What is the Minimum Down Payment for a First-Time Home Buyer?
Buying your first home is a huge accomplishment, whether you’re dreaming of a sprawling ranch-style in Dallas or a charming Victorian home in Charlotte. It’s natural to have a lot of questions, and one of the most common is, “What exactly is a down payment? And what is the minimum down payment for a first-time home buyer?” Simply put, a down payment is the initial sum of money you pay upfront when buying a home, with the remaining amount financed through a mortgage.
If you’re concerned about the minimum down payment for a first-time buyer, rest assured that the minimum required is typically lower than the traditional 20%. According to Redfin Real Estate, the minimum down payment for first-time homebuyers varies depending on the type of loan. Many loans offer down payments as low as 3% or even 0%.
Here’s a quick breakdown:
- FHA loans, for example, typically require 3.5% down.
- VA and USDA loans may offer 0% down for eligible borrowers.
- Conventional loans, like HomeReady and Home Possible, generally require a minimum of 3% down.
Ready to explore your options further?
What is a down payment?
A down payment is the initial capital a buyer contributes towards a property’s purchase price. According to the National Association of Realtors, 52% of first-time buyers used a conventional loan to finance their home, while 29% used an FHA loan, and 9% used a VA loan. The share of first-time buyers using an FHA loan has declined from 55% in 2009 to 29% in 2024.
How much do first-time home buyers have to put down?
The minimum down payment you’ll need varies significantly based on the type of mortgage loan you choose. To illustrate these varying requirements, imagine you’re a first-time homebuyer looking to purchase a home for $450,000. The table below outlines the potential down payment requirements you might encounter, factoring in your credit score and different loan types. For a personalized assessment of your down payment, the best loan type for your situation, and current interest rates, use the Redfin mortgage calculator.
| Loan type | Minimum down payment | Credit Score | Down Payment Amount |
| FHA | 3.5% | Good | $15,750 |
| Conventional | 3% | Good | $13,500 |
| USDA | 0% | Good | 0 |
| VA | 0% | Excellent | 0 |
FHA loan
FHA loans serve a crucial role in enabling homeownership for those with sufficient income but limited accumulated wealth, who often face challenges saving for large down payments due to high rents and other financial pressures. According to the 2024 FHA Annual Report, more than 8 out of 10 FHA-insured home purchase mortgages were for first-time homebuyers, a significantly higher proportion compared to the rest of the market, where first-time buyers comprised half of originations.
FHA is also a primary source of low-down payment financing for underserved borrowers; 2023 Home Mortgage Disclosure Act (HMDA) data indicates that a majority of Black and Hispanic borrowers, and nearly half of all rural borrowers, who obtained low down payment mortgages did so through FHA.
Conventional loan
Conventional loans have become increasingly attractive due to the availability of low down payment options. Programs like ONE+ by Rocket Mortgage require as little as a 1% down payment (with the flexibility to pay up to 3%), and Rocket Mortgage contributes an additional 2% towards the client’s down payment.
Similarly, HomeReady and Home Possible programs, backed by Fannie Mae and Freddie Mac, respectively, are designed for low-to-moderate-income borrowers and typically require a minimum 3% down payment.
USDA and VA loan
For first-time homebuyers, USDA and VA loans offer a significant advantage by typically requiring no down payment. VA loans are specifically designed for eligible active-duty service members, veterans, and surviving spouses, providing 0% down payment options and often competitive interest rates.
Similarly, USDA loans are available for properties in eligible rural and suburban areas, allowing qualified low-to-moderate-income borrowers to purchase a home with no money down. Both of these government-backed loan programs aim to make homeownership more accessible to specific populations by reducing the upfront financial burden of a down payment.
