How much should your down payment be?

February 11, 2019

If you're looking to buy a home, one of the major hurdles you need to clear is the down payment. This stage of the process is intimidating for many prospective homebuyers. So, how much should your down payment be?

There's no simple answer to this question. The amount you decide to put down on your house depends on your financial situation, the loan program you choose and even the location you're trying to buy in. Despite the different factors that affect this payment, a 2018 National Association of Realtors report states that the median down payment is about 7 percent for first-time buyers and 13 percent overall.

If you're looking for firmer guidelines, some common loan types and their minimum down payments are:

  • FHA loan: 3.5 percent
  • Conventional loan: 3-15 percent
  • VA and USDA loans: 0 percent

Be aware that if you can't put down at least 20 percent, lenders require mortgage insurance as a way to guarantee they'd be covered if you could not repay the loan. This insurance is expensive, but usually, if you gain 20 percent equity in your home, you can cancel it.

There are also loan programs that don't require down payments — which looks like an attractive option. But it's not the sweet deal it seems; your interest rates and fees would be higher because you'd be more of a risk as a borrower.

It always pays to do your research. Check into what different lenders charge for fees to find the best possible deal. Putting down as much as you can comfortably afford is the best policy because you would start with more equity in your home, and monthly payments, fees, and loan-to-value (LTV) ratio would be lower.

You can punch your numbers into this mortgage calculator to get an idea of what a good down payment would be for you:
Down Payment Calculator: Calculate Your Down Payment

For more resources on down payments, go to:
What Down Payment is Required?
How much is a down payment on a house?