How Much Down Payment Is Required for a House?

Along with closing costs, the down payment on a house can be a substantial upfront expense during the homebuying process. Find out how much is required for a down payment on a house, why you might want to make a larger down payment and which options you have for obtaining the necessary funds.

What is a down payment on a house?

A house down payment is the upfront cash you put down toward the home’s purchase price. The minimum down payment percentage depends on factors such as the mortgage program, your credit score and your chosen lender. The down payment is usually partially paid at the contract signing, with the remaining balance paid at closing.

Since this down payment helps offset some of the mortgage lender’s risk, it can improve your chances of mortgage loan approval. Additionally, the amount you put down contributes to your home’s equity.

How much down payment is required for a house?

Like many homebuyers, you may think you need to put a hefty 20% down on a new home. However, based on data from the National Association of Realtors, the typical down payment on a house actually stands at 8% for first-time homebuyers and 19% for repeat homebuyers.

Your minimum down payment percentage ultimately depends on your financial situation, the property, your lender and the specific loan program. The lowest down payment on a house is none at all, and some government-backed mortgage programs offer this option for primary residence purchases. Other loans require down payments ranging from 1% to 20%, depending on the type of mortgage.

0% down mortgage loans

If you’re trying to find out how to buy a house with no money down, your options include the following government agencies: U.S. Department of Veterans Affairs (VA) loans and U.S. Department of Agriculture (USDA) loans. These loans target specific types of borrowers, which we'll discuss below.

VA loans

VA loans have no down payment requirement when the purchase price of the home you choose costs is equal to or less than its market value. However, you can only apply for a VA loan if you or your spouse has an approved military affiliation since the organization requires a Certificate of Eligibility. These loans offer additional benefits such as competitive interest rates, no mortgage insurance premiums and flexibility in the kind of home you can buy. You may have to pay a VA funding fee based on the down payment amount, your military affiliation and the number of VA loans you've already taken out.

USDA Loans

USDA loans also have no minimum down payment, but you’ll need to pick a property in an approved rural location. Your options include USDA Single Family Direct Home Loans and the USDA Single Family Housing Guarantee Program, both of which have income, asset and property restrictions. You'll also need to show that you don't already own a suitable home.

USDA Single Family Direct Home Loans have the lowest income limits and most restrictive property requirements. But if you qualify, you can also have your mortgage payments reduced temporarily. The USDA Single Family Housing Guarantee Program provides more options for buying or building a property, sets no property price limit and admits applicants who earn up to 115% of their area’s median income. However, it requires an upfront loan guarantee fee and an annual guarantee fee, which function as mortgage insurance and help the USDA to continue to providing loans to qualified buyers.

While VA and USDA loans are the largest categories of zero-down payment mortgages, some people may be eligible for other options. There are now lenders that will offer a total of 100% financing on FHA loans as well. They offer the traditional 96.5% first mortgage but also provide a second mortgage for the remaining 3.5%.

Physicians may qualify for zero-down mortgages with no private mortgage insurance through programs offered by some lenders. Additionally, some credit unions offer loans that don't require a down payment for their members.

1-3% down mortgage loans

Backed by either Freddie Mac or Fannie Mae, conventional mortgage programs for primary residences can allow for down payments as low as 3%, and they usually require good credit. The Fannie Mae HomeReady and Freddie Mac Home Possible programs don't have a first-time homebuyer requirement and can help you get a mortgage even with a low income. The income limits for these programs are 80% and 100% of your area's median income for HomeReady and Home Possible, respectively.

Some lenders such as Rocket Mortgage and Riverbank Finance offer programs that give you 2% toward the minimum down payment so that you only need to come up with 1%. While these offers can come with restrictions on the down payment amount allowed, they can make homeownership more accessible. Plus, lenders may offer other perks such as waiving the private mortgage insurance (PMI) which usually applies to conventional mortgages.

If you don’t meet the HomeReady or Home Possible income limits, 3% down conventional programs exist, too. These include Fannie Mae's 97% Loan-to-Value (LTV) Standard program and Freddie Mac's HomeOne program. You’ll need to be a first-time homebuyer to qualify.

3.5% down mortgage loans

Backed by the government, Federal Housing Administration (FHA) loans require a minimum 3.5% down payment for a house as long as you have a credit score of at least 580. The minimum rises to 10% with a credit score of 500 to 579.

While these loans have lenient credit requirements and no income restrictions, they require upfront and ongoing mortgage insurance premiums that, in most cases, are paid for the life of the loan. You can also only use an FHA loan for a primary residence.

10-20% down mortgage loans

You might make a 10% or higher down payment to make yourself more appealing to the lender or to qualify for a larger loan amount than a smaller down payment allows. And if you're buying something other than a primary residence, the lender will likely want 10% down for vacation homes and 15% down for investment properties.

You may also need a larger down payment — up to 20% — if you plan to take out a jumbo loan that exceeds the conforming loan limits that the Federal Housing Finance Agency has set. Depending on the location, these usually range from $766,550 to $1,149,825. These loans also require good credit and sufficient cash reserves. Some lenders do offer jumbo loans with only a 10% down payment requirement.

