Buyer guide · Down payment basics
What is a down payment?
A down payment is the portion of the purchase price you pay upfront — but it is not the same as your total cash to close. Many buyers fixate on the down payment and forget closing costs, escrows, insurance, taxes, and mortgage insurance. Here is the full picture, in plain English.
Down payment, defined.
Your down payment is the cash you put toward the home upfront — it becomes your initial equity and reduces the amount you borrow. The math is simple: purchase price minus loan amount equals your down payment. It is usually shown both as a dollar amount and as a percentage of the price.
Example: a $500,000 purchase with 5% down means a $25,000 down payment and a $475,000 loan amount — before any closing costs and prepaids, which are separate (more on that next).
Down payment vs closing costs.
These are two separate buckets of cash. Mixing them up is the most common reason a buyer is short at the closing table.
Down payment
- Goes toward equity in the home
- Reduces the loan amount
- Sets your loan-to-value (LTV)
Closing costs & prepaids may include
- Lender fees (origination, underwriting, processing)
- Title / settlement fees
- Appraisal and credit report
- Recording fees
- Prepaid interest
- Homeowners insurance
- Property-tax escrows
- HOA / condo items when applicable
A lender credit or seller credit can reduce your cash to close, but it is a contribution or a tradeoff — not costs disappearing. Learn how to choose a mortgage lender and estimate the payment with the mortgage payment calculator.
How much down payment do you need?
Minimums vary by program and by file. These are common general guidelines — eligibility, income, credit, and property all factor in, and program rules can change.
Conventional
As low as 3% down may be available for some eligible first-time buyers; 5%+ is common otherwise. Pricing and PMI depend on credit and loan-to-value. Not everyone qualifies for the lowest options.Program guideFHA
Commonly 3.5% down for eligible borrowers with qualifying credit, subject to FHA guidelines. FHA carries its own mortgage insurance, which affects the real cost.Program guideVA
Eligible veterans and service members may be able to buy with 0% down, but eligibility, entitlement, the VA funding fee (unless exempt), and property requirements apply.Program guideJumbo
Above the conforming limit, expect a larger down payment and stronger reserves — the amount depends on lender, loan size, credit, property type, and market.Program guideUSDA financing may allow 0% down in eligible rural and suburban areas, subject to income, property, and location rules — a narrower fit, mentioned only for completeness.
Down payment and LTV.
Loan-to-value (LTV) is the loan amount divided by the property value or purchase price. A bigger down payment means a lower LTV. For example, 20% down = 80% LTV.
LTV matters because it can affect your rate, whether you pay mortgage insurance, how underwriting views the file, and which program options are open to you. It is one of the biggest levers in mortgage pricing — which is why the down payment decision is really a pricing-and-payment decision.
Do you really need 20% down?
No — many buyers do not put 20% down. On many conventional loans, 20% down avoids monthly PMI and may improve pricing. But waiting years to save 20% is not always the best move when home prices, rent, and your personal timing are in play. Sometimes buying sooner with PMI and removing it later wins; sometimes waiting wins. It is a tradeoff, not a rule.
The honest way to decide is to compare the scenarios side by side. See Florida rate examples and model the monthly numbers with the mortgage payment calculator before you commit to a down payment amount.
Down payment and mortgage insurance.
How much you put down often decides whether — and which kind of — mortgage insurance you carry.
Conventional
Less than 20% down often means monthly PMI until you reach enough equity. PMI can usually be removed later — a key advantage over FHA.FHA
FHA loans carry mortgage insurance under FHA rules regardless of down payment — an upfront premium plus monthly MIP. Factor it into the full payment.VA
Eligible VA loans have no monthly mortgage insurance, but may include a VA funding fee unless you are exempt. That changes the comparison.Eligible veterans: the no-PMI advantage is one of several benefits of a VA loan in Florida.
Gift funds, seller credits, lender credits.
Three different things buyers mix up. None of them is free money — each has rules and tradeoffs.
Gift funds
May be allowed depending on the loan program and documentation. Usually require a gift letter and a clear paper trail showing the source. Some programs limit who can give and how much.
Seller credits
A seller contribution toward allowable closing costs and prepaids, within program limits. They generally do not replace the required down payment — they reduce cash to close, not the equity requirement.
Lender credits
Money toward closing costs in exchange for a higher rate. Not free money — compare it against the rate, APR, and monthly payment to see whether the tradeoff is worth it.
Compare the structure on the rates page, and read how to choose a mortgage lender so a credit isn’t hiding a worse rate.
How much cash do you really need?
Your down payment is only one line. Cash to close can also include closing costs, prepaids, escrows, inspections, upfront fees, and reserves where required.
Run your real numbers in the mortgage payment calculator — it’s the fastest way to see the payment and cash picture together.
First-time buyer down payment strategy.
