How Much Is the Minimum Down Payment on a House?

You don’t need 20% down to buy a house.

Many buyers qualify with 3% to 5% down, depending on the loan program and property type.

This guide explains the minimum down payment and how much cash you actually need to buy a house.

What is a down payment on a house?

A down payment is the portion of the home’s purchase price that you pay upfront in cash when buying a property.

Your mortgage loan finances the remaining balance.

Example:

If you buy a home for $500,000 and make a 3% down payment, you would pay $15,000 in cash and finance $485,000 through a mortgage.

• Purchase price: $500,000

• Down payment (3%): $15,000

• Mortgage amount: $485,000

Before closing, your lender must verify that the funds are available in an acceptable account, such as:

• Checking or savings accounts

• Retirement accounts

• Investment accounts

Your down payment is separate from closing costs, which are additional expenses required to finalize the mortgage.

What’s the difference between a down payment and closing costs?

A down payment and closing costs are two separate expenses when buying a home.

The down payment reduces the amount you borrow.

Closing costs cover the fees and expenses required to approve and complete your mortgage.

Typical closing costs include:

• Appraisal fee

• Credit report

• Lender fees

• Title insurance

• Attorney fees

Most buyers pay closing costs at the same time they pay the down payment during closing.

Closing costs usually range between 2% and 5% of the purchase price.

Example:

On a $500,000 home, closing costs may range from $10,000 to $15,000.

You can estimate these costs using NewCastle’s Closing Cost Calculator when you view our current rates. 

Why do lenders require a down payment?

Lenders require a down payment because it reduces risk and demonstrates the buyer's financial commitment to the purchase.

A down payment benefits both the lender and the homebuyer.

Lower loan balance

When you contribute part of the purchase price upfront, you borrow less money.

A smaller mortgage often results in:

• Lower monthly payments

• Less interest paid over time

Better loan terms

Buyers who make larger down payments may qualify for:

• Lower mortgage rates

• Reduced monthly payments

• Fewer loan restrictions

Because buyers with more equity historically default less often, lenders reward them with better terms.

What is the minimum down payment for a house?

The minimum down payment for a house is usually 3% to 5% of the purchase price.

However, the exact requirement depends on the loan program.

Common minimums include:

Example:

A buyer purchasing a $450,000 home with a 3% down payment would need $13,500 upfront.

Many buyers qualify for low-down-payment programs if they meet income and credit requirements.

• Illinois mortgage loan limits for 2026

What is the average down payment on a house?

The average down payment varies between first-time buyers and repeat buyers.

Typical averages include:

• First-time homebuyers: 6 - 8%

• Repeat buyers: 15 - 20%

First-time buyers often put down less because many mortgage programs allow smaller down payments.

Example:

A buyer purchasing a $400,000 home with a 7% down payment would need about $28,000 upfront.

Many buyers choose smaller down payments so they can keep savings for emergencies or renovations.

What mortgage programs offer low down payments?

Several mortgage programs allow buyers to purchase homes with low or no down payment.

Conventional 3% down mortgage

Qualified buyers can purchase a home with as little as 3% down.

Conventional loan requirements typically include:

• Credit score of 620 or higher

• Stable employment

• Primary residence purchase

If the down payment is below 20%, lenders require private mortgage insurance (PMI).

FHA 3.5% down mortgage

FHA loans allow buyers to purchase homes with 3.5% down and flexible credit requirements.

FHA loans are popular among:

• First-time buyers

• Buyers with moderate credit scores

• Buyers purchasing multi-unit homes

Example:

An FHA buyer purchasing a $500,000 property with 3.5% down would need $17,500 upfront.

FHA loans require mortgage insurance, which increases the monthly payment.

VA loan (0% down)

Eligible veterans and active-duty service members can purchase homes with no down payment using a VA loan.

VA loans also offer:

• Competitive interest rates

• Limited closing costs

• No monthly mortgage insurance

USDA loan (0% down)

USDA loans allow buyers in eligible rural and suburban areas to purchase homes with no down payment.

