comes to making a down payment.

Research your home loan options thoroughly to minimize your out-of-pocket costs, as many require just 0% to 3% down. Then make sure you find a participating mortgage lender who offers the home loan program you need.

Don’t forget to look into down payment assistance options near you. Help is available for first-time home buyers who know where to look for it.