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How Much is a Down Payment on a House?
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The down payment you make on a home can range from nothing to 20% or more of the home’s price, depending on the loan program you qualify for and your financial situation. However, the short-term benefit of a low down payment may be offset by the long-term costs.
Knowing the ins and outs of what a down payment is and how much you should put down can help you decide what’s best for your homebuying plans.
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What is a down payment?
A down payment is upfront money paid to purchase a home. In some cases, the amount you need for a down payment is set by the loan program you qualify for. For example, conventional loan programs typically require at least a 3% down payment. However, there are mortgage options backed by government agencies like the U.S. Department of Veterans Affairs (VA) that don’t require any down payment.
That may come as a surprise to many who still mistakenly think all lenders require a 20% mortgage down payment. Despite access to no- and low-down-payment programs, many homebuyers choose to make a larger down payment to reduce their monthly payment and closing costs. In a competitive housing market, a bigger down payment tells a seller you’re more solid financially than a minimum down payment borrower.
What’s the average down payment for homebuyers?
According to data from the National Association of Realtors (NAR), from 1989 through 2021, first-time homebuyers tend to range between 6% and 7% on a down payment, compared to repeat buyers, who spent about 17% on down payments in 2021.
How much of a down payment do I need for a house?
In order to get a mortgage to buy a house, you only need the minimum amount required by the loan program you’re applying for. The most common programs are as follows:
- Conventional loans.Non-government loans with guidelines set by Fannie Mae and Freddie Mac.
- FHA loans.Mortgage made by FHA-approved lenders are insured by the Federal Housing Administration (FHA), with lower loan limits than conventional mortgages allow.
- VA loans.Eligible military borrowers, their spouses and eligible survivors may qualify for VA loans with no down payment, mortgage insurance or loan limit requirements.
- USDA loans.Low- to moderate-income homebuyers may qualify for no-down-payment financing in rural areas backed by the U.S. Department of Agriculture (USDA).
- Jumbo loans.If you’re buying an expensive home in a higher-priced part of the country where loan amounts exceed the conforming loan limits, you may need a jumbo loan.
All government loan programs require you to use the home as a primary residence. Conventional lenders allow you to buy second homes or investment properties, but higher down payment minimums apply. You may also need to pony up more down payment cash if you’re buying a multifamily home or a manufactured home.
Minimum down payment requirements
The table below gives you a side-by-side glance at minimum down payments for single-family home purchases based on the loan programs and occupancy types described above.
| Loan program | Minimum down payment requirement | Occupancy requirement |
|---|---|---|
| Conventional | 3% 10% 20% | Primary residence Second home Investment property |
| FHA | 3.5% with a 580 credit score 10% with a score between 500 and 579 | Primary only |
| VA | 0% | Primary only |
| USDA | 0% | Primary only |
| Jumbo | 20% in most cases 5% down payment programs may be available in some areas | Primary* |
*Jumbo loans may be available for second homes and investment properties with much higher down payments
How much should you put down on a house?
Your down payment decision really comes down to your financial needs and wants. If you have a significant amount of money saved up, the choice revolves around whether you should pay extra now to realize a bigger return on your home investment dollars later.
In general, the bigger the down payment, the lower the payment you’ll shell out every month and the more home equity you’ll have from the outset. With a 20% down payment you’ll avoid PMI, a type of conventional mortgage insurance required to protect lenders in case you default.
However, if you’re cash-strapped and prefer to have an extra financial cushion, a low down payment leaves you with more money to cover the unexpected repair and maintenance issues of first-time homeownership.
Pros and cons of a big down payment
| Pros | Cons |
|---|---|
Your monthly payment will be lower and you’ll have more equity | You’ll deplete cash to make the bigger payment |
You can qualify for a more expensive home | You’ll have less cash on hand for emergencies and home repairs |
You could reduce or eliminate mortgage insurance costs and reduce your closing costs | You’ll have less cash to invest in funds that may have a higher return |
Pros and cons of a small down payment
| Pros | Cons |
|---|---|
You’ll keep more cash in the bank | You’ll have a higher monthly payment |
You’ll have more funds for unexpected expenses | Your interest rate may be higher |
You’ll have a bigger mortgage interest write-off if you itemize deductions | You’ll pay more in mortgage insurance and closing costs |
How to find down payment assistance
If you don’t have cash sitting in your savings or checking account, you can use any one or a combination of the following options to gather your down payment money together.
Gifts.You can get a gift from family and friends, as long as they are willing to show the account the funds are coming from. They’ll also need to complete a gift letter confirming you don’t have to repay the money. One caveat: Your donor will have to pay taxes on the gift money if the amount is more than $16,000.
401(k) loan.Some retirement and 401(k) accounts allow you to borrow to buy a home. Check with your financial advisor or employer to get details about options.
Sale of assets.Selling a car or other assets to stockpile down payment cash is acceptable, but additional documentation is usually required.
Down payment assistance programs.These down payment assistance programs may be available in your area, but many set a minimum time period for how long you have to stay in the home to avoid having to repay the money:
- State and local down payment assistance programs. Check with your local or state housing authority or local housing nonprofits to find out what type of homebuying assistance they offer. Funds are usually limited, and typically only low- to moderate-income buyers are eligible in specific areas.
- Special grants. Money may be available to buy homes in neighborhoods the local government is trying to revitalize.This money doesn’t need to be repaid.
- Employer-based assistance. Emergency medical workers, law enforcement professionals and recent college graduates may be eligible for special down payment and closing cost programs.
- HUD homes. FHA foreclosed homes can be purchased with down payments as low as $1. Check the HUD Homestore to find out what’s for sale in your area.
- Special lender zero-down programs. Banks and mortgage lenders periodically offer special no-down payment loan programs. Check with local loan officers to see if you’re eligible.