ET Saturday 8 a. Eastern Time Sat 8 a. Get a call back layer. You are using an unsupported browser version. Learn more or update your browser. Learn About Mortgages. Get a call back from one of our lending specialists.
We ask for your ZIP code because we need to know your time zone so we can call you during the appropriate business hours. We ask for your email address so that we can contact you in the event we're unable to reach you by phone. The information on this site does not modify any insurance policy terms in any way. A down payment is an upfront partial payment toward the purchase of a home.
Down payment requirements are typically expressed as a percentage of the sales price of the home. A down payment reduces the amount the buyer needs to borrow to buy the home. Many people get their down payments from savings, and others source funds from selling their current house or from gifts or grants from family, friends or special programs for homebuyers. Your income, cash on hand, credit score and debt-to-income DTI ratio can affect whether or not you qualify, and the terms of your loan.
In general, borrowing a conventional loan — one available through or guaranteed by a private lender or either of two government-sponsored entities, Fannie Mae or Freddie Mac — requires a down payment of 5 percent or higher. Some conventional loan programs allow for a down payment of just 3 percent, however, so this can be an option for first-time homebuyers and others who have less cash available.
PMI typically costs between 0. Other loans allow for much less down: FHA loans require as little as 3. Down payment requirements for a conventional loan can vary depending on the lender, the borrower and the type of property. For example, first-time homebuyers and buyers with low to moderate incomes could qualify for a conventional loan with a 3 percent down payment.
For most others, though, the minimum starts at 5 percent for a primary residence. Second homes typically start at 10 percent, and investment properties can require as much as 25 percent. That said, the amount you need to put down can depend on your creditworthiness and financial situation, so consult with your loan officer to get a better idea of what requirements apply to you. Jumbo loans typically require 10 percent down or more.
Like conventional loans, FHA loans with less than 20 percent down require mortgage insurance. The difference, though, is that you have to pay an upfront mortgage insurance premium MIP when you close, which is 1. The amount you have to pay annually for insurance, and for how long, depends on your down payment amount, your repayment term and loan amount.
However, if you put down more than 10 percent, your premium will be 0. The U. VA loans are available to most members of the armed forces and veterans and their families. USDA loans, on the other hand, are available to borrowers planning to purchase homes in designated rural areas.
USDA loans are for rural and suburban home buyers who meet the program's income limits and other requirements. Conventional loans are not backed by the government, but follow the down payment guidelines set by the government-sponsored enterprises Fannie Mae and Freddie Mac. Down payment requirements can also vary by lender and the borrower's credit history. The minimum down payment for an FHA loan is just 3. Saving money takes time, so a zero or low-down-payment requirement may speed up your ability to buy a home.
But making a larger down payment has advantages, which include:. A better mortgage interest rate. More equity in your home right off the bat. A lower down payment makes the loan a bigger risk in the eyes of the lender. If a borrower defaults on one of these loans, the associated government agency will reimburse the lender for what the borrower owes.
But you pay for the guarantee through fees or mortgage insurance , depending on the program. Getting ready to buy a home? The optimum down payment amount will depend on your goals and financial situation. Select personalised ads.
Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Home Ownership Mortgage. Part Of. How Mortgages Work. Rates for Different Loan Types. Saving on Fees. Lender vs. Lender Options. Table of Contents Expand. Understanding Down Payments. Your Loan-to-Value Ratio. Down Payment Impacts Your Offers. Benefits of Larger Down Payment. Low Down Payment Loan Programs.
Conventional loans. Government-Insured Loans. Down Payment Assistance Programs. Example of a Down Payment. The Bottom Line. Key Takeaways The down payment you make on your home impacts what kind of mortgage you qualify for, how much money a lender will give you, and the loan's terms and conditions. But the size of your down payment also impacts your lifestyle and long-term financial planning goals, as it determines your monthly mortgage payments and how much money you'll have for other expenses.
If you've only ever rented, keep in mind that your monthly expenses as an owner include more than just the mortgage; there are also property taxes, maintenance, insurance, and potential repairs. A larger down payment will give you a lower loan-to-value ratio, or LTV. This key measure makes you less risky to lenders, may qualify you for lower interest rates, and may help you avoid fees, such as private mortgage insurance.
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