Consider the down payment requirement first when looking to buy a house. Buying a home without a down payment is possible, but you may wonder what amount you need to save.

Here is an overview of down payment requirements and the average amount buyers pay for different types of loans.

What is the best amount to put down on a house?

There is a minimum down payment requirement for different types of loans. The following are the major types of loans and the down payments required for each.

Conventional loan:  Typical types of mortgage loans include conventional loans and adjustable-rate mortgages. In the case of a traditional loan, there is a minimum 3% down payment requirement. If your credit score is below 620 or you carry significant debt, your lender may ask for a larger down payment.

Department of Veterans Affairs (VA) loan : VA loans are government-backed and are available to current and former members of the armed forces. If you qualify for a VA loan, you can buy a home without spending money.

U.S. Department of Agriculture (USDA) loan:  If you want to purchase a home in rural or suburban areas, you may be interested in USDA loans. The government backs these loans and can provide financial assistance. USDA loans can allow you to buy a home without putting any money down, just like VA loans.

Federal Housing Administration (FHA) loan :  FHA loans are government-backed loans with lower credit and financial requirements than conventional ones. You must put down at least 3.5% at closing to qualify for an FHA loan.

What Is The Average Down Payment For A House?

The National Association of REALTORS  states that first-time home buyers put down about 6% of the home's price. In comparison, repeat buyers put down 13%. A typical home purchase will cost between $10,000 and $15,000, but this depends heavily on the type of loan and the current market conditions. You don't need a specific amount as a down payment to buy a house. There is no right or wrong answer. A down payment assistance program can help you pay for your down payment if you cannot.

If you're thinking about how much you should put down, consider the following:

• Your loan type's minimum down payment
• Emergency fund you have (or don't have)
• Repair costs and the condition of your home
• Retirement age
• Other debts you owe

Do Large Down Payments Make A House More Affordable?

In general, larger down payments tend to result in less interest paid over time and eliminate private mortgage insurance (PMI) fees (assuming the down payment amounts to at least 20% of the purchase price).

A sizable down payment is only sometimes a good idea for everyone, so analyzing your finances is essential. When you wait until you have enough savings for a large down payment, you may pay more in rent than you would if you eliminated PMI and reduced your interest payments. You may also miss an opportunity to enter a hot housing market at the right time.

Getting pre-approved for a mortgage will help you determine what kind of terms you will qualify for.  

Is There A Need For a 20% Down Payment On A House?

It is common knowledge that a down payment of 20% is required to obtain a mortgage and purchase a home. Even though some properties may require a substantial down payment, 20% is no longer a do-or-die requirement. Conventional, FHA, and VA mortgages, all of which require no down payment, are available today.

Private mortgage insurance (PMI) requirements created the myth of a 20% down payment. If you default on your loan, your lender is protected by PMI insurance. When you bring less than 20% down to your closing, most lenders will require you to pay PMI, even though PMI protects the lender, not you.

With a conventional loan, you can request to cancel your PMI once you reach 20% equity in your house. If you have a lower down payment, you will still be required to pay PMI.

In addition to saving money on interest, putting 20% down on a mortgage has some other benefits. Your monthly payment may become lower, and you will also be able to access lower interest rates. The money you borrow and the interest you pay can also be reduced over time, saving thousands of dollars.

It can take a long time to save for a sizable down payment. If you put more money down, you might have less money left over for repairs and renovations.

Decide how much you want to put down on your mortgage loan based on your loan requirements, financial situation, and individual needs.

Statistics On Average Down Payments In 2023

• Realtor.com says the average down payment on a primary residence was 13 percent in the first quarter of 2023.
• According to ATTOM Data Solutions, the median down payment as of the first quarter 2023 was $26,250.
• In the first quarter of 2023, ATTOM  identified five housing markets with the highest median down payments: San Jose-Sunnyvale-Santa Clara ($365,000), San Francisco-Oakland-Hayward ($239,000), Los Angeles-Long Beach-Anaheim ($174,000); Boulder ($171,135); and Santa Rosa.

Down Payment Source

The National Association of Realtors (NAR) reported that 47% of homebuyers used personal savings for their down payment. Most young buyers used savings for the purchase. In contrast, most older buyers used proceeds from selling another primary residence.

Down payments can also be funded by selling stocks and bonds, receiving a gift from relatives or friends, or receiving a tax refund or inheritance.

Bottom Line

One of the significant obstacles to buying a home for many renters is coming up with a down payment. Most buyers put down less than 10 percent of the purchase price, but older buyers tend to put down more, often owing to equity from their previous home. Down payment amounts are also influenced by where you buy. For instance, buyers who live in more expensive areas like California need more money for a 3 percent down payment.

It's good to know that you don't need the oft-quoted 20 percent to qualify for a mortgage. Approximately 6% of a borrower's loan value is paid as a down payment. However, depending on your loan type and credit score, you can buy a home with as little as 3% down. A USDA or VA loan may even allow you to purchase a home with no money down. Minimum down payments vary depending on the type of loan.

Individual circumstances will determine the exact down payment you should make. Mortgage Dove can help you assess your loan options and understand the actual cost of your mortgage when you are ready to start.