How Much Should I Have for a Down Payment on a House?

January 2, 2021 | 2 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. A down payment is an up-front payment you make towards the home’s total purchase price and helps the mortgage company determine your loan amount and loan terms.

Many often wonder how much money they should have saved for a down payment on a house. The answer depends on your overall budget, your credit profile, debt-to-income ratio, and desired loan program.

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.  

What Size Down Payment is Right for Me? 

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. 

Use our 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. 

Mortgage Down Payment Requirements for Different Programs

Different loan programs have different mortgage down payment requirements. GuardHill offers numerous loan programs with varying guidelines to appeal to borrowers with unique credit profiles.

Down payment requirements for jumbo and Non-QM loans may be higher than traditional conforming loans because they inherently carry more risk. On the contrary, down payments for an FHA loan may be as little as 3.5%. 

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.