How Much Do I Need for a Down Payment on a House?

So, you’re in the market for a home. You’re done with helping someone else build equity in their home and want to make the jump to having your own investment. There will be a lot of things you’re considering as you venture down this exciting road. Neighborhoods, property growth, school quality, and the local job market are all things to consider. The big elephant in the room is the factor that defines how far down this road of equity you get to start and that is your down payment. So, you’re asking how much do you need for a down payment on a house? Let’s get that answered for you.

Let’s Start at the Ground Floor

The simple answer is 3.5% of the price of the home with a 30-year-fixed-rate mortgage. This minimum down payment is set by the Federal Housing Administration or FHA. There are only two instances where a no-money-down purchase can happen.

  • VA Loan Programs – Veterans have access to 100% financing
  • USDA Loan Programs – You can also purchase a home for no-money-down if you qualify as low income and are looking for a home in a rural region

The Downside of Low Down Payments

This may sound like good news but this situation does not come without its disadvantages. The biggest downside to this approach is the inclusion of Private Mortgage Insurance or PMI. This is an additional monthly payment for anyone with a down payment lower than 20%. This payment will always accompany your mortgage payment until you pay off 20% of the value of your home.

Low down payments also mean higher monthly mortgage payments aside from the addition of PMI. So, you may get your house sooner but you’re going to be paying more across the board.

The 20% Down Payment

It has long been known that 20% is the standard for the ideal down payment amount. The FHA uses it as their standard when it comes to assessing risk and the need for instituting PMI. Here’s a breakdown of what these down payment amounts look like:

Home Value – Down Payment Size at 20%

$200,000 – $40,000 Down

$350,000 – $70,000 Down

$500,000 – $100,000 Down

$750,000 – $150,000 Down

As you can see, these down payment amounts can be high and difficult to come to the table with if you’re a first-time homebuyer. A lot of first-time homebuyers have to change their desired towns, cities, and even states due to the sheer size of these numbers. This is not meant to overwhelm you but encourage you to get started as soon as possible if you want to minimize your mortgage payments and not limit where you can afford.

Many people are still okay with the added costs of PMI. Buying a home with a lower down payment can still be feasible if you find the right lender and have good control over the amount of income needed to handle your existing debt.  You also never have to just pay your mortgage payment as is and can always pay more per month to eliminate your PMI.

Please reach out to with any home buying questions as we’d love to help you find the perfect home and neighborhood to make a safe investment in.

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