2025 Loan Lending Standards for First-Time Home Buyers
| Loan Type | Credit Score | Debt-to-Income Ratio | Income Employment | Occupancy | Mortgage Insurance | Loan Limits |
| FHA | 580 or higher | 43% or less | Borrowers need to show steady income and proof of employment, typically with at least two years of history. | FHA loans are designed for primary residences, meaning you must live in the property you purchase with the loan. | FHA loans require both an upfront and annual Mortgage Insurance Premium (MIP) | FHA loan limits vary based on location and the type of property |
| Conventional | 620 or higher | 36% or less | You generally need two years of stable income and employment. Lenders will verify this with financial documents. | The borrower is generally expected to live in the property as their primary residence for a minimum period, often 12 months. | If your down payment is less than 20%, you will need private mortgage insurance (PMI), which protects the lender. You can usually request PMI removal once you have 20% equity. | Conventional loans must adhere to conforming loan limits set by the FHFA |
| USDA | 620 or higher | 41% or less | Your household income cannot exceed 115% of the median household income for the area. | The home must be your primary residence. Investment properties or second homes are not allowed. | No Private Mortgage Insurance (PMI) | Instead, the maximum loan amount is determined by the borrower’s income, ability to repay, and the property’s appraised value. Instead, the maximum loan amount is determined by the borrower’s income, ability to repay, and the property’s appraised value. |
| VA | 620 or higher | 41% or less | no specific income limit for a VA loan, but borrowers must demonstrate a stable and reliable income. | The home must be your primary residence, meaning you intend to occupy it. | No Private Mortgage Insurance (PMI) | If you have full VA loan entitlement (meaning you haven’t used the benefit before, or you’ve paid off and sold a previously financed VA home), there are no official loan limits imposed by the VA. |
Smaller down payment vs. larger down payment
Pros of a smaller down payment:
- More financial flexibility: Tying up less cash in your down payment leaves you with more liquidity to handle unexpected expenses or pursue other investment opportunities.
- Opportunity to invest elsewhere: The money not used for a large down payment could potentially earn a higher return if invested elsewhere, like in the stock market.
- Faster homeownership: A smaller down payment requires less time to save for, potentially allowing you to enter the housing market sooner, especially in areas with rising property values.
- Reduced risk of losing a large initial investment if home value depreciates: While a smaller down payment still carries some risk if the market dips, the potential loss of your initial investment is less compared to a large down payment.
- Easier access to funds in case of emergency: Money not tied up in a large down payment is more easily accessible in case of a financial emergency.
Pros of a larger down payment:
- Lower monthly payments: Borrowing less overall directly translates to lower monthly mortgage payments.
- Reduced total interest paid: By borrowing less, you’ll pay less interest over the life of the loan, saving a significant amount of money in the long run.
- Increased equity: A large down payment gives you more immediate ownership (equity) in your home.
- Avoiding private mortgage insurance (PMI): With a conventional loan, a down payment of 20% or more typically allows you to avoid paying PMI.
- Lower interest rate: Lenders often view borrowers who make larger down payments as less risky and may offer a lower interest rate.
- Better loan terms: A larger down payment can improve your overall financial profile, potentially leading to more favorable loan terms and a greater chance of loan approval.
- Stronger offer: In a competitive housing market, a larger down payment can make your offer more attractive to sellers and increase your chances of having your offer accepted.
How to lower your down payment as a first-time buyer?
Navigating the world of homeownership as a first-time buyer might seem daunting, especially when it comes to the down payment. However, there are several avenues to explore that can significantly ease this financial hurdle.
One excellent strategy is to utilize low or no-down-payment loan programs. Loans like VA and USDA offer the incredible benefit of 0% down for eligible borrowers, while FHA and certain conventional loans can require as little as 3% or 3.5% down. These programs are specifically designed to make homeownership more accessible, reducing the initial cash needed upfront.
Beyond specialized loan programs, you can also explore down payment assistance programs. Many states and local governments offer generous grants and low-interest loans specifically designed to help first-time homebuyers cover down payments and even closing costs. These can be a game-changer, as grants often don’t need to be repaid.
Additionally, don’t overlook options like a down payment gift from family members, or even seller concessions, where the seller agrees to pay a portion of your closing costs, freeing up more of your funds for the down payment. With these various strategies, putting together your down payment can be much more achievable than you might think.
What is the minimum down payment for a first-time home buyer?
Understanding the minimum down payment is a crucial first step in your home-buying journey. While options can range from 0% for VA and USDA loans to 3% for conventional loans and 3.5% for FHA loans, the exact amount you’ll need depends on your unique financial situation and the loan program that’s right for you.
Curious about the minimum down payment for your first home? Use our calculator to quickly find out and take the guesswork out of your home-buying budget.
The post What is the Minimum Down Payment for a First-Time Home Buyer? appeared first on Redfin | Real Estate Tips for Home Buying, Selling & More.
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