What is the minimum down payment for first-time home buyers?

Whether you’re dreaming of a vast ranch style in Dallas or a charming Victorian home in Charlotte, buying your first home is a great achievement. It’s natural that there are many questions, and one of the most common ones is, “What exactly is a down payment? And what is the minimum down payment for first-time home buyers?” Simply put, a down payment is the sum of the initial money you pay upfront when purchasing a home, with the remaining amount being funded through a mortgage.

If you are worried about a minimum down payment for first-time buyers, you can rest assured that the minimum required is usually lower than the traditional 20%. According to Redfin Real Estate, the minimum down payment for first-time home buyers depends on the type of loan. Many loans offer a 3% or 0% lower payment.

This is a simple breakdown:

For example, FHA loans typically require a 3.5% down. VA and USDA loans may offer 0% down to eligible borrowers. Traditional loans like HomeReady and Home typically need to be reduced by at least 3%.

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What is a down payment?

A down payment is the initial capital that the buyer contributes to the purchase price of a real estate. According to the National Association of Realtors, 52% of first-time buyers used traditional loans to fund their homes, 29% used FHA loans and 9% used VA loans. The share of first-time buyers using FHA loans fell from 55% in 2009 to 29% in 2024.

How much should first-time home buyers keep?

The minimum down payment required will vary greatly depending on the type of mortgage you choose. To illustrate these various requirements, imagine you are the first home buyer looking to buy a home for $450,000. The table below outlines different loan types, taking into account the potential down payment requirements and credit scores you may encounter. Personalized down payment ratings, the best loan type for your situation, and current interest rates use the Redfin Mortgage Calculator.

Loan type Minimum down payment Credit score score Upper amount fha 3.5%$ 15,750 Traditional 3% Good 13,500 usda 0% good 0 va 0% Excellent 0

FHA loan

FHA loans play an important role in enabling homeownership for people with sufficient income but accumulated wealth. According to the 2024 FHA Annual Report, FHA Insurance’s 10+ home buying mortgages were for first-time home buyers, a significantly higher percentage compared to other regions in the market where first-time buyers made up half of the outbreak.

The FHA is also a major source of low-down payment financing for underserved borrowers. Data from the 2023 Mortgage Disclosure Act (HMDA) shows that a majority of black and Hispanic borrowers, as well as almost half of rural borrowers who have obtained low down payment mortgages, did so through the FHA.

Traditional loans

Traditional loans are becoming more and more attractive as low down payment options are available. A program like one with Rocket’s mortgage requires a 1% down payment (with the flexibility to pay up to 3%), and the Rocket Mortgage will donate an additional 2% to the client’s down payment.

Similarly, the possible HomeReady and Home programs backed by Fannie Mae and Freddie Macs are respectively designed for low to moderate income borrowers, and typically require a minimum down payment of 3%.

USDA and VA loans

For first-time home buyers, USDA and VA loans offer great benefits by not usually requiring a down payment. VA loans are specifically designed for eligible Active Duty Service members, veterans and surviving spouses, offering a 0% down payment option and often competitive interest rates.

Similarly, USDA loans are available to eligible rural and suburban facilities, allowing highly-income borrowers to purchase homes without money from eligible low-income individuals. Both these government-supported loan programs aim to make homeownership more accessible to certain populations by reducing the financial burden of down payments.

2025 Loan Loan Standards for First-time Home Buyers

Loan Type Credit Score Debt and Income Income Employment Employment Mortgage Insurance Loan Limitations FHA 580 or more and 43% or less must exhibit stable income and employment proof of employment, usually with a history of more than two years. FHA loans are designed for major housing. This means you will need to live in the property you purchased on a loan. FHA loans have both pre- and annual mortgage premiums (MIP) loan restrictions vary depending on the type of property you have at least 620% of the traditional property. Usually, you need a stable income and employment for two years. The lender will check this in financial statements. Borrowers are generally expected to live in the property as their primary residence for a minimum period, often for 12 months. If your down payment is less than 20%, you will need a private mortgage insurance (PMI) that protects your lender. Usually, if you have 20% of the stock, you can request that the PMI be removed. Traditional loans require compliance with conformance loan restrictions set by FHFA USDA 620 or below at 41% or below. Household income cannot exceed 115% of the median household income in this area. The home must be your main residence. Investment property or second home is not permitted. Instead, there is no private mortgage insurance (PMI), but the maximum loan amount is determined by the borrower’s income, ability to pay back, and the valuation of the property. Instead, the maximum loan amount is determined by the borrower’s income, ability to pay back, and the valuation of the property. There is no specific income limit for VA loans above 620 or below 41%, but borrowers must demonstrate stable and reliable income. The home must be your main residence. In other words, you’re going to occupy it. There is no private mortgage insurance (PMI) (if you mean you have never used benefits before or have paid off and sold your previously funded VA home), there is no official loan limit imposed by the VA.

Less down payments and large down payments

Pros of a low down payment:

Increased financial flexibility: Reducing down payment cash increases liquidity to handle unexpected expenses and pursue other investment opportunities. Opportunities to invest elsewhere: Money not used for large down payments can potentially earn higher returns when invested elsewhere, like the stock market. Fastest homeownership: Smaller down payments will result in less time to save money, and you could potentially enter the housing market faster, especially in areas where property values are rising. Lower risk of losing large initial investments if housing value drops: Less down payments still carry some risk when the market falls, but the potential losses on initial investments are less than large down payments. Easy access to emergency funds: Money that is not tied to a large down payment is easily accessible in the event of an economic emergency.

The advantages of a bigger down payment:

Monthly Payment Reduction: Overall low borrowing translates directly into reducing monthly mortgage payments. Total Interest Payment: By reducing your borrowing, you can pay the lifespan of your loan and save a significant amount of money in the long run. Stock increase: A large down payment will provide you with more immediate ownership (subsidy) in your home. Avoiding Private Mortgage Insurance (PMI): With traditional loans, using a down payment of 20% or more will usually avoid paying PMI. Lower Interest Rates: Lenders often believe that borrowers who make more lower payments are at a lower risk and may offer lower interest rates. Better Loan Terms: A larger down payment can improve your overall financial profile, leading to more favorable loan terms and a higher chance of loan approval. Stronger Offers: In a competitive housing market, a larger down payment can make your offer more attractive to sellers and increase your chances of accepting your offer.

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

Navigating the world of homeownership as a first-time buyer, especially when it comes to down payments, can seem daunting. However, there are several measures that can significantly ease this financial hurdle.

One good strategy is to use a low-wage or unpaid payment loan program. Loans like VA and USDA offer an incredible benefit of 0% down to eligible borrowers, but can reduce by just 3% or 3.5% on FHA and certain traditional loans. These programs are specifically designed to make homeownership more accessible and pay upfront the initial cash you need.

You can also explore down payment assistance programs beyond professional loan programs. Many states and local governments offer generous grants and low interest rate loans specifically designed to help first-time home buyers cover falls and closure costs. These can be game changers as grants are often not required to be repaid.

Plus, don’t overlook options such as down payment gifts from family members or seller concessions. The seller agrees to pay a portion of the closing costs and releases more funds for the down payment. With these different strategies, putting together a down payment can be much more achievable than you think.