Down Payment: How Much You Should Save to Buy a House
In this article:
A down payment is the amount of money you spend upfront to purchase a home and is typically combined with a home loan to fulfill the total purchase price of a home. In addition your down payment amount, your credit score, credit history, total debt and annual income will influence how much of a loan you can qualify for.
A great tool to see how much you can afford based upon your down payment and annual income is Zillow s affordability calculator. Zillow s tool will also take into account your monthly debts, the interest rate on your debt, your loan term, and many other settings that you can personalize to give you a more accurate result on a home price.
Down Payments: How much do I need to save?
The higher your down payment, the lower your monthly mortgage payment will be. The amount required for a down payment depends on your loan type. Typically you will need to save 3 to 20 percent of the sale price in cash in order to qualify for a conventional loan (e.g. 30-year fixed mortgage). Down payments for jumbo loans can be as low as 10%. If you put down less than 20 percent on a conventional loan, you will most likely have to pay mortgage insurance (either private or public depending on the type of loan). See more information about mortgage insurance here.
Get pre-qualified and see how much you can afford
Low down payment financing options
Saving for 20 percent down might be too difficult or take too many years for many first-time home buyers or borrowers with lower household incomes. Popular alternative programs allow for a zero to 3.5 percent down payment option, although a zero down-payment option is more difficult to get.
The most common programs for lower down payment mortgages come from the Federal Housing Administration (FHA). Most FHA loans require a minimum 3.5 percent down and a decent credit score in order to qualify which makes them appealing for first time home buyers. Additionally, these types of loans are federally insured to reduce the risk of loss if a borrower defaults on their mortgage payments.
Fannie Mae offers two additional low down payment options that are not packed by the FHA: HomeReady® mortgages and Conventional 97 mortgages. Both options allow for a 3% down payment. HomeReady® mortgages are designed for creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in designated low-income, minority, and disaster-impacted communities. Conventional 97 mortgages are designed to help creditworthy home buyers who would otherwise qualify for a mortgage but may not have the resources for a larger down payment.
If you meet the eligibility guidelines, you may be able to qualify for a home loan with a zero down payment through the Veterans Affairs (VA loan) or the Department of Agriculture (USDA loan) programs. Both programs have eligibility restrictions that are outlined on their websites.
In addition to FHA and VA, there are state and local assistance programs that help people get a home loan with low down payments.