The amount you need for a down payment on a house depends largely on the type of mortgage loan you choose and the price of the home. Here are key points to consider:
- Ideal Down Payment : Putting 20% down is often recommended because it helps you avoid private mortgage insurance (PMI), reduces your loan amount, and lowers monthly payments. However, it is not mandatory
- Minimum Down Payment by Loan Type :
- Conventional loans: as low as 3% down for qualified borrowers.
- FHA loans: minimum 3.5% down with a credit score of at least 580; 10% down if credit score is 500-579.
- VA loans: 0% down for eligible veterans and service members.
- USDA loans: 0% down for eligible rural and suburban home buyers.
- Jumbo loans: typically require 5-10% down.
- Second homes or investment properties: usually require 10-20% down or more
- Average Down Payments :
- Median down payment for all buyers is about 18%.
- First-time buyers typically put down around 8-9% on average
- Home Price Impact : The down payment is a percentage of the home’s purchase price. For example, on a $400,000 home, a 5% down payment would be $20,000; for homes over $500,000, the required percentage may increase (e.g., 5% on the first $500,000 plus 10% on the remainder in Canada)
- Financial Strategy : If 20% down would deplete your savings, smaller down payments (3-10%) may be better to keep reserves for emergencies or repairs. Larger down payments reduce your loan size and monthly payments but are not always feasible
In summary, while 20% down is ideal to avoid extra costs like PMI and get better loan terms, you can buy a house with as little as 0-3.5% down depending on the loan program and your qualifications. The exact amount depends on the home price and loan type you select. It’s advisable to explore all options and consult with a mortgage professional to determine what fits your financial situation best
