How Much Down Payment Do You Need? Minimums and Gift Rules

The minimum down payment depends on the loan program: 3 percent on a conventional loan through Fannie Mae's 97 percent LTV options, 3.5 percent on an FHA loan with a credit score of 580 or higher, and zero on VA-backed and USDA guaranteed loans for eligible borrowers. Twenty percent is where conventional mortgage insurance generally stops, not a requirement to buy. Here are the minimums, the credit tiers behind them, and the gift rules lenders follow.

Key takeaways

• Fannie Mae's HomeReady and standard 97 percent LTV options allow 3 percent down on a one-unit principal residence; HomeReady has an income limit, and the standard option needs a first-time home buyer unless the loan includes a Community Seconds.
• FHA requires 3.5 percent down with a minimum decision credit score of 580 or higher; scores of 500 to 579 are limited to 90 percent LTV, or 10 percent down.
• VA-backed purchase loans and USDA Section 502 guaranteed loans require no down payment for eligible borrowers, and neither charges private mortgage insurance, although VA charges a one-time funding fee and USDA charges an up-front guarantee fee and an annual fee.
• Under Fannie Mae rules a gift can cover the entire down payment on a one-unit principal residence, with a signed gift letter stating the amount, no expected repayment, and the donor's details.

How much down payment do you need to buy a house?

Fannie Mae allows 3 percent down on its 97 percent LTV conventional options, HUD allows 3.5 percent on an FHA loan with a minimum decision credit score of 580 or higher, and the Department of Veterans Affairs and USDA Rural Development allow zero for borrowers and properties that qualify. No federal rule requires 20 percent down.

Down payment and LTV are the same number from two sides: 3 percent down is 97 percent LTV, as our guide to loan-to-value thresholds explains. On a $400,000 purchase, 3 percent is $12,000, 3.5 percent is $14,000, and 20 percent is $80,000.

Minimums by program at a glance

Can you buy a house with 3 percent down on a conventional loan?

Yes. Fannie Mae allows 97 percent LTV on a one-unit principal residence through HomeReady, which has an income limit, and the standard 97 percent option, which requires a first-time home buyer. Both must be fixed-rate loans of up to 30 years underwritten through Desktop Underwriter. Freddie Mac offers parallel 3 percent options: Home Possible, with the same 80 percent of area median income limit, and HomeOne, for first-time home buyers.

The Eligibility Matrix dated August 5, 2026 caps adjustable-rate loans at 95 percent, and its footnote on ratios above 95 percent requires that, for non-HomeReady purchases without a Community Seconds, at least one borrower be a first-time home buyer. A Community Seconds is a subordinate loan from an eligible public agency, nonprofit, or employer. Because that rule applies only above 95 percent LTV, a repeat buyer can still put 5 percent down. Above 80 percent LTV a conventional loan carries private mortgage insurance, covered in what PMI is and how to remove it.

HomeReady income limit and the homeownership education rule

Total qualifying income may not exceed 80 percent of the area median income. First-time home buyer status is not required, but homeownership education is required when all occupying borrowers are first-time home buyers.

What credit score do you need for 3.5 percent down on an FHA loan?

A minimum decision credit score of 580 or higher is eligible for FHA's maximum purchase financing of 96.5 percent LTV, which is 3.5 percent down, subject to the rest of FHA underwriting. Scores of 500 to 579 are limited to 90 percent LTV, or 10 percent down, and scores below 500 are not eligible, under HUD Mortgagee Letter 10-29 as carried into Handbook 4000.1.

FHA calls the 3.5 percent the minimum required investment, defined in Handbook 4000.1 as "at least 3.5 percent of the Adjusted Value of the Property." FHA charges its own mortgage insurance premium at any down payment, a central trade-off in FHA vs conventional loans. Which scoring model produces that number is changing for FHA case numbers assigned on or after January 1, 2027, with the thresholds unchanged; see which credit score mortgage lenders use.

Which mortgage programs allow zero down?

Two federal programs allow zero down: VA-backed purchase loans for eligible service members, veterans, and surviving spouses, and USDA Section 502 guaranteed loans for moderate-income households in eligible rural areas.

VA: no down payment, no monthly mortgage insurance, a one-time funding fee

The Department of Veterans Affairs describes the VA-backed purchase loan as requiring no down payment as long as the sales price is not higher than the home's appraised value, with no private mortgage insurance. Most borrowers pay a one-time funding fee; the schedule and exemptions are covered in our guide to the VA funding fee.

USDA: income limit and eligible-area lookups rather than a dollar cap

USDA Rural Development describes the Section 502 guaranteed program as 100 percent financing with "no money down for those who qualify." Household income cannot exceed 115 percent of the area's median household income, and the home must be the primary residence in an eligible rural area; both tests run on USDA's income and property eligibility site. Under 7 CFR Part 3555, an up-front guarantee fee can be included in the loan, and the lender may pass an annual fee on to the borrower.

Can the down payment be a gift?

Yes, on a principal residence or second home. Under Fannie Mae's personal gifts rule, a gift can cover the entire down payment on a one-unit principal residence at any LTV. For a two- to four-unit principal residence or a second home above 80 percent LTV, the borrower must first contribute 5 percent from their own funds.

Fannie Mae's acceptable donors are relatives and non-relatives with a familial relationship, such as a domestic partner; a donor may not be, or be affiliated with, the builder, developer, real estate agent, or another interested party. The one exception is a seller who is also an acceptable donor and has no tie to any other interested party. FHA's donor list is broader, but FHA also bars interested party contributions from funding the minimum required investment, so a seller credit cannot be the down payment.

