While many people still believe it's necessary to put down 20% when buying a home, that isn't always the case. In fact, lower down payment programs are making homeownership more affordable for new home buyers.
Improved Equity Position: A larger down payment gives you more equity in the home from the start, which can be beneficial if you need to sell or refinance in the future. Overall, a 50 percent down payment can enhance your likelihood of loan approval and result in more favorable loan terms.
While 20% down is often recommended, putting down 10% is still a solid option for many home buyers, especially if you have good credit and stable income. A 10% down payment option is less than the typical 20%, but it can still open up a range of home loan options like conventional loans and FHA loans.
What is a typical down payment? As of June 2024, the typical down payment on a house was 18.6% — or $67,500 nationwide. Down payments vary widely by location, though. In San Jose, Calif., for example, the typical down payment is $451,500.
To purchase a $200,000 house, you need a down payment of at least $40,000 (20% of the home price) to avoid PMI on a conventional mortgage. If you're a first-time home buyer, you could save a smaller down payment of $10,000–20,000 (5–10%). But remember, that will drive up your monthly payment with PMI fees.
How much down payment for a $300,000 house? The down payment needed for a $300,000 house can range from 3% to 20% of the purchase price, which means you'd need to save between $9,000 and $60,000. If you get a conventional loan, that is. You'll need $10,500, or 3.5% of the home price, with a FHA loan.
Conventional loans are most often but not always conforming loans, and they're considered the most common mortgage option. The minimum down payment for a conventional mortgage loan is 3% of the purchase price if you're a first-time home buyer, and it's 5% for repeat buyers.
In most cases, $10,000 is more than enough of a down payment to buy a decent home. But that may not be true in the most expensive housing markets, such as Hawaii and California. Many aspiring home buyers still believe the myth that they need a down payment of 20% of a home's purchase price.
On a salary of $100,000 per year, as long as you have minimal debt, you can afford a house priced at around $311,000 with a monthly payment of $2,333. This number assumes a 6.5% interest rate and a down payment of around $30,000. The 28/36 rule is often used as a guide when deciding how much house you can afford.
Mortgage closing costs are fees and expenses you pay when you secure a loan for your home, beyond the down payment. These costs are generally 3 to 5 percent of the loan amount and may include title insurance, attorney fees, appraisals, taxes and more.
The mortgage insurance rate you receive will be expressed as a percentage. It may depend on factors such as your down payment and credit score. But typically it's around 0.2% to 2% of the loan amount per year. Credit Karma's PMI calculator will provide an estimate for you.
You'll usually need a credit score of at least 640 for the zero-down USDA loan program. VA loans with no money down usually require a minimum credit score of 580 to 620. Low-down-payment mortgages, including conforming loans and FHA loans, also require FICO scores of 580 to 620.
Putting down this amount generally means you won't have to worry about private mortgage insurance (PMI), which eliminates one cost of home ownership. For a $400,000 home, a 20% down payment comes to $80,000. That means your loan is for $320,000.
The Bottom Line. PMI is expensive. Unless you think you can get 20% equity in the home within a couple of years, it probably makes sense to wait until you can make a larger down payment or consider a less expensive home, which will make a 20% down payment more affordable.
Potential for higher interest rates: You may end up with a higher mortgage interest rate due to the assistance, which can increase the overall cost of your loan. “The interest rates on mortgages with assistance are also usually 0.5-1% higher [than those without] to offset risk,” Morgan says, “costing thousands more.”
The Benefits of a Higher Down Payment
Borrowers who put down 20% or more don't have to pay private mortgage insurance (PMI), which either comes with a heavy one-time premium, or carries annual costs to the borrower of between 0.3% and 1.5% of the entire loan.
FHA loans are recognized for their flexibility regarding credit, income, and down payment guidelines. They require a minimum down payment of just 3.5%, which is $10,500 for a $300,000 home. Please also note that mortgage insurance premiums are a requirement for all FHA loans.
There are also loan programs that let you put as little as zero down. However, a smaller down payment means a more expensive mortgage over the long term. With less than 20 percent down on a house purchase, you will have a bigger loan and higher monthly payments.
How much is a down payment on a 200K house? A 20% down payment on a 200K house is $40,000. A 5% down payment is $10,000, and a 3.5% is $7,000. Talk with various lenders to see what you might qualify for.
The house you can afford on a $70,000 income will likely be between $290,000 to $360,000. However, your home-buying budget depends on quite a few financial factors — not just your salary.
But that's far from true. In fact, according to data from the National Association of Realtors, the average down payment for first-time home buyers is just 8% (versus 19% for repeat buyers).
With a $45,000 annual salary, you could potentially afford a house priced between $135,000 to $180,000, depending on your financial situation, credit score, and current market conditions. However, this range can vary significantly based on several factors we'll discuss.