Whether you’re buying a home for the first time or you’re an experienced homeowner looking for a new place to live, you may be wondering how much to put down for your home. mortgage.
Although a 20% down payment is a common suggestion among financial experts, it is an unrealistic goal for many potential buyers. Additionally, down payment requirements and the impact of your down payment may vary depending on the type of mortgage you choose. If you’re just starting out, you may want to check out our analysis of the different types of mortgages in our current mortgage rate guide.
As you prepare to buy a home, here’s what you need to know about how much down payment you’ll need for a home and how much is right for your financial situation.
Is a 20% deposit required?
With a median home sales price of $420,800, according to Q1 2024 data from the Federal Reserve Bank of St. Louis (FRED), you’ll need to save nearly $85,000 to reach a 20% down payment, and that’s in addition to your loan closing costs.
The main reason financial experts recommend a 20% down payment is because conventional mortgage lenders typically require private mortgage insurance (PMI) on loans with lower down payments. Private mortgage insurance protects lenders in the event of default. It typically costs between $30 and $70 per month for every $100,000 borrowed.
A larger down payment can also lower your monthly payment and potentially help you qualify for a lower interest rate.
However, minimum down payment requirements are typically well below 20%, and with government-backed loan programs, mortgage insurance and similar costs aren’t dependent on your down payment.
Minimum Deposit Requirements
If you’re buying a home for the first time, you may be discouraged to realize that it may take you years to come up with the down payment needed to purchase the type of home you want. Fortunately, some loan programs have lower down payment requirements than others, making homeownership more accessible.
Here are the minimum down payment percentages, for eligible applicants, that you can expect to meet for the most popular loan options:
| Loan program | Minimum deposit |
|---|---|
| Conventional loans | 3% |
| Giant loans | ten% |
| FHA Loans | 3.5% |
| VA Loans | 0% |
| USDA Loans | 0% |
| Conventional loans | |
|---|---|
| 3% | |
| Giant loans | |
| ten% | |
| FHA Loans | |
| 3.5% | |
| VA Loans | |
| 0% | |
| USDA Loans | |
| 0% |
It’s important to note that the 3% minimum down payment for conventional loans is aimed primarily at first-time home buyers. If you’ve owned a home within the last three years, the minimum is usually 5%.
Also be aware that if you have a credit score below 580 (but not below 500) and you are getting an FHA home loan, you will need to put down a minimum down payment of 10%.
Historical data on median house prices in the United States
If you’re curious about how the median home sales price has increased over the decades, take a look at this chart from FRED:
What is the average down payment for a house?
In the first quarter of 2024, buyers put down an average of 13.6% of their home’s purchase price, according to a report from Realtor.com, with a median value of $26,400. Here’s how those numbers have changed in recent years, according to the report:
| Year | Average down payment percentage of home value | Median down payment amount |
|---|---|---|
| First quarter 2024 | 13.6% | $26,400 |
| Q1 2023 | 13% | $24,100 |
| Q1 2022 | 13.1% | $27,500 |
| First quarter 2021 | 11.7% | $19,700 |
| Q1 2020 | 10.7% | $14,000 |
| Q1 2024 | |
|---|---|
| 13.6% | |
| $26,400 | |
| First quarter 2023 | |
| 13% | |
| $24,100 | |
| Q1 2022 | |
| 13.1% | |
| $27,500 | |
| First quarter 2021 | |
| 11.7% | |
| $19,700 | |
| Q1 2020 | |
| 10.7% | |
| $14,000 |
What can you use as a down payment?
Lenders have strict rules about what funds you use for your down payment, mainly to limit potential risks. For example, you can’t use the proceeds from a personal loan or a credit card cash advance. However, you can use the following funds for your down payment:
- Personal savings: Any money you’ve set aside over time in a savings or investment account can be used as a down payment. If you’re buying your first home, you may even be able to withdraw up to $10,000 from an individual retirement account without incurring a 10% early withdrawal penalty, although the withdrawal is subject to income tax.
