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How Much Do First Time Home Buyers Need For a Down Payment?

If you’re ready to buy a home, you’re probably already thinking about how you’re going to handle that down payment.

Many times, potential homebuyers don’t even know how much money they need to put down.

While there are certainly other considerations, a down payment is at least partially tied to a home’s sale price.

For instance, for a $200,000 home,

10% down= $20,000

20% down=$40,000

Changing the down payment obviously makes a big difference.

The 20% rule

Ideally, a prospective homebuyer would be able to put 20% down. 

In the case of a $300,000 home, that comes out to $60,000.

While it may sting a little, with 20% down you’re able to qualify for

  • Lower interest rate
  • Smaller monthly mortgage payments

You may also stand out more to a seller considering multiple offers, and you avoid buying private mortgage insurance this way. 

While that part sounds appealing, it’s not very realistic for many homebuyers. 

Even though 20% has long been the gold standard when it comes to down payments, the majority of homebuyers do NOT put 20% down.

In most cases, a buyer puts down anywhere from 3% to 20% of a home’s sale price.

Some estimates suggest the average down payment is about 7% for a first-time buyer.

3.5% down

With an FHA loan you can drop the down payment to just 3.5%. In this case, you will have to pay mortgage insurance premiums.

It’s not the only option out there, though.

3% down

There are also some conventional mortgages available that can bring it down to as low as 3%. 

You may find the required down payment varies depending on your credit history and the lender your choose.

In other words, you may discover you can get your loan down to 3.5% if you have a certain credit score, but only down to 10% if your credit score is slightly lower on the scale.

Zero down payment

In some cases, buyers are able to purchase a home with zero percent down. This is most common with a 

  • VA loan 
  • USDA loan

With a VA loan you have to be a veteran. Your income and your credit also come into consideration.

Typically, a USDA loan helps low to moderate-income people purchase a home in a rural area. You do need to have good enough credit in order to qualify. 

The question, how much do I need for a down payment, therefore, can differ from property to property, buyer to buyer and lender to lender.

Not only will you need to consider how much cash you have on hand to use as a down payment right now, but also what the total down payment you make now means for your financial situation over time. 

About the author

I am from Chicago, IL and I have been lending in this area for 20+ years. My team and I strive to give you an enjoyable mortgage experience while providing you the best programs and rates! I am also offering a FREE mortgage analysis to determine if refinancing is right for you.