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How much down payment do you need for a house?

Laura Gariepy
Updated 9 min read

As you research how to buy a house, you’ll quickly learn that there are more expenses involved than your monthly mortgage bill. You’ll have to pay for a property appraisal, cover closing costs, and make a down payment on your new home.

We’ll share everything you need to know about down payments so you can plan and budget accordingly.

A down payment is your initial cash investment in your new home and is a percentage of the property’s sale price. You’ll remit your down payment to your lender on closing day to finalize your mortgage.

Dig deeper: How much money do I need to buy a house?

Many lenders require you to make a down payment to have an immediate financial stake in your home. However, that’s not always the case.

Your required down payment will be based on the type of mortgage loan you choose, your financial standing and creditworthiness, and the amount you borrow to purchase your home. Here’s the minimum you’ll pay by mortgage type:

The percentages above reflect the purchase of a primary residence. However, if you plan to buy a second home like a vacation house or investment property, expect to make a higher down payment. You’ll generally need to put at least 10% down on your second home and 15% down on your rental.

According to the most recent National Association of Realtors (NAR) Home Buyers and Sellers Generational Trends report, the median down payment across all home buyers in 2023 was 14%. Young home buyers (age 24-32) tended to put down less than 10%, while elderly home buyers (age 77-97) generally put down more than 25%.

Per the NAR, as of December 2023, the median price of an existing home for sale was $382,600. Knowing that, let’s convert percentages into dollars to give you a true idea of how much a down payment can run:

  • Average down payment among young buyers (8%): $30,608

  • Average down payment overall (14%): $53,564

  • Average down payment among elderly buyers (27%): $103,302

Now, let’s examine the pros and cons of making a higher or lower down payment.

There are many benefits to making a large down payment, including:

  • Less debt. When you pay more upfront, you can borrow less to cover the rest of the purchase price.

  • Lower monthly payments. A lower principal loan balance means a smaller mortgage payment, freeing up cash for other expenses or financial goals.

  • Lower interest rate (potentially). Your lender may reward you for reducing their risk (by borrowing less) by offering you a better interest rate.

  • No mortgage insurance (potentially). If you put down 20% or more, you can avoid paying for private mortgage insurance, further lowering your monthly housing expense.

Yahoo Finance tip: If you take out an FHA mortgage, you must pay mortgage insurance for the entire loan term if you put less than 10% down. If you meet or exceed that requirement, you can have the insurance dropped after 11 years. However, if you have at least 20% equity in the property, you could also refinance to a conventional mortgage to get rid of the insurance coverage.

Dig deeper: Understanding FHA mortgage insurance

On the other hand, there’s some potential upside to making a low down payment, such as:

  • Faster homeownership. A smaller down payment takes less time to save up, accelerating your path to purchase.

  • More funds to renovate or decorate. You’ll have some additional cash on hand to make the home your own.

  • Other investment opportunities. Consider putting additional money into other investments.

Kelley C. Long, certified financial planner, financial coach, and host of the Financial Bliss with Kelley Long podcast, said via email, "You may also find a lower down payment makes more sense if you're planning to refinance sooner than later so you're less concerned about the rate you pay at the outset and are more concerned with just getting into the property you are buying."

Like any question in personal finance, the answer is, "it depends." Even industry experts can’t come to a consensus. Here are two of their viewpoints:

"The old 'rule' of putting down 20% like our parent's generation is no longer applicable," said Shmuel Shayowitz, president and chief lending officer of Approved Funding, via email. "There is no right answer to how low or how high of a down payment to put down when buying a house. Every situation needs to be evaluated on its own."

For instance, "Putting down a 3% down payment for some first-time home buyers, despite having to pay an additional $100-200 [per month] of PMI, might be well worthwhile versus waiting and continuing to rent. Additionally, if someone is planning on doing work to their new home, it might also be recommended to put down a smaller downpayment, despite the PMI, only to have that PMI removed once renovations are completed and adequate proof is provided to show the increase in value," Shayowitz said.