These loans are designed to help moderate-income buyers access affordable housing.

How much down payment is required for a 2-to-4 unit property?

The minimum down payment for a multi-unit property (2-to-4 units) is typically 3.5% to 5% of the purchase price, depending on the loan program. 

Typical minimum down payments include: 

Example:

A Chicago buyer purchasing a $700,000 two-unit property would need $24,500 down (3.5%) with an FHA loan and $35,000 down (5%) with a conventional loan.

Because buyers can collect rent from other units, multi-unit properties are a popular strategy for first-time buyers in Chicago.

• How to buy a 2-to-4-unit property in Chicago

How much cash do you need to buy a house?

Most buyers need 5% to 10% of the purchase price in total upfront cash.

This amount includes:

• Down payment

• Closing costs

Example: 

A buyer purchasing a $600,000 Chicago home might need:

• Down payment (3%): $18,000

• Closing costs: $12,000

• Total cash needed: about $30,000

Seller credits may help reduce closing costs, lowering the amount of cash required.

When do you pay the down payment?

You pay the down payment at closing, the final step in the home purchase process.

However, most buyers pay earnest money earlier in the process.

Earnest money is a small deposit paid when signing the purchase contract.

Typical earnest money deposits range between 1% and 3% of the purchase price.

Example:

• Purchase price: $500,000

• Down payment (3%): $15,000

• Earnest money (1%): $5,000 paid upfront

• Remaining down payment at closing: $10,000

The earnest money is applied toward your down payment during closing.

Where can you get money for a down payment?

Most homebuyers use personal savings for their down payment. However, lenders allow several other acceptable sources of funds. 

Common sources include:

• Personal savings from checking, savings, or investment accounts

• Retirement accounts, such as a 401(k) or IRA

• Gift funds

• Down payment assistance programs from state or local housing agencies

• Proceeds from selling another home 

Some buyers may also borrow against assets they own. For example, you may borrow from a retirement account or a line of credit secured by real estate.

Before approving your mortgage, the lender must verify the source of your down payment funds. This usually requires bank statements, gift letters, or documentation showing the source of the money.

What are down payment assistance programs?

Down payment assistance programs help buyers who have stable income but limited savings.

These programs may provide:

• Grants that do not require repayment

• Low-interest loans

• Forgivable loans after several years

Many state and local housing agencies offer assistance programs to support first-time homebuyers.

A mortgage expert can help determine whether you qualify for these programs.

Is it worth putting 20% down on a house?

Putting 20% down eliminates private mortgage insurance (PMI).

This can reduce the monthly mortgage payment.

However, many buyers choose smaller down payments so they can keep savings for emergencies or home improvements.

Example:

A buyer purchasing a $600,000 home could choose:

• 3% down: $18,000

• 10% down: $60,000

• 20% down: $120,000

The best option depends on your financial goals, savings, and monthly budget.

A mortgage professional can help you compare scenarios.

Frequently asked questions about down payments

Can you buy a house with 3% down?

Yes. Many buyers qualify for 3% down conventional mortgages.

These programs allow buyers to purchase homes sooner without waiting years to save a large down payment.

Can you buy a house with no down payment?

Yes. Some mortgage programs allow 0% down payments, including VA and USDA loans.

However, buyers must still pay closing costs.

Can gift money be used for a down payment?

Yes. Many mortgage programs allow gift funds from relatives.

Lenders usually require a gift letter confirming that the money is not a loan.

Can seller credits pay for a down payment?

No. Seller credits cannot cover a down payment.

However, a seller credit can cover closing costs, reducing the amount of cash you need at closing.  

Get Pre-Approved for a Mortgage

The fastest way to determine your required down payment is to get pre-approved for a mortgage.

During pre-approval, NewCastle Home Loans confirms your:

• Credit score

• Debt-to-income

• Source of funds to close

Then you receive a verified approval letter showing exactly how much home you can afford.

A verified pre-approval also helps your offer stand out to Chicago sellers and real estate agents.