The Truth About Your Down Payment

How Much Do You Really Need for a Down Payment? Spoiler: It’s Not Always 20%

For decades, the “rule” for buying a home was simple: save up 20% for your down payment. But in today’s market, that’s no longer the norm—and for many, that’s great news.

Many loans today require just 3%–5% down. On a $400,000 home, that’s $12,000–$20,000—still a big chunk of change, but far more doable than the old-school 20%.

Here’s what a 6% down payment looks like at different price points:

• $200,000 home → $12,000 down

• $300,000 home → $18,000 down

• $400,000 home → $24,000 down

• $500,000 home → $30,000 down

• $600,000 home → $36,000 down

• $700,000 home → $42,000 down

• $800,000 home → $64,000 down

  
  

But there’s a catch: Your down payment affects your monthly payment. The higher your loan amount, the higher your monthly cost. The average buyer today puts down around 7%, but Herbert reminds us—there’s no magic number. It all depends on your savings, income, and long-term goals.

Know Your Loan Options

There’s more than one way to finance your home purchase. The right loan depends on your financial situation, credit history, and goals.

1. Fixed-Rate Mortgage

• Pros: Same payment every month, great for budgeting, lock in a low rate.

• Cons: Higher overall interest, no rate drop unless you refinance.

  
  

2. Adjustable-Rate Mortgage (ARM)

• Pros: Lower starting rate, potential savings if rates drop.

• Cons: Risk of higher payments if rates rise, harder to budget.

  
  

3. Conventional Mortgage (Offered by private lenders)

• Pros: As little as 3%–5% down.

• Cons: PMI required under 20% down, minimum credit score (usually 620).

  
  

4. Jumbo Loan

• Pros: Lets you finance high-value properties.

• Cons: Bigger down payment, higher costs, stricter credit requirements.

  
  

5. Government-Backed Loans

• FHA Loan: For first-time buyers with lower credit and small down payment; loan limits and higher insurance apply.

• VA Loan: For service members, veterans, and spouses—no down payment or mortgage insurance.

• USDA Loan: For low-income buyers in rural/suburban areas—no down payment required.

  
  

The Bottom Line

