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The Front Porch Blog

Education on all things homeownership

How Much Down Payment for a House is Enough?

December 17, 2020 Blog, Homebuying, Financial IQ

Your down payment questions answered.

The typical down payment on a home depends on your income, eligibility, and goals—and finding the mortgage that fits best. All too often, the excitement of finding a home you want to buy comes first, followed by the bubble-bursting question of “can I afford it?”

For many Americans, coming up with the cash needed for closing and a traditional 20 percent down payment can be a big barrier to homeownership.

According to a recent study, it could take 21 years for a household earning the national median income of $63,179 to save 20 percent, plus closing costs, for a $274,600 home, the median sales price for a single-family home in 2019.

That’s just too long to wait.

What is the minimum down payment you need to buy a home?

So, how much do you really need to put down to afford a new home? The good news is, not 20 percent—and it can be as little as zero.

There is no hard and set rule for down payments because every buyer is different, with different challenges, strengths, and assets—such as strong credit history, or a sizable down payment, a low debt-to-income ratio, or a high monthly income. Additionally, each bank or lender is different, offering different products and incentives.

According to the 2019 National Association of Realtors 2019 Buyer and Seller Survey, the median down payment was 12 percent for all buyers, 6 percent for first-time buyers, and 16 percent for repeat buyers.

There are also loan programs that incentivize homeownership, such as for veterans (VA) or first-time home buyers (FHA), that offer loans requiring no downpayment or a very small percentage.

What are some options for low down payment loans?

Lower down payment loans are fairly common—17 percent of all buyers and 25 percent of first-time buyers used an FHA loan to purchase, taking advantage of low down payment programs.

Some low down payment loans include:

What other options can help with down payment assistance?

Another great way to get your foot in the door of your dream home is to seek out down payment assistance programs. There are a host of state and local programs that your loan officer can connect you with, such as grants for first-time homebuyers, that help buyers meet down payment qualifications.

What are the drawbacks of low down payment loans?

When you have a low or no down payment loan, there are some considerations. The less money you put down on a home, the higher your monthly payment will be. Also, you might have to pay private mortgage insurance (PMI). PMI protects the lender in case you default on the loan. PMI is calculated as a percentage of the loan amount and added to your monthly mortgage payment.

Furthermore, lower down payment loans typically come at higher interest rates. If you want to have the lowest possible interest rate and monthly payment, then a 20 percent down payment is the best solution.

At Lennar Mortgage, we offer a variety of loans to fit whatever your unique circumstances may be. Our goal is to make finding a mortgage a stress-free process so that you can realize your dream of homeownership. 

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