What a gift letter must say, line by line

Fannie Mae requires a letter signed by the donor that specifies the actual or maximum dollar amount, states that no repayment is expected, and lists the donor's name, address, telephone number, and relationship to the borrower. FHA's letter covers the same items and must be signed and dated by both the donor and the borrower.

The lender must also document the transfer. Fannie Mae accepts a donor's check with the borrower's deposit slip or evidence of an electronic transfer, while FHA accepts the donor's bank statement showing the withdrawal, a canceled check, a withdrawal receipt, or evidence of an electronic transfer, each paired with evidence of the deposit into the borrower's account.

Does a bigger down payment always get a lower rate?

Not always, and not evenly. LTV is priced in bands by the agencies and by each lender, so crossing a threshold such as 80 or 95 percent changes the pricing and the mortgage insurance, while a few extra points inside a band may change nothing. A larger down payment shrinks the loan and the back-end debt-to-income ratio, but it uses cash that would otherwise remain as reserves.

The lender can matter as much as the band. Each lender layers its own margin and overlays on the agency LTV adjustments, so two lenders can quote different rates at the same down payment; why two lenders quote different rates walks through the layers, which is one reason borrowers commonly compare several offers at one down payment.

How does your down payment show up in a HomeTurf auction?

HomeTurf is a technology marketplace, not a lender or loan originator. In a Pre-Approval auction, lenders see your down payment and LTV as ranges. In a Purchase auction, they see the exact price, loan amount, and down payment, because accurate offers depend on them, and your credit score, income, and assets as ranges. Either way, N.M.L.S.-verified, state-licensed lenders bid on those details, and you stay anonymous while they bid. Every offer shows its rate, A.P.R., fees, and points exactly.

HomeTurf does not pull credit, and your credit range is self-reported; the lender you choose verifies your credit, funds, and any gift in its own underwriting. Auctions run 12, 24, 36, or 48 hours, capped at 48 hours because mortgage rates change daily. Lenders cannot pay for placement, HomeTurf never selects, ranks as best, or recommends a lender, and only the lender you choose receives your contact details, with 36 hours to reach out. HomeTurf does not lock or guarantee any rate.

Frequently asked questions

What is the minimum down payment for a two- to four-unit home you will live in?

Fannie Mae's Eligibility Matrix caps a two- to four-unit principal residence at 95 percent LTV, so a conventional loan needs 5 percent down, with at least 5 percent from the borrower's own funds above 80 percent LTV. FHA insures one- to four-unit properties at 96.5 percent LTV, or 3.5 percent down, and a VA-backed loan can buy up to four units with no down payment for an occupying borrower.

Can closing costs be paid with gift funds too?

Yes. Fannie Mae's personal gifts rule allows gift funds for the down payment, closing costs, and reserves, subject to the minimum borrower contribution on two- to four-unit homes and second homes above 80 percent LTV. The money still cannot come from the agent, builder, or another interested party, or from the seller unless the seller is a relative who qualifies as an acceptable donor.

Can a gift be combined with a down payment assistance program?

Yes. Fannie Mae accepts gifts, grants from eligible entities, and Community Seconds subordinate liens together, with combined LTV up to 105 percent with a Community Seconds. FHA counts a governmental agency with a homeownership assistance program as an acceptable gift donor. HUD's state pages list programs by state, and the lender confirms which it accepts.

Does FHA allow gift funds for the down payment?

Yes. Under Handbook 4000.1 a gift can satisfy FHA's 3.5 percent minimum required investment when the donor is a family member, the borrower's employer or labor union, a close friend with a documented interest in the borrower, a charitable organization, or a governmental agency with a homeownership assistance program. The lender needs a gift letter signed by donor and borrower and bank records tracing the transfer.

Can the down payment be borrowed?

It depends on the collateral. Fannie Mae's Selling Guide states that personal unsecured loans, such as signature loans, lines of credit on credit cards, and overdraft protection on checking accounts, are not an acceptable source for the down payment, closing costs, or reserves. Borrowed funds secured by an asset the borrower owns, such as a vehicle or a 401(k) account, are acceptable; the lender counts the new payment as debt unless the loan is secured by the borrower's financial assets.

Know your minimum before you compare

The program sets the floor, and the credit, income, and gift rules decide which floor you can use. On HomeTurf, verified lenders compete on the details you post while you stay anonymous, and you choose. When you are ready to see competing offers at your own down payment, you can Start Your Auction. HomeTurf is a technology marketplace, not a lender, and it is free for borrowers.

Remember that this is general information, not financial advice, and every situation is different.

Sources

• Fannie Mae, Selling Guide: B5-6-01 HomeReady eligibility, B3-4.3-04 Personal Gifts, B3-4.3-06 Grants and Lender Contributions, B3-4.3-15 Borrowed Funds Secured by an Asset, and B3-4.3-17 Personal Unsecured Loans
• Fannie Mae, Eligibility Matrix, August 5, 2026: singlefamily.fanniemae.com
• U.S. Department of Housing and Urban Development, Handbook 4000.1, August 12, 2026 update: hud.gov
• U.S. Department of Housing and Urban Development, Mortgagee Letters 10-29 and 2026-11: hud.gov and hud.gov
• U.S. Department of Veterans Affairs, VA-backed purchase loan: va.gov
• USDA Rural Development, Single Family Housing Guaranteed Loan Program and 7 CFR Part 3555: rd.usda.gov and ecfr.gov
• Freddie Mac, Home Possible and HomeOne mortgage product pages: sf.freddiemac.com and sf.freddiemac.com

HomeTurf is a technology marketplace, not a lender or loan originator. This content is for general information only and is not financial or legal advice.