Down Payment Guide for First-Time Buyers: How Much You Really Need
Minimums run from zero on VA and USDA loans to 3% on HomeReady and 3.5% on FHA, and the cash you actually bring usually sits above that floor.
By Priya Natarajan-Wells · Oct 06, 2026 · 9 min read
The down payment you need is a percentage of the purchase price, so the dollar amount depends entirely on what homes cost in your metro. The program floors are fixed: 3.5% on most FHA loans for borrowers with a credit score of 580 or higher (U.S. Department of Housing and Urban Development, undated; Experian, April 2025), 3% on Fannie Mae's HomeReady (The Mortgage Reports, July 2026), and no down payment at all on VA loans with full entitlement (Lower.com, May 2026) or USDA loans in eligible rural areas (NerdWallet, September 2026).
What buyers actually put down is higher than the floor. The median first-time buyer put 9% down in 2024, the highest since 1997 (National Association of Realtors, November 2024). This guide works the math on two illustrative prices — $250,000 and $500,000 — so you can scale it to your own market. Confirm your own numbers with a licensed loan officer before you commit cash.
Cost Breakdown
Down payment is a percentage, not a flat fee, so the only honest way to show dollars is to pick prices and scale. The ranges below apply program percentages to a $250,000 purchase price (lower-cost metro) and a $500,000 purchase price (higher-cost metro). Your own number is your local price times the percentage.
FHA minimum down payment — $8,750 to $17,500. HUD requires a minimum cash investment of at least 3.5% of the lesser of the appraised value or the sales price (U.S. Department of Housing and Urban Development, undated). That 3.5% applies at a credit score of 580 or higher (Experian, April 2025). On a $250,000 price with 3.5% down, you bring $8,750 and finance $241,250 on a 30-year fixed; at $500,000 you bring $17,500 and finance $482,500. FHA loans carry their own mortgage insurance premium, charged upfront and annually — ask your lender for the current amounts, which the program sets, not the lender.
FHA with a score of 500 to 579 — $25,000 to $50,000. The minimum rises to 10% in that credit band (Experian, April 2025). The same $250,000 purchase needs $25,000 down instead of $8,750, which is the single largest cost swing credit repair can produce before you apply.
Conventional HomeReady minimum — $7,500 to $15,000. HomeReady is a 3% down loan usable for a single-family home, a condo, or a property with up to four units (The Mortgage Reports, July 2026). It requires private mortgage insurance, as most conventional loans under 20% down do, though Fannie Mae allows the PMI to be discounted against a standard 3% down conventional loan (Fairway Independent Mortgage Corporation, March 2026).
VA and USDA — $0. VA loans allow 100% financing with full entitlement and a supportive appraisal (Lower.com, May 2026). USDA is a zero-down mortgage for buyers in eligible towns and rural areas under the Rural Development Guaranteed Housing Loan Program (NerdWallet, September 2026). Neither charges monthly PMI; VA charges a one-time funding fee for most borrowers and USDA charges a guarantee fee, both set by the program.
The 20% PMI threshold — $50,000 to $100,000. PMI applies when you put less than 20% down on a conventional loan and protects the lender, not you (Freddie Mac, July 2022). Reaching 20% is a choice, not a requirement; the median first-time buyer put 9% down in 2024 (National Association of Realtors, November 2024), or $22,500 to $45,000 on these two prices.
Two terms you will see side by side on your Loan Estimate: the interest rate is the cost of borrowing the principal, while the APR folds lender charges into a single annualized figure. They are not interchangeable, and a lower rate with higher fees can carry the higher APR.
Itemized Costs by Category
All dollar ranges apply the cited percentage to a $250,000 price (low) and a $500,000 price (high), 30-year fixed, purchase, first-time buyer. Substitute your own metro's price.
| Cash item | $250,000 to $500,000 price | Who sets it |
|---|---|---|
| FHA minimum down payment, credit score 580+ | $8,750 to $17,500 (3.5%) | Program-set by HUD; not negotiable with the lender |
| FHA minimum down payment, credit score 500 to 579 | $25,000 to $50,000 (10%) | Program-set by HUD; not negotiable |
| HomeReady conventional minimum | $7,500 to $15,000 (3%) | Program-set by Fannie Mae; lender may require more by overlay |
| VA with full entitlement, supportive appraisal | $0 to $0 | Program-set; no monthly mortgage insurance, one-time funding fee applies |
| USDA in an eligible area | $0 to $0 | Program-set; no monthly PMI, guarantee fee applies |
| Typical first-time buyer down payment (9% median, 2024) | $22,500 to $45,000 | Borrower's choice; negotiable against your cash reserves |
| Average first-time buyer down payment (7%) | $17,500 to $35,000 | Borrower's choice |
| 20% down to avoid conventional PMI | $50,000 to $100,000 | Borrower's choice; threshold is lender-set |
| Repeat-buyer median for comparison (23%, 2024) | $57,500 to $115,000 | Borrower's choice |
Sources: U.S. Department of Housing and Urban Development (undated); Experian (April 2025); The Mortgage Reports (July 2026); Lower.com (May 2026); NerdWallet (September 2026); National Association of Realtors (November 2024); Fairway Independent Mortgage Corporation (March 2026).
How to Complete the Process
- Pull your credit score (1 day). Check it against the thresholds that change your cash: 580 or higher for FHA's 3.5% minimum, 500 to 579 for the 10% minimum (Experian, April 2025). If you sit just under 580, pricing the two outcomes first is worth the delay.
