How Much to Put Down on a House

November 3, 2021 | 3 min read | The mortgage process
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If you are thinking about buying a home, a great place to start is planning for a mortgage down payment. Many often wonder how much money they should have saved for a down payment on a house. The answer depends on your overall budget, credit profile, debt-to-income ratio, and desired loan program.

What is a Down Payment on a House?

A down payment is an up-front payment you make towards the home’s total purchase price. This helps the mortgage company determine your loan amount and loan terms. The difference between the agreed-upon purchase price and down payment amount is the loan amount.

What is the Average Down Payment on a House?

The average down payment for a house is typically between 10-20% of the purchase price. However, numerous loan programs that provide mortgage solutions for borrowers with down payment amounts less than the average. 

How Do Down Payment Requirements Vary?

The down payment requirements may vary depending on the loan program (conforming, jumbo, FHA, etc.) and property type (primary residence, second home, or investment property). 

  • Primary residence: The down payment requirement on a primary residence may vary between 3-20% of the purchase price. Typically, loans for primary residences have less strict requirements than second homes and investment properties, as they are deemed less risky to lend on. 
  • Second home: You may be required to put at least 10-20% of the purchase price down when buying a second home. 
  • Investment property: Many investment property loan programs today require a down payment of at least 20-25% of the purchase price. 

How Much Should I Save for a House? 

The amount you should save for a down payment on a house depends on your desired wants, needs, overall budget, and eligibility for the loan. The right size for your down payment may depend on your current employment and income status, existing debts, and your total assets. The general rule of thumb is to not spend more than 25% of your monthly income on your monthly mortgage payments. You also want to make sure you set an appropriate budget to ensure you will have enough money left on-hand for emergencies and necessary lifetime savings. 

You may also consider speaking with one of our mortgage specialists to get pre-approved and better understand what loan amount you may qualify for. In turn, this may help you in budgeting or planning for a down payment. 

Down Payment Calculator

Use this interactive mortgage calculator to input different scenarios to generate some estimated monthly payments.

Benefits of Having a Larger Down Payment on a House 

Typically, having a larger down payment may have the associated benefits:

  • More equity in your home: If you initially put more money down, you will start with more equity in your home and a smaller loan balance (less debt). 
  • Lower mortgage rates: Having a larger down payment may warrant a more competitive interest rate.
  • Lower monthly mortgage payments: Smaller monthly mortgage payments may allow you to have more monthly income to put into savings, invest in the market, or pay for other expenses.
  • Avoid mortgage insurance: If your down payment is less than 20%, you may be required to pay private mortgage insurancewhich is an added factor to your monthly payment.  

What Should I Do if I Cannot Afford a Down Payment on a House?

If you do not have enough money right now for a down payment, the best place to start is to create a down payment savings plan. If you do not think you will save up for a down payment fast enough, you may consider asking a family member for a cash gift. Down payment gifts are common among many first-time homebuyers. 

Get in touch with us to learn more about how to put your best foot forward before placing an offer on a home and applying for a mortgage.