The pros of larger home down payments

If you can afford it, making more than the minimum down payment on a house has its advantages. You can have more manageable monthly payments, pay less in the long run and benefit from having more immediate equity in your home.

More affordable monthly mortgage payments

Since the down payment reduces the necessary mortgage amount, you’ll have a lower monthly mortgage payment if you put more money down.

For example, if you buy a $250,000 home and take out a 30-year mortgage with a 7% mortgage rate, a sample monthly payment — excluding PMI, taxes and insurance, which can all vary widely — may look like the following:

• 3% down: $1,613.36
• 5% down: $1,580.09
• 10% down: $1,496.93
• 20% down: $1,330.60

Not only does a smaller payment mean more room in your budget for other expenses, but it could also help reduce the risk of defaulting on your mortgage and losing the home. You may also find it easier to pay your mortgage off early.

Less interest paid

Mortgage lenders consider the down payment amount as one factor for determining mortgage interest rates. By putting more money down, you reduce the risk to the lender, who may reward you with a lower interest rate. While these interest savings especially add up over time, the lower rate matters for your closing costs, as well, since these include some prepaid interest.

Higher upfront home equity

Your home’s equity equals its value minus the money you owe on it. Only meeting the minimum down payment requirements could mean no immediate equity at all. But by putting down a significant amount, you can reduce the risk of going underwater on your home loan, where you owe more than your home’s value. If you try to sell a property with an underwater mortgage, you may not make enough money off the sale to pay off your lender.

Having more equity also helps if you need home equity financing later for home improvements.

Lower fees

Some mortgage programs require upfront or ongoing fees that you can reduce or eliminate with a big enough down payment. For example, the VA funding fee goes down as long as you make a 5% minimum down payment. You can also avoid having to pay private mortgage insurance for conventional loans if you put down 20%.

More appealing offer

Larger down payments may also sway home sellers confronted with multiple offers. As the housing market has become more competitive, many prospective buyers may find that a larger down payment may help them edge out the competition by making their offer more attractive to the sellers.

The cons of larger home down payments

While making the ideal down payment for a house offers financial benefits, having the cash tied to the home comes with drawbacks, including:

Lower cash reserves for emergencies

By using a large portion of your savings for your down payment, you could experience financial struggles if a job loss or other emergency occurs. You may end up needing to borrow money to cover unexpected expenses or even default on your mortgage if you run out of ready cash for your monthly payments. To reduce the risk, make sure you have a sufficient emergency fund before purchasing a home.

Potential delays for home shopping

If you use a down payment calculator, you’ll see how large the target amount can be. Obtaining this lump sum may require delaying your home-buying plans for a long time.

In the meantime, property prices or interest rates could rise, or home inventory might fall, and you can’t find what you want. If you currently rent, delaying a home purchase means not reaping the benefits of owning such as building up equity and having more stability and control over your home.

Risk of your home losing value

While making a large down payment helps build equity right away, declining property values could quickly cut into that. This can happen due to economic changes or local factors in your neighborhood. If this happens, you may feel uneasy knowing you put so much cash in the home and can’t get it back.

Less cash for other goals

A high down payment means you won't have that cash to use for other goals. This could mean having to wait to pay down other debts or not having enough to save for your retirement or make home renovations. A lower down payment could allow you to accomplish multiple goals.

How to come up with a down payment for a house fast

You could get a second job, sell unneeded items or cut expenses and put the money toward your down payment. You might also borrow or withdraw from a retirement account, but you should first consider potential penalties. Another option is asking for down payment gifts from family and friends. Finally, you should check with your state and local governments for any available down payment assistance programs in your area.

Can you buy a house without a down payment?

You might be able to buy your first home without a down payment if you qualify for a VA or USDA loan. Otherwise, research down payment assistance programs that may cover the minimum down payment for your type of loan. Just keep in mind that you’ll still need funds to cover your closing costs or else roll them into the loan.

How to buy a house with low income and no down payment

USDA mortgages target homebuyers with no down payment funds and low incomes. If you don’t qualify for one, you could consider a co-borrower with sufficient income.

As long as you don’t need to purchase a home immediately, you can get more loan options if you work on your finances. Some actions to take could include reducing other debts, raising your income, improving your credit and seeking other potential down payment sources. Some of the best mortgage lenders have resources you can use to identify assistance programs available in your area.

Who gets the down payment on a house?

At the time of closing, you’ll use a cashier’s check or wire transfer to provide the down payment to the settlement agent. The home’s seller eventually gets the down payment and other money left over from the home’s sale price after reductions for costs such as their past mortgage payoff, real estate agent's commission and other fees.

Summary of Money's how much is required for a down payment on a house

If you plan on buying a house with a small or no down payment, carefully explore your mortgage options and understand the ongoing costs. A low down payment may get you a home faster, but it can also mean additional costs such as private mortgage insurance or a higher upfront fee for certain mortgage programs. A large down payment can offer long-term savings and lower payments, but it leaves less money available if you experience any hardship. Work with your lender to explore the pros and cons of your options and determine what works best for you.