- Proceeds from sales of your current home: If you are selling your current home, you may be able to time it right to use the proceeds to cover your down payment on your new home.
- House Equity: If you don’t plan on selling your current home, you can tap into your equity in the form of a home equity loan, home equity line of credit, or cash-out refinance loan and use those funds for your deposit on a second home.
- Friends and family: Lenders generally accept funds gifted or loaned by a family member or friend. This includes inheritances received from recently deceased loved ones.
- Piggyback loan: A piggyback loan is a second mortgage that you can use to increase your down payment. For example, you could put 10% down in cash and borrow 10% using a piggyback loan to meet the 20% requirement to avoid PMI. The piggyback loan may have a higher interest rate than your primary mortgage.
Regardless of how you plan to put together your down payment, it is important that you properly document the source of the funds you use. Lenders will typically request bank statements and other documentation to ensure the funds are eligible.
Learn more: How to Calculate Your Home Equity
Is it possible to get a mortgage loan with no down payment?
If you’re struggling to come up with the money for a down payment, it’s possible to buy a home without one. Here’s how to get a home loan with no down payment (if you qualify):
- VA Loans. If you are an eligible member of the U.S. military community, you may be able to get a VA loan, which does not require a down payment.
- USDA Loans: Like VA loans, USDA loans do not require a down payment to be approved. You may qualify for a USDA loan if you are purchasing a home in an eligible rural community and have a low to moderate income.
- Conventional loans: Although rare, some conventional lenders offer no-down home loans to low-income, first-time home buyers.
“In some cases, this type of product is exactly what someone needs to access their own piece of the American dream,” says Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage.
How to get help with a down payment
If you’re buying a home for the first time, some lenders, community organizations and government agencies offer down payment assistance programs that can help you meet the minimum requirement for your loan. In some cases, these programs can also provide assistance with closing costs.
Down payment assistance can come in a variety of forms, including grants, forgivable loans, low-interest loans, deferred payment loans, and special savings accounts that match your contributions.
If you are a first-time homebuyer and have a relatively low income, talk to a mortgage professional in your area to learn more about potential assistance options. A housing counseling agency certified by the U.S. Department of Housing and Urban Development (HUD) may also be able to help you identify programs for which you may be eligible.
How much should you pay for a house?
Every situation is different, so there is no one-size-fits-all answer to this question that will work for every potential buyer. When determining the right down payment for a home, it’s important to evaluate your financial situation and goals and weigh the pros and cons of a larger or smaller down payment.
Advantages and disadvantages of a larger down payment
While a larger down payment can lower your monthly payment and interest rate (and, in the case of a conventional loan, potentially eliminate PMI), it can take longer to save enough to reach your down payment goal.
Additionally, by tying up more money in your home, you will have less savings for other needs.
“Ultimately, you also have to consider moving, decorating, landscaping and other items that come with homeownership, so it’s always a good idea to make sure you have some reserves,” says Alvarez of William Raveis Mortgage.
Advantages and Disadvantages of a Smaller Down Payment
On the other hand, a smaller down payment can allow you to purchase a home faster and leave you with more savings for other financial needs and goals. However, a smaller down payment can be costly in the long run.
“If a buyer doesn’t have a vested interest, it’s much easier to walk away when times get tough,” says California-based real estate agent Lindsey Harn. So the less down payment you put on your home purchase, the higher your interest rate and monthly payments will be.
Additionally, if real estate prices in your area drop, you may find yourself underwater on your home, owing more than it’s worth. This can limit your options if you want to sell your home in the near future.
Takeaways
When buying a home, your down payment is crucial in determining the cost of your loan. However, you don’t necessarily have to follow the common rule of thumb of putting down 20%, especially if you’re applying for a government-backed loan rather than a traditional mortgage.
There are pros and cons to putting down more or less on a home, and it’s important to consider them all carefully to determine what’s best for your situation. But at the very least, we think first-time buyers who may have thought 20% was unattainable or who would be putting a strain on their finances will be encouraged that a down payment can be much lower — and homeownership is more accessible than it might seem at first.
