How much down payment do you need for a house?

If you think you have to delay buying a house because you need a down payment of 20%, think again. The median down payment for first-time homebuyers in 2023 was just 8%, according to the National Association of REALTORS®. That’s $8,000 for every $100,000 borrowed, or $32,000 for a $400,000 home.

While $32,000 is a lot less than $80,000 — which is what you’d pay if you put 20% down — it’s still more than most homeowners can save in a reasonable period. You’d need to set aside almost $900 every month for three years, assuming sales prices didn’t change.

Fortunately, you may be able to buy a home with a low down payment (0% to 5%), depending on your circumstances. Here’s what you need to know about down payments so you can create a plan to reach your home ownership goals.

What is a down payment for a house?

If you’re buying a house, a down payment is a percentage of the home’s purchase price that you bring to the table to reduce how much you have to borrow. The larger your down payment, the smaller your mortgage. 

Traditionally, homebuyers use their savings to make a down payment. However, many mortgage loan programs will let you use gifts or grant money for part or all of your down payment. 

How much do different types of loans require?

Lenders offer many types of mortgages that require far less than 20% down for first-time homebuyers:

What are the benefits of a larger down payment?

Making a larger down payment involves trade-offs. Consider these pros and cons when deciding how much you want to put down on your mortgage:

How can you save for a down payment?

Saving for a down payment is an important part of the homebuying process. Usually, this entails examining your cash flow and adjusting it to reflect a shift in your priorities. Your cash flow is the money you have coming in (like paychecks, bonuses, and side income) and going out (such as rent and groceries).

You might previously have spent $400 a month on dining out. Once homeownership becomes a goal, restaurant meals might become less important. Reallocating some of that spending into a high-yield savings account can help you save for a down payment while keeping up with inflation.

Some people save for a down payment by tackling what is probably their biggest expense: housing costs. They may prioritize future homeownership by moving in with relatives temporarily. People who don’t have this option might rent a room in someone else’s house or find a place they can share with roommates.

You can also adjust your income to improve your financial situation. This might mean pursuing a promotion, talking to recruiters, earning a degree or certification, or picking up a part-time job in your spare time. 

How do down payment assistance programs work?

Many states and localities offer grants, low-cost second mortgages, or mortgage credit certificates to help first-time homebuyers with their down payments, closing costs, and monthly housing expenses. Here are some of the assistance programs you might encounter:

• Grants: A grant is money you don’t have to pay back. 
• Second mortgages: A low-cost second mortgage may have an interest rate as low as 0% and may be forgivable once you’ve lived in the home long enough. Some programs only require you to repay the second mortgage when you sell or refinance. 
• Mortgage credit certificates (MCC): MCCs give you a federal tax credit equal to a percentage of your total annual mortgage interest and help you qualify for a larger mortgage. If you pay $10,000 in interest and have a 20% mortgage credit certificate, you’ll get $2,000 back when you file your tax return. You can itemize the remaining $8,000 if you don’t take the standard deduction.

These programs are meant to help people who may be at a disadvantage. To qualify, you’ll typically need to earn below a certain income threshold, live in a certain area, or buy in a certain area. 

You’ll often have to work with a preferred lender to participate in a state or local down payment assistance program. Make sure to get quotes from multiple lenders — both lenders who participate in the program and those who don’t — to see where you can truly get the best deal.

Some lenders, such as Rocket Mortgage, Bank of America, PNC, and Wells Fargo, also offer grants and lender credits for a down payment or closing costs.

Down payment FAQ

What is the standard down payment on a house?

The traditional down payment on a house is 20%, but the median down payment in 2023 was 8% for first-time buyers and 19% for repeat buyers, according to the National Association of REALTORS®.

What is the minimum down payment on a house?

Minimum down payment requirements vary depending on what type of mortgage you qualify for and whether you’re eligible for down payment assistance. Your down payment could be as low as 0% with a VA  or USDA loan. You could also use grants or other assistance to bring your down payment for a conventional mortgage or FHA loan down to zero. 

Without assistance, the minimum down payment is 3% on a Fannie Mae Home Ready, Freddie Mac HomePossible, or regular conventional loan, and 3.5% on an FHA loan.

Are there other costs to be aware of when buying a home?

Closing costs typically add thousands of dollars to a homebuyer’s expenses. The amount varies by location and lender. In 2022, homebuyers paid a median of nearly $6,000 in total loan fees, according to the Consumer Financial Protection Bureau.

These costs include lender and third-party fees for origination, underwriting, credit reporting, home appraisal, flood zone determination, title search and insurance, notary, escrow services, transfer taxes and government recording. Many of these fees are fixed and don’t vary based on loan amount. Borrowers can also choose to pay points, or prepaid interest, in exchange for a lower interest rate.

Why are down payments required by mortgage lenders?

Lenders have down payment requirements because a borrower who has invested their own money into a property is more likely to make their monthly mortgage payments and less likely to default. The lender’s customers — the mortgage investors who fund home loans and the servicing companies that administer loans — are less likely to lose money when borrowers have skin in the game.