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The average down payment in America is equal to about **6% of the borrower's loan value**. However, it's possible to buy a home with as little as 3% down depending on your loan type and credit score. You may even be able to buy a home with no money down if you qualify for a USDA loan or a VA loan.

**Yes, putting 20% down lowers your home buying costs**. Borrowers who can make a big down payment will save a lot over the life of their mortgage loan. But a smaller down payment allows many first-time home buyers to get on the housing ladder sooner.

Pros. A **20%** down payment is widely considered the ideal down payment amount for most loan types and lenders. If you're able to put 20% down on your home, you'll reap a few key benefits.

**A down payment of 5% is enough to qualify for mortgage loan**. But it usually comes with the extra costs of mortgage insurance. And that in turn will increase the size of your monthly payments.

If you're taking out a Federal Housing Administration, or FHA, loan and putting down less than 20%, **you'll still need to pay private mortgage insurance each month, but it'll be called a mortgage insurance premium, or MIP, instead of PMI**.

The Advantages of a Higher Down Payment

There's no doubt that **putting down greater than 20% will get a homebuyer a lower monthly mortgage payment**. A large down payment lowers the overall risk to the lender of financing the home, and so they will reward the customer with a better rate.

**It is absolutely ok to put 10 percent down on a house**. In fact, first-time buyers put down only 6 percent on average. Just note that with 10 percent down, you'll have a higher monthly payment than if you'd put 20 percent down.

If you make $3,000 a month ($36,000 a year), your DTI with an FHA loan should be no more than $1,290 ($3,000 x 0.43) — which means you can afford a house with a monthly payment that is **no more than $900 ($3,000 x 0.31)**. FHA loans typically allow for a lower down payment and credit score if certain requirements are met.

To purchase a $300K house, you may need to make **between $50,000 and $74,500 a year**. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, the type of home loan, loan term, and mortgage rate.

If the home price is $500,000, a **20%** down payment is equal to $100,000, resulting in a total mortgage amount of $400,000 ($500,000 - $100,000). The average down payment in the US is about 6% of the home value.

Monthly payments on a $300,000 mortgage

At a 4% fixed interest rate, your monthly mortgage payment on a 30-year mortgage might total **$1,432.25 a month**, while a 15-year might cost $2,219.06 a month.

While buyers may still need to pay down debt, save up cash and qualify for a mortgage, the bottom line is that **buying a home on a middle-class salary is still possible — in some places**. Below, check out 15 cities where you can become a homeowner while earning $40,000 a year or less.

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; **670 to 739** are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.

You'll typically need **at least 3 percent of the purchase price of the home as a down payment**. Keep in mind that you'll need to put at least 20 percent down to avoid having to pay for mortgage insurance, however. Don't let the mortgage insurance cost scare you, though.

On a $70,000 income, you'll likely be able to afford a home that costs **$280,000–380,000**. The exact amount will depend on how much debt you have and where you live — as well as the type of home loan you get.

The usual rule of thumb is that you can afford a mortgage **two to 2.5 times your annual income**. That's a $120,000 to $150,000 mortgage at $60,000.

**A 50 percent down payment can also increase your purchasing power, as it results in a lower loan balance and monthly payment than a smaller down payment would yield**. With a lower balance and loan payment, you free up more of your gross income, which also minimizes the lender's risk.

However, offering a down payment of 25 percent **can improve the affordability of the loan**. For example, when your down payment is larger, the total loan balance decreases, which lowers the monthly payment. Likewise, offering a down payment of 25 percent brings your loan-to-value ratio to 75 percent.

The 20% down payment rule of thumb is **a way to manage your costs when buying a home**. By making a down payment that's at least 20% of the purchase price, you often avoid extra monthly expenses and pay less interest than somebody who buys with a smaller down payment.

**The more money you put down, the better**. Your monthly mortgage payment will be lower because you're financing less of the home's purchase price, and you can possibly get a lower mortgage rate.

The traditional way to avoid paying PMI on a mortgage is to **take out a piggyback loan**. In that event, if you can only put up 5 percent down for your mortgage, you take out a second "piggyback" mortgage for 15 percent of the loan balance, and combine them for your 20 percent down payment.

As a rule of thumb, **home loan EMI should not exceed 35-40% of your total income**. In our survey, almost 28% of homebuyers indicated willingness to part with more than 50% of their household income towards EMIs, which can spell disaster. “Get a clear and real understanding of your finances.

Based on a standard work week of 40 hours, a full-time employee works 2,080 hours per year (40 hours a week x 52 weeks a year). So if an employee earns $40,000 annually working 40 hours a week, they make about **$19.23 an hour** (40,000 divided by 2,080).