Whether you’re buying a home for the first time or you’re an experienced homeowner looking for a new place, you may wonder how much to put down on your mortgage loan.
While financial experts commonly suggest a 20% down payment, this is often unrealistic for many prospective homebuyers. Additionally, down payment requirements and their impact can vary based on the type of mortgage loan you choose. If you’re just getting started, you may want to review our breakdown of different mortgage types in our current mortgage rates guide.
As you prepare to buy a home, here’s what you should know about the amount of down payment you’ll need and how to determine the right amount for your financial situation.
Is a 20% down payment required?
With the median home sales price at $420,800, according to Q1 2024 data from the Federal Reserve Bank of St. Louis (FRED), a 20% down payment would require nearly $85,000, plus your loan’s closing costs.
Financial experts recommend a 20% down payment because conventional mortgage lenders typically require private mortgage insurance (PMI) on loans with lower down payments. PMI protects lenders if you default on your payments and generally costs between $30 and $70 per month for every $100,000 borrowed.
A larger down payment can also reduce your monthly payment and potentially qualify you for a lower interest rate.
However, the minimum down payment requirements are usually much lower than 20%. Government-backed loan programs often have different criteria for mortgage insurance and related costs.
Minimum down payment requirements
For first-time homebuyers, saving up for a down payment can feel daunting. Fortunately, some loan programs have lower down payment requirements, making homeownership more accessible.
Here are the minimum down payment percentages for eligible applicants for popular loan options:
| Loan program | Minimum down payment |
|---|---|
| Conventional loans | 3% |
| Jumbo loans | 10% |
| FHA loans | 3.5% |
| VA loans | 0% |
| USDA loans | 0% |
Note that the 3% minimum down payment for conventional loans is primarily for first-time homebuyers. If you’ve owned a home in the past three years, the minimum is generally 5%.
If your credit score is below 580 (but no lower than 500), an FHA loan will require a minimum 10% down payment.:
What’s the average down payment on a house?
In Q1 2024, homebuyers put down an average of 13.6% of their home’s purchase price, according to Realtor.com, with a median dollar value of $26,400. Here’s how those numbers have changed over the past few years:
| Year | Average down payment percentage of home value | Median down payment amount |
|---|---|---|
| Q1 2024 | 13.6% | $26,400 |
| Q1 2023 | 13% | $24,100 |
| Q1 2022 | 13.1% | $27,500 |
| Q1 2021 | 11.7% | $19,700 |
| Q1 2020 | 10.7% | $14,000 |
What can you use as a down payment?
Lenders have strict rules for the sources of your down payment funds to limit potential risk. You can’t use proceeds from a personal loan or a credit card cash advance, but you can use the following:
- Personal savings: Money set aside in savings or investment accounts can be used. First-time homebuyers may withdraw up to $10,000 from an IRA without incurring a 10% early withdrawal penalty, though the withdrawal will be subject to income taxes.
- Sales proceeds from your current home: If you sell your current home, you may use the proceeds for your new home’s down payment.
- Home equity: You can tap into your home equity through a loan, line of credit, or cash-out refinance for a down payment on a second home.
- Friends and family: Lenders accept funds gifted or loaned by family members or friends, including inheritances.
- Piggyback loan: A second mortgage used to increase your down payment amount. For example, putting down 10% in cash and borrowing 10% with a piggyback loan to meet the 20% requirement to avoid PMI. The piggyback loan may have a higher interest rate than your main mortgage.
Properly document the source of your down payment funds as lenders typically require bank statements and other documentation.
Is it possible to get a no down payment mortgage?
If you’re struggling to save for a down payment, you can buy a home without one if you qualify:
- VA loans: Available to eligible U.S. military community members with no down payment required.
- USDA loans: No down payment required for eligible rural community homebuyers with low to moderate income.
- Conventional loans: Rarely, some lenders offer zero down home loans to first-time homebuyers with lower incomes.
According to Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage, “In some cases, this type of product is exactly what someone needs to get in the door of their own piece of the American dream.”
How to get help with a down payment
First-time homebuyers can explore down payment assistance programs offered by lenders, community organizations, and government agencies. These programs may also assist with closing costs.
Down payment assistance can come in the form of grants, forgivable loans, low-interest loans, deferred-payment loans, and special savings accounts that match your contributions.
Speak with a mortgage professional in your area or a HUD-certified housing counseling agency to learn about potential assistance options.
How much should you put down on a home?
The right down payment amount varies for each prospective homebuyer. Evaluate your financial situation and goals, and weigh the pros and cons of a larger versus smaller down payment.
Pros and cons of a larger down payment
A larger down payment can reduce your monthly payment and interest rate and, for conventional loans, potentially eliminate PMI. However, it can take longer to save up, and tying up more money in your home leaves you with less savings for other needs.
Sarah Alvarez of William Raveis Mortgage advises, “Consider moving, decorating, landscaping, and other home ownership expenses, and ensure you have reserves.”
Pros and cons of a smaller down payment
A smaller down payment can get you into a home more quickly and leave you with more savings for other financial needs. However, it can result in higher long-term costs, higher interest rates, and monthly payments.
Lindsey Harn, a California-based real estate agent, notes that a smaller down payment can make it easier to walk away when times get tough, leading to higher interest rates and monthly payments. If real estate prices drop, you risk being underwater on your home, limiting your options if you want to sell soon.
The takeaway
Your down payment plays a crucial role in determining your loan costs. You don’t necessarily need to follow the 20% rule of thumb, especially with government-backed loans. Carefully consider the advantages and disadvantages of a larger or smaller down payment to determine what’s best for your situation. First-time homebuyers may find it encouraging that a down payment can be much lower than 20%, making homeownership more attainable.
