Whether you're buying a home for the first time or you're a seasoned homeowner looking for some new digs, you may be wondering how much to put down on your mortgage loan.
While a 20% down payment is a common suggestion among financial experts, that's an unrealistic objective for many prospective homebuyers. What's more, down payment requirements and the impact of your down payment can vary depending on the type of mortgage loan you choose—if you’re just getting started, you may wish to check out 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 how much down payment you'll need for a house and the right amount for your financial situation.
Is a 20% down payment 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'd need to save up nearly $85,000 to reach a 20% down payment, and that's on top of your loan's closing costs.
The primary reason financial experts recommend a 20% down payment is that conventional mortgage lenders typically require private mortgage insurance (PMI) on loans with lower down payment amounts. PMI protects lenders in the event that you default on your payments. It typically costs between $30 and $70 per month for every $100,000 borrowed.
A larger down payment can also reduce your monthly payment amount and potentially help you qualify for a lower interest rate.
However, the minimum down payment requirements are typically much lower than 20%, and with government-backed loan programs, mortgage insurance and similar costs aren't contingent on your down payment.
Minimum down payment requirements
If you're a first-time homebuyer, it may feel disheartening to realize it could take years to save up a down payment for the type of home you have your eye on. 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 have to meet for the most popular loan options:
It's important to note that the 3% minimum down payment for conventional loans is mainly for first-time homebuyers. If you've owned a home in the past three years, the minimum is generally 5%.
Also beware that if you have a credit score below 580 (but no lower than a 500 score) and you obtain an FHA home loan, you’ll be required to make a minimum 10% down payment.
Historical data for median U.S. house prices
If you're curious how the median house sale price has gone up over the decades, take a look at this chart from FRED:
What's the average down payment on a house?
In the first quarter of 2024, homebuyers put down an average of 13.6% of their home's purchase price, according to a report from Realtor.com—with a median dollar value of $26,400. Here's how those numbers have changed over the past few years, per the report:
What can you use as a down payment?
Lenders have strict rules for the funds you use for your down payment, primarily to limit potential risk. For example, you can't use proceeds from a personal loan or a credit card cash advance. However, you can use the following toward 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 a first-time homebuyer, you may even be able to withdraw up to $10,000 from an individual retirement account without incurring a 10% early withdrawal penalty—though the withdrawal will be subject to income taxes.
- Sales proceeds from your current home: If you're 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.
- Home equity: If you're not planning on selling your current home, you could tap 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 down payment on a second home.
- Friends and family: Lenders will typically 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 loan you can use to increase your down payment amount. For example, you may 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 main mortgage.
Regardless of how you plan to come up with your down payment, it's important that you properly document the source of the funds you use. Lenders will typically ask for bank statements and other documentation to ensure that the funds are eligible.
Learn more: How to calculate your home equity
Is it possible to get a no down payment mortgage?
If you're struggling to come up with some cash for a down payment, it is possible to buy a home without one. Here's how to get a home mortgage with no money down (if you qualify):
- VA loans. If you're an eligible member of the U.S. military community, you may be able to get a VA loan, which doesn't require a down payment.
- USDA loans: Like VA loans, USDA loans don't require a down payment to get approved. You may qualify for a USDA loan if you're buying a home in an eligible rural community and have a low to moderate income.
- Conventional loans: While rare, some conventional lenders offer zero down home loans to first-time homebuyers with lower incomes.
"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," 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 various forms, including grants, forgivable loans, low-interest loans, deferred-payment loans and special savings accounts that match your contributions.
If you're a first-time homebuyer and have a relatively low income, speak with a mortgage professional in your area to learn 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 you could be eligible for.
How much should you put down on a home?
Every situation is different, so there's no universal answer to this question that fits every prospective homebuyer. To determine how much down payment is right for a house, it's important to evaluate your financial situation and goals and weigh the pros and cons of a larger vs. smaller down payment.
Pros and cons of a larger down payment
While a larger down payment can minimize your monthly payment and interest rate—and on a conventional loan, potentially eliminate PMI—it can take longer to save up enough to meet your down payment goal.
What's more, tying up more money in your home leaves you with less savings for other needs.
"At the end of the day, you also have to consider moving, decorating, landscaping and other items that come along with home ownership, so it’s always smart to make sure you have reserves," Alvarez of William Raveis Mortgage says.
Pros and cons of a smaller down payment
On the flip side, a smaller down payment can get you into a home more quickly and leave you with more savings for other financial needs and objectives. However, a smaller down payment can be costly in the long run.
"If a homebuyer doesn’t have any skin in the game, it is much easier to walk away when times get tough," says Lindsey Harn, a California-based real estate agent. As a result, the less money you put down on your home purchase, the higher your interest rate and monthly payment will be.
What's more, if real estate prices in your area go down, you're at risk of being 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.
The takeaway
When buying a home, your down payment is crucial in determining your loan costs. However, you don't necessarily need to follow the commonly quoted rule of thumb to put down 20%, especially if you're applying for a government-backed loan instead of a conventional mortgage.
There are advantages and disadvantages to putting down more or less on a home purchase, and it's important to carefully consider them all to determine what’s best for your situation. But at the very least, we think first-time homebuyers who may have felt that 20% was unattainable or would stretch their finances thin will find it encouraging that a down payment can be much lower—and homeownership is more attainable than it might have seemed at first.
