How Much Do I Need for a Down Payment on a House?

It is essential for us to have homes so we can live comfortably and be able to shelter ourselves. We don’t want to deprive ourselves of the basic necessity of shelter. That is why we work and save for us to buy our own place.

Buying a home means you have already heard you need to put a 20% down payment first and then pay monthly on the remaining balance and it is not a small amount of money and most people would agree.

Not everyone is able to afford a 20% down payment, and it is the truth. The good thing is there are 5%, 10%, or even 3.5% down payment depending on the type of loan assistance you get or how good your credit score is.

Let’s break it all down so it’s easy to understand.

 

What Is a Down Payment, Anyway?

Buying a home means the other party needs a sort of ‘security’ money that you need to offer to make sure they are not in a disadvantage on their end. This money is called a down payment. It’s the amount of money you pay upfront towards the total price of the house.

For example, the home you want to buy costs $250,000. However, you need to put down 10%, which means you’ll need $25,000 in cash saved up to be able to get it. The rest of the money, which would be $225,000, that would come from a home loan called a mortgage.

The more money you put down, the less you’ll have to borrow. That also means you’ll have smaller monthly payments later.

 

How Much Do Most People Put Down?

There’s no single number that works for everyone. What you need depends on a few things, like:

• The type of mortgage loan you get
   
• Your credit score
   
• Your income
   
• Whether you’ve owned a home before
   

In general, down payments usually fall into one of these ranges:

• 5% to 10% – This is common for first-time buyers. Many people can qualify for a loan at this level, especially if they have good credit and a steady income.
   
• 15% to 20% – If you have a little more saved up, you might be able to make a larger down payment. That could help lower your monthly mortgage and get you a better interest rate.
   
• 20% or more – If you can pay this much, you might not have to pay for something called private mortgage insurance (PMI), which is an extra monthly cost many lenders require if you put down less than 20%.
   

 

What If I Can’t Afford 5% Down?

There are still other options you can avail yourself of; however, you cannot expect them to be available for everyone. It could also be much more tedious in process compared to having the traditional down payment. Some of the programs below are designed to help people afford below 5% down payment.

• FHA Loans – These are backed by the government. You may only need 3.5% down, and they are often a good choice for people with lower credit scores.
   
• VA Loans – These are for military service members, veterans, and their families. If you qualify, you may not need any down payment at all.
   
• USDA Loans – These loans are for people buying homes in rural areas. Like VA loans, they sometimes offer 0% down if you meet the income and location rules.
   

Each loan type has its own rules, so it’s important to talk to a lender who can walk you through the details.

 

Your Credit Score Matters More Than You Think

Even if you have a steady job and money saved up, your credit score plays a big role in whether you’ll be approved for a loan—and how much money you’ll need to put down.

Lenders love people who have a higher credit score because this means a person is a good payor and is more likely to make them money rather than lose some. A person with a high credit score is less risky in their perspective and has a much better changes of getting approved, lesser interest rate, better loan terms and lower downpayment.

In contrast, if your credit score is low, expect the opposite of having a high credit score. This means you are going to be offered higher interest rates, higher payments, and not so good loan terms because they see this as a risk already and this is basically they’re only requirement is, for you to have the ability to pay.

 

Where Can I Check My Credit Score?

If you’re not sure what your credit score is, don’t worry. There are free tools online to help you check.

1. Visit annualcreditreport.com – This website lets you get one free credit report each year from each of the three big credit agencies: Experian, TransUnion, and Equifax. These reports show your full credit history, but they don’t always show your score.
    
2. Go to MyFICO.com – This site gives you your FICO score, which is the credit score most lenders look at. There may be a small fee, but it’s one of the best ways to see exactly what a lender would see.
    

Knowing your score is a good first step. It can help you figure out what kind of loan you might qualify for—and how much of a down payment you’ll need.

 

How to Raise Your Credit Score Before You Buy

If your credit score isn’t where you want it to be, don’t panic. You can improve it over time with a few smart habits:

• Always pay your bills on time. Late payments can hurt your score more than you think.
   
• Keep your credit card balances low. Try not to use more than 30% of your total credit limit.
   
• Avoid opening new credit cards unless you really need to. Too many new accounts can make lenders nervous.
   
• Check your credit reports for mistakes. If you see anything that doesn’t look right, you can report it and get it fixed.
   

Even small changes can make a big difference if you stick with them. Improving your credit score could help you get a better loan—and that could save you thousands of dollars over time.

 

The Bottom Line

The more downpayment you are able to offer, the lesser the amount you have to pay monthly. Unless you pay it in cash. Realistically, not everyone is able to afford paying in cash and we can back it up with statistics, but that is another story.

The best way for you to be able to come up with a downpayment is to simply save up for the amount you need. The earlier you start, the better. Always make sure to consider as well your lifestyle, cost of living, expenses, and other obligations.