Dig deeper: Should you rent or buy a home?

On the other hand, Long said, "The conventional 20% still makes the most sense in terms of the best mortgage rates unless you qualify for special financing terms such as a VA loan or a community-based incentive. When interest rates were lower, it made more sense to say the lower your down payment, the better, but with current rates, you want to weigh the rate you're paying against what you'd do with the cash otherwise. Like if you'd just keep it in savings at 4.5%, it's better to put it down if your mortgage rate is 6.5% to reduce your interest costs."

Ultimately, you know your situation and goals better than anyone. It’s wise to look at your down payment as an integrated piece of your financial life rather than an isolated expense.

According to the NAR’s 2023 Home Buyers and Sellers Generational Trends report, nearly half of home buyers funded their down payments with savings. Roughly four out of 10 buyers (generally older) used proceeds from selling their prior home to cover the cost. Younger buyers tended to get money from loved ones to boost their savings.

Some prospective homeowners tap into their 401(k) retirement accounts to raise cash. However, doing so may not be best for your financial future because the money you withdraw now won’t benefit from years of compound interest. You may also have to pay taxes on what you withdraw. (Taking a loan from your 401(k) delivers the same consequence of missing out on compound interest and requires repayment.)

Saving up for your down payment can be one of the most challenging parts of the home buying process.

Fortunately, with some planning, persistence, and patience, you can save up the money you need. Taylor Kovar, certified financial planner and CEO and founder of Kovar Wealth Management, said via email, "set a savings goal, create a budget, cut unnecessary expenses, and consider automating savings. Explore side gigs for additional income to help meet this goal."

Long suggested making the process fun. "Open a separate savings account and try to make a game of it. For example, every time you forgo ordering delivery for dinner, transfer the amount you typically would pay for delivery to your down payment fund. This way, your sacrifice isn't just not spending the money on delivery; you're literally saving the money toward your new home."

You may be able to get a loan to cover your down payment, but it’s generally not advisable because it increases your overall debt, Kovar said.

However, if you need to close on a new house before your existing residence sells, it can make sense to go into debt temporarily for your down payment.

Your options typically include a home equity loan or home equity line of credit (HELOC), a bridge loan, or a 401(k) loan. You might also borrow money from a family member or friend. If you do, ensure the loan terms are spelled out in writing, as the lender will want to see a signed agreement, suggested Long.

Learn more: What is a HELOC, and how does it work?

If you’re a first-time home buyer (which means you haven’t owned a home in three or more years), you may qualify for down payment assistance. Depending on the program, the aid may come as a grant, forgivable loan, no or low-interest loan, deferred payment loan, or matched savings gift.

Qualification requirements vary from program to program but can include income limits, minimum credit scores, property location, and other criteria. You can explore local programs in your area via hud.gov or through your state’s housing finance agency.

Dig deeper: Everything you need to know about first-time home buyer programs

While saving up a down payment is a significant financial accomplishment that should be celebrated, you’re not done yet. You still need to cover closing costs and monthly mortgage payments until you sell or refinance the property.

Plus, "No matter how frugal you think you can be with moving in, it's always a good idea to also budget at least a couple thousand dollars for basics like shower curtains, waste baskets, yard tools, small furniture, and minor repairs. You may not be able to predict what those expenses will be, but you will have them regardless," Long said.

Read more: Believe it or not, you can get a mortgage with 1% down

A down payment is the amount of cash you pay upfront when buying a house. If you have 5% of the home price for a down payment, you'll borrow the remaining 95% with a mortgage. You'll present the down payment money the day you close on the house.

Let's say you buy a $400,000 home but don't have $400,000 in cash. In this case, you might be able to make a 3% down payment (which comes to $12,000) and borrow the remaining $388,000 by taking out a mortgage.

No, a 20% down payment is not required for most types of home loans. An exception might be if you need a special type of mortgage, like a jumbo loan. Just know that if you put 20% down on a conforming mortgage (what you probably think of as a "regular mortgage"), you won't have to pay for private mortgage insurance.