Down Payment on a House: What You Actually Need

Saving for a down payment on a house is increasingly challenging as housing prices continue to rise. With the median home price climbing significantly in recent years, prospective buyers face the tough job of setting aside more money than ever before to secure their dream home. But how much down payment do you actually need? It depends on your loan type, lender, and priorities.

How much do you need for a down payment on a house?

You probably have heard that you need to put down 20 percent to buy a home. In reality, there isn’t a one-size-fits-all percentage for a down payment. The amount you’ll need varies based on the type of loan you choose and your mortgage lender’s requirements, among other factors.

For example, a conventional loan might require a down payment as low as 3 percent. FHA loans, which are designed to help first-time homebuyers, require a minimum down payment of 3.5 percent. VA loans, available to veterans and active-duty military personnel, and USDA loans, aimed at rural property buyers, often have no down payment requirement at all. Each loan type comes with its own set of criteria and benefits, so it’s essential to understand your options and choose the one that best fits your financial situation.

Average Down Payment on a House

According to Hannah Jones, an economic data analyst at, the nationwide average down payment for a house in the second quarter of 2023 was 14.4%, with a median of $34,248.

In this period, Louisiana homebuyers made the lowest average down payment at 9.2%, or $6,729. Conversely, Washington, D.C. saw the highest average down payment percentage at 20.4%, with a median down payment of $100,800, reflecting the area’s high housing costs.

This 2024, home buyers are making smaller down payments as home prices have been decreasing since peaking in late 2022. The average median down payment in Q2 2023 was $34,248, down 3.3% from the previous year, while the median sales price dropped 7.4% to $416,100. Affordable markets have seen an increase in down payments as a percentage of the sales price, whereas pricier markets have seen declines. Higher median down payments are likely due to buyers having more purchasing power and seeking lower monthly payments amid higher mortgage rates.

The average down payment for a house varies significantly from state to state, primarily due to differences in home prices. Another contributing factor is the age of home buyers, with older buyers typically having more financial resources available.

Benefits of a Large Down Payment

  1. Lower Monthly Mortgage Payments: A larger down payment reduces the amount you need to borrow, leading to lower monthly mortgage payments.
  2. Less Interest Paid Over Time: With a smaller loan amount, you’ll pay less interest over the life of the mortgage, potentially saving thousands of dollars.
  3. Equity Build-Up: A sizable down payment immediately gives you equity in your home, which can be beneficial if you need to sell or access home equity in the future.
  4. Higher Chance of Mortgage Approval: Lenders often view a large down payment favorably, increasing your chances of mortgage approval, especially if you have other factors that may be considered risky.
  5. Avoiding Private Mortgage Insurance (PMI): If you put down at least 20% of the home’s purchase price, you typically avoid the additional cost of PMI, which is required for loans with lower down payments.
  6. Lower Risk of Being Underwater: A substantial down payment reduces the risk of owing more on your mortgage than your home is worth, especially if home values decline.
  7. Negotiating Power: Sellers may view buyers with larger down payments as more serious and financially stable, giving you potential negotiating power in the purchase process.
  8. Financial Flexibility: Having a lower mortgage balance due to a large down payment can provide financial flexibility, allowing you to save, invest, or handle unexpected expenses more comfortably.

What is the ideal down payment on a house?

Your ideal down payment hinges on your goals and financial standing. While a larger down payment has its advantages, going too high could strain your finances post-move-in. With conventional mortgages, if your down payment is under 20%, you may need to pay for private mortgage insurance (PMI). However, once your equity surpasses 20%, you can request to cancel PMI. Play with various scenarios to see how changing your down payment size impacts other expenses.

Considerations for Your Down Payment on a House

Apart from your mortgage payment, there are other factors to think about when deciding on your down payment size:

  • Maintain some savings: Avoid using all your savings for the down payment to prevent overextending your budget or depleting your emergency fund.
  • Account for closing costs: Ensure you have cash available for closing costs, typically 2%-6% of the home’s purchase price.
  • Plan for homeownership costs: Set aside funds for ongoing home maintenance, repairs, and emergencies, even if your new home is move-in ready.
  • Compare mortgage rates: Research and compare rates from several lenders, and explore down payment assistance programs, especially if you’re a first-time buyer.

In conclusion, choosing the right down payment size involves balancing your financial goals, savings, and ongoing homeownership costs. It’s crucial to have a clear understanding of your budget, avoid overextending yourself, and explore options such as down payment assistance programs and competitive mortgage rates. By carefully considering these factors, you can make a well-informed decision that sets you up for success in your homeownership journey.