If you are thinking about buying a home, a great place to start is planning for a mortgage down payment. Many often wonder how much money they should have saved for a down payment on a house.
You do not need a 20% down payment to buy a house. Depending on the mortgage program and your qualifications, you may be able to put down much less. Certain conventional mortgage programs allow eligible borrowers to put as little as 3% down.
The minimum you can put down and the amount you should put down are not always the same. Your choice affects how much you borrow, possible mortgage insurance costs, and how much cash you have left after closing. The answer depends on your overall budget, credit profile, debt-to-income ratio, and desired loan program.
Down Payment Requirements
So, how much down payment do you need to buy a house? There is no single minimum down payment for buying a home. The down payment requirements may vary depending on the loan program (conforming, jumbo, FHA, etc.).
| Mortgage type | Potential minimum down payment |
| Conventional loan | Certain programs allow as little as 3% down |
| FHA loan | As little as 3.5% down for eligible borrowers |
| VA loan | No down payment may be required for eligible borrowers |
| Jumbo loan | Requirements vary by program, property, loan amount, and borrower qualifications |
These are potential program minimums. Your actual requirement will depend on the mortgage program and your qualifications.
Property Types
Down payment requirements also might change depending on property type (primary residence, second home, or investment property).
- Primary residence: The down payment requirement on a primary residence may vary between 3-20% of the purchase price. Typically, loans for primary residences have less strict requirements than second homes and investment properties, as they are deemed less risky to lend on.
- Second home: You may be required to put at least 10-20% of the purchase price down when buying a second home.
- Investment property: Many investment property loan programs today require a down payment of at least 20-25% of the purchase price.
Does Down Payment Size Matter?
The amount you put down decides how large your loan will be and how much cash remains after closing. Putting down a larger sum reduces the total mortgage balance and typically leads to lower monthly principal and interest payments. With many conventional mortgages, a 20% down payment also eliminates the need for private mortgage insurance.
Choosing a smaller down payment lowers the upfront cash needed to purchase a home. This can let you acquire a property sooner or keep larger cash reserves for other expenses. However, it also creates a larger overall loan amount and may trigger mortgage insurance requirements or different interest rates based on your loan type.
Determining Down Payment Size
Once you’ve determined what mortgage programs you qualify for, there are some additional considerations:
Look at Monthly Payment Amount
A bigger down payment reduces the overall loan amount. When the interest rate and loan term stay the same, a lower mortgage balance leads to reduced monthly principal and interest expenses.
Assess various scenarios to see whether a larger down payment markedly cuts your monthly costs.
Consider Mortgage Insurance
Most conventional mortgages demand private mortgage insurance when the down payment is under 20%. Different loan programs have their own mortgage insurance requirements.
Include all applicable mortgage insurance costs in your total when comparing estimated monthly payments.
Calculate your remaining cash balance.
In addition to your down payment, you may need to cover closing costs and other transaction fees. You could also require money for moving, home repairs, emergencies, or other personal expenses. Certain mortgage agreements mandate that you maintain specific cash reserves.
While a larger down payment lowers your monthly mortgage expenses, it also decreases the cash you have left after purchasing the home.
Review Your Mortgage Options
Down payment rules vary according to the particular mortgage and the property type. Someone with a conforming mortgage will have different choices than someone financing a jumbo property. Requirements also differ depending on whether the home is a primary residence, a second home, an investment property, a condo, or a co‐op.
Down Payment Calculator
Multiply the purchase price by the percentage you plan to put down.
Purchase price × down payment percentage = down payment amount
For a $500,000 home:
| Down payment | Down payment amount | Mortgage amount |
| 3% | $15,000 | $485,000 |
| 3.5% | $17,500 | $482,500 |
| 5% | $25,000 | $475,000 |
| 10% | $50,000 | $450,000 |
| 15% | $75,000 | $425,000 |
| 20% | $100,000 | $400,000 |
Use this interactive mortgage calculator to input different scenarios to generate some estimated monthly payments.
Benefits of Having a Larger Down Payment on a House
Typically, having a larger down payment may have the associated benefits:
- More equity in your home: If you initially put more money down, you will start with more equity in your home and a smaller loan balance (less debt).
- Lower mortgage rates: Having a larger down payment may warrant a more competitive interest rate.
- Lower monthly mortgage payments: Smaller monthly mortgage payments may allow you to have more monthly income to put into savings, invest in the market, or pay for other expenses.
- Avoid mortgage insurance: If your down payment is less than 20%, you may be required to pay private mortgage insurance, which is an added factor to your monthly payment.
Your Down Payment Is Not the Only Cash You May Need
If you have $100,000 to allocate toward a home, you are not required to use the whole sum for your down payment.
You need to consider closing costs and other transaction expenses. You may need cash for moving, repairs, or unforeseen costs. Certain mortgages obligate you to maintain specific cash reserves.
Determine the total cash you are prepared to spend. Then, decide how much of that total will go toward the down payment and how much will be set aside for the other transaction costs.
Can You Use Gift Money for a Down Payment?
Certain mortgage programs allow you to use gift funds for a down payment if you satisfy specific program requirements.
Regulations vary based on the particular mortgage, property type, occupancy status, and donor. Lenders frequently require documents that verify the source of the money and demonstrate that the recipient is not required to repay it.
If you are receiving money from someone to assist with your purchase, consult your mortgage specialist before transferring the funds. They will outline the specific documents you must provide.
How to Determine the Right Down Payment
Speak with a lender before choosing a down payment percentage. Getting pre-approved can also help you better understand what loan amount you may qualify for. In turn, this may help you in budgeting or planning for a down payment.
Get in touch with us to learn more about how to put your best foot forward before placing an offer on a home and applying for a mortgage.
Frequently Asked Questions
What is a Down Payment on a House?
A down payment is an upfront payment you make toward the home’s purchase price. This helps the mortgage company determine your loan amount and loan terms. The difference between the agreed-upon purchase price and down payment amount is the loan amount.
What is the Average Down Payment on a House?
The average down payment for a house is typically between 10-20% of the purchase price. However, numerous loan programs that provide mortgage solutions for borrowers with down payment amounts less than the average.
Do You Need 20% Down to Buy a House?
No. Many mortgages do not require a 20% down payment. The 20% figure comes up often because putting at least 20% down on a conventional mortgage can generally eliminate the need for private mortgage insurance, or PMI. That does not mean every buyer should aim for 20%.
What Should I Do if I Cannot Afford a Down Payment on a House?
If you do not have enough money right now for a down payment, the best place to start is to create a down payment savings plan. If you do not think you will save up for a down payment fast enough, you may consider asking a family member for a cash gift.
Down payment gifts are common among many first-time homebuyers.