Saving for a House? Here’s What You Need

NEW YORK – You might have heard you'll need a 20% down payment to buy a home. While there's a reason that number seems standard, 20% isn't set in stone. Many mortgages require borrowers to put down as little as 3% or 3.5%, and some loans don't have minimums at all.

The median sale price of a home in the U.S. in the first quarter of 2024 was $335,500, according to real estate data provider ATTOM. During that same period, the median down payment was $26,700, or 8% of the median home price.

Other data suggests a higher percentage, though. In its "2024 Home Buyers and Sellers Generational Trends" report, the National Association of Realtors found the median down payment among all buyers (some 6,817 new homeowners) to be 15%.

That's similar to ATTOM's monthly "United States Real Estate Overview," which for May 2024 puts the national median home sales price at $384,375 and the median down payment at $60,202, or 15.6%.

As home prices have risen, so have loan amounts. In the first quarter of 2024, the median mortgage on a single-family home was $329,800, up over 7% year over year, according to ATTOM. Conversely, down payments in relation to mortgage sizes have declined: The $26,700 in Q1 2024 has dropped nearly 21% from $33,750 in Q4 2023.

Just as home prices vary widely across the U.S., down payment amounts vary by location. The higher down payments tend to be concentrated in higher-cost states like California, Hawaii, Massachusetts and Washington.

When you don't have 20% for a down payment

The minimum amount you'll need for a down payment depends on the cost of the home and what type of mortgage you get. The minimum requirements range from no down payment at all to 5%.

Many borrowers put down more than the minimum, either through savings, gifts or down payment assistance.

In fact, 14% of current homeowners used a financial gift from family and friends for a down payment for their first home, while another 14% used an assistance loan or program for first-time buyers, according to Bankrate's recent Down Payment Survey.

The more you put down, the less you'll need to borrow and the less you'll pay in interest. You're also more likely to get a better interest rate on your mortgage.

A bigger down payment also translates to more equity in the home to start — a tappable asset, as well as a potential safeguard against declines in home values.

If you're getting a conventional or FHA loan and can put down at least 20%, you'll also avoid the requirement to buy mortgage insurance, an extra expense on top of your monthly mortgage payment.

That said, there is a case to be made for a smaller down payment, even if it means paying mortgage insurance.

If you've been renting for a while and have limited savings, pulling together at least the minimum down payment might be preferable to continuing to rent, especially if your housing needs have changed.

Frequently asked questions

What is the typical mortgage down payment for first-time homebuyers versus repeat homebuyers?

As of 2023, the typical mortgage down payment for a first-time homebuyer was 8%, while the typical down payment for a repeat homebuyer was 19%, according to the National Association of Realtors®.

How can I avoid paying for mortgage insurance without making a 20% down payment?

If you're putting down less than 20% on a conventional loan, you won't be able to completely avoid private mortgage insurance. A few mortgage lenders offer "no-PMI" mortgages. While you won't have to pay for PMI with these types of loans, you will pay a higher interest rate, which could end up costing you more over time than the insurance premiums.

Another possible solution: a piggyback mortgage. You'll finance 80% of the home's price with one mortgage, take out a second mortgage for 10%, and then come up with the remaining 10% in cash. That second mortgage, plus your 10% contribution, in effect gives you a 20% down payment — so you avoid PMI. If you're a first-time homebuyer, you might get a break on PMI anyway. Many first-time buyer programs come with reduced premiums.

How can I fund a down payment?

The most common ways to fund a down payment include saving, using a gift from relatives or friends or getting a grant or some other form of assistance. Some buyers borrow or withdraw funds from retirement accounts or sell investments. However, you get your funds, just be sure to have them in your bank account for a minimum of two months before applying for a mortgage. If not, you'll likely need to provide extra documentation to prove where the money came from.

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