- Inventory and document your cash sources (1 to 2 weeks). Lenders want two months of statements for every account. First-time buyers drew on savings (69%), loans or gifts from friends and family (25%), financial assets (21%), and inheritances (7%) in 2024 (National Association of Realtors, November 2024). Gifted funds need a signed gift letter naming the donor, the amount, and that no repayment is expected.
- Check whether a zero-down program fits before you budget (3 to 10 days). Request your VA Certificate of Eligibility if you have served, since full entitlement with a supportive appraisal allows 100% financing (Lower.com, May 2026). Check the property address against USDA's eligible rural area maps (NerdWallet, September 2026). Either result removes the down payment line from your budget entirely.
- Ask about down payment assistance (2 to 4 weeks). Affordable Housing Program set-aside funds can be used to satisfy the FHA 3.5% minimum cash investment (U.S. Department of Housing and Urban Development, undated). Eligibility, income caps, and funding cycles differ by state and by participating lender, so start this before you write an offer.
- Get a written preapproval from two or three lenders (2 to 5 days). Compare Loan Estimates side by side on rate, APR, and whether the quote assumes 3%, 3.5%, or more down. Ask each lender for the PMI figure on a conventional quote and the MIP figure on an FHA quote in dollars per month.
- Write the offer and open escrow (1 to 3 days after acceptance). Your earnest money deposit is credited toward the down payment at closing; the amount and deadline are set by local custom and negotiated in the contract, so have your agent state it in writing.
- Wait on the appraisal and recheck the math (1 to 3 weeks). FHA's minimum is 3.5% of the lesser of the appraised value or sales price (U.S. Department of Housing and Urban Development, undated), so a low appraisal changes the loan amount and often the cash you bring. Do not assume a closing date holds until the appraisal and underwriting conditions clear.
- Confirm the final cash figure and wire it (1 to 3 days before closing). Your Closing Disclosure gives the exact cash to close. Call the escrow or title office at a number you looked up yourself to verify wire instructions before sending.
- Set a PMI cancellation reminder (after closing). On a conventional loan with less than 20% down, you can request cancellation once the balance reaches 80% of original value if you are current on payments (Bankrate, December 2020), and PMI terminates automatically at the scheduled 78% point (Freddie Mac, July 2022).
Frequently asked questions
Do I really need 20% down as a first-time buyer?
No. The median first-time buyer put 9% down in 2024 — $22,500 on a $250,000 price — and that was the highest first-time figure since 1997 (National Association of Realtors, November 2024). The 20% figure matters only because it is the point at which conventional loans stop requiring PMI (Freddie Mac, July 2022).
How does my credit score change the FHA down payment?
At 580 or higher you put 3.5% down; at 500 to 579 you put 10% (Experian, April 2025). On a $300,000 purchase that is $10,500 versus $30,000 — a $19,500 difference in cash for the same house and the same 30-year term.
Can I use gift money or assistance funds for the down payment?
Yes, within program rules. A quarter of first-time buyers (25%) used a gift or loan from a relative or friend in 2024 (Virginia REALTORS®, December 2024), and Affordable Housing Program set-aside funds can satisfy FHA's 3.5% minimum cash investment (U.S. Department of Housing and Urban Development, undated). Your lender will require a gift letter and sourcing documentation.
Which low-down-payment loan carries mortgage insurance?
HomeReady at 3% down requires PMI, as most conventional loans under 20% down do, though Fannie Mae permits a discounted PMI rate versus a standard 3% down conventional loan (Fairway Independent Mortgage Corporation, March 2026). FHA charges an upfront and annual mortgage insurance premium regardless of down payment size. VA with full entitlement (Lower.com, May 2026) and USDA (NerdWallet, September 2026) charge no monthly mortgage insurance but do carry a funding fee and a guarantee fee respectively.
Can HomeReady be used for a condo or a two-to-four-unit property?
Yes — HomeReady's 3% down applies to a single-family home, a condo, or a property with up to four units (The Mortgage Reports, July 2026). On a $400,000 duplex that is $12,000 down and a $388,000 loan. Condo and multifamily approvals add project review and, for condos, HOA budget and reserve checks that vary by association and can add weeks.
Sources
- U.S. Department of Housing and Urban Development (HUD) — HUD 4155.1 Chapter 5, Section B
- Experian — FHA Loan Down Payment Requirements (2025-04)
- Fairway Independent Mortgage Corporation — FHA Loan Down Payment: Guide to Low Down Payment Homebuying (2026-03)
- The Mortgage Reports — 3% Down Payment Mortgages for First-Time Home Buyers (2026-07)
- Fairway Independent Mortgage Corporation — Fannie Mae HomeReady® Loan: Your Ticket to Homeownership (2026-03)
- Lower.com — Do You Need a Down Payment for a VA Loan? (2026-05)
- NerdWallet — What Is a USDA Loan? Am I Eligible for One? (2026-09)
- National Association of Realtors (NAR) — First-Time Home Buyers Shrink to Historic Low of 24% as Buyer Age Hits Record High (2024-11)
- Virginia REALTORS® — Key Takeaways from NAR's 2024 Profile of Home Buyers and Sellers (2024-12)
- Freddie Mac (My Home by Freddie Mac) — Breaking down PMI (2022-07)
- Bankrate — How To Get Rid Of Private Mortgage Insurance (PMI) (2020-12)
Written by
Priya Natarajan-Wells
Priya writes about first-time buyers and the emotional math of mortgages. She likes tracing how a single rate change ripples through an ordinary family's plans. Her pieces tend to start with a kitchen table, not a spreadsheet.
