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For home buyers, understanding exactly when the down payment is due is a primary financial concern. The core conclusion is straightforward: you do not need the full down payment when you submit an offer. Instead, you provide a smaller earnest money deposit with your offer to show good faith, and you pay the remainder of your down payment at the closing, when the property's title is officially transferred. This process protects both the buyer and seller throughout the transaction.
An earnest money deposit is a sum of money submitted with a purchase offer to demonstrate to the seller that the buyer is serious and acting in good faith. This deposit is typically held in an escrow account—a neutral third-party account that safeguards the funds until closing—and is then credited toward the buyer's down payment and closing costs. The amount varies but is generally between 1% and 2% of the home's purchase price. Based on our experience assessment, in highly competitive housing markets, a larger deposit can make an offer more attractive to a seller. However, it is advisable to avoid depositing an excessively large amount, as there are specific contract contingencies that must be met for the deposit to be fully refundable.
The down payment is the portion of the home's purchase price that the buyer pays upfront, with the remainder financed through a mortgage loan. The required amount is primarily determined by the lender and the type of loan. While a 20% down payment is often cited to avoid Private Mortgage Insurance (PMI)—an additional insurance premium that protects the lender—many conventional and government-backed loans allow for much lower payments. It is common to see down payments ranging from 3% to 10%. For example, FHA loans can require as little as 3.5% down for qualified buyers. The following table outlines common loan types and their typical down payment requirements for 2026.
| Loan Type | Typical Down Payment Range | Key Note |
|---|---|---|
| Conventional Loan | 3% - 20% | PMI is usually required if down payment is less than 20%. |
| FHA Loan | 3.5% - 10% | Popular choice for first-time buyers with lower credit scores. |
| VA Loan | 0% | Available for eligible veterans, service members, and spouses. |
| USDA Loan | 0% | For eligible homes in designated rural areas. |
The complete down payment, minus the earnest money deposit, is due at closing. Closing, also known as settlement, is the final step in the real estate transaction where the property title is transferred from the seller to the buyer. Several days before closing, you will receive a Closing Disclosure from your lender that details the exact amount you need to bring to the table. This amount will include the remaining down payment and all closing costs. These funds typically must be provided in the form of a cashier's check or via a wire transfer from your bank account.
This is a critical reason why the earnest money deposit exists and why contingencies are vital. A financing contingency in your purchase contract protects your earnest money. If you are denied a mortgage loan despite making a good-faith effort to obtain one, this contingency allows you to cancel the contract and receive your full earnest money deposit back. Without this contingency, you could risk forfeiting your deposit. Other common protective contingencies include a satisfactory home inspection and appraisal.
The key to a smooth purchase is understanding that the earnest money deposit secures the contract, while the full down payment finalizes the purchase at closing. By planning for both payments and ensuring your contract includes protective contingencies, you can navigate this financial process with confidence.