If this is your first home, do not anchor only on the minimum down payment. Compare the monthly payment, cash to close, seller- credit strategy, loan program, mortgage insurance, and your long-term plan together. The lowest down payment is not always the best total outcome.
Start with first-time homebuyer guidance for Orlando, compare FHA and conventional on your scenario, and let a mortgage broker in Orlando line up the options side by side.
Florida buyer notes.
In Florida, the down payment is only one part of the picture. Property taxes and homeowners insurance can meaningfully change the monthly payment and the debt-to-income math. HOA and condo fees can affect approval, and condos may carry project or warrantability requirements that influence financing.
None of that is a reason to over-save or under-save on the down payment — it is a reason to look at the whole file. The down payment is one input into the approval, not the whole story.
Ask before you pick a down payment amount.
As an Orlando mortgage broker, Shahram compares FHA, VA, conventional, and jumbo options and explains the payment, cash-to-close, and rate tradeoffs in plain language — modeling 3%, 5%, 10%, and 20% down plus lender-credit structures so you can see which fits your file. A no-BS scenario review, not a sales pitch.
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Plan the whole file.
Down payments, answered.
What is a down payment?
A down payment is the portion of the home's purchase price you pay upfront out of your own (or gifted) funds. It becomes your initial equity and reduces the loan amount — purchase price minus loan amount equals your down payment. It is shown both as a dollar figure and as a percentage of the price.
Is a down payment the same as closing costs?
No. The down payment goes toward equity and lowers your loan amount. Closing costs and prepaids are separate — lender fees, title and settlement charges, appraisal, recording fees, prepaid interest, homeowners insurance, and property-tax escrows. You generally need both, which is why total cash to close is more than the down payment alone.
How much down payment do I need to buy a house?
It depends on the loan program and your file. Some eligible conventional first-time buyers may put as little as 3% down; FHA is commonly 3.5% for qualifying borrowers; eligible VA buyers may use 0% down; jumbo usually requires more. The right amount also weighs mortgage insurance, monthly payment, and cash to close — not just the minimum.
Do I need 20% down to buy a home?
No — many buyers do not put 20% down. On many conventional loans, 20% down avoids monthly PMI and can improve pricing, but waiting to save 20% is not always the best move when home prices, rent, and your timing are factored in. It is a tradeoff worth modeling, not a hard rule.
What is the minimum down payment for a conventional loan?
For some eligible first-time buyers, conventional financing may allow as little as 3% down; 5% or more is common otherwise. Eligibility depends on credit, income, the property, and program guidelines, and lower down payment usually means monthly PMI until you reach sufficient equity.
What is the minimum down payment for an FHA loan?
FHA commonly allows 3.5% down for eligible borrowers with qualifying credit, subject to FHA guidelines. FHA loans carry an upfront and monthly mortgage insurance premium, so compare the full payment against conventional rather than just the down payment.
Can VA buyers buy with no down payment?
Eligible veterans and service members may be able to buy with 0% down. It is not automatic — eligibility, entitlement, the VA funding fee (unless you are exempt), occupancy, and property requirements all apply. The funding fee can often be financed into the loan.
Can gift funds be used for a down payment?
Often, yes — depending on the loan program and documentation. Gift funds typically require a gift letter and a clear paper trail showing the source and transfer. Some programs limit who may give a gift and how much, so the file has to be documented correctly.
Can seller credits cover my down payment?
Generally no. Seller credits are a contribution toward allowable closing costs and prepaids, within program limits — they usually do not replace the required down payment unless a specific program structure allows it. They reduce cash to close, not the equity requirement.
How does down payment affect mortgage insurance?
On many conventional loans, less than 20% down means monthly PMI until you reach enough equity. FHA loans carry mortgage insurance under FHA rules regardless. VA loans have no monthly mortgage insurance but may have a funding fee unless exempt. Mortgage insurance changes the monthly payment and should be compared, not ignored.
How does down payment affect my mortgage rate?
A larger down payment lowers your loan-to-value, which on many programs can improve pricing and reduce or remove mortgage insurance. The exact effect depends on credit, program, occupancy, property type, and market conditions — so compare rate, APR, and payment across down payment scenarios rather than assuming.
How do I know the best down payment amount for my situation?
Compare scenarios — 3%, 5%, 10%, and 20% down — on monthly payment, cash to close, mortgage insurance, and your timeline, not just the minimum. Send your numbers and Shahram will model the options side by side so you can choose with the full picture in front of you.
Not sure how much to put down?
Send the real scenario — purchase price, down payment available, credit range, property type, loan goal, and whether you have gift funds or seller credits — and Shahram will help compare the options.
Estimates only. Not a Loan Estimate, not an approval, not a commitment to lend, not a rate lock. Final terms depend on verified credit, income, assets, property, loan program, lock date, lender conditions, and actual third-party fees. The Mortgage Expert · NMLS 2412313 · Equal Housing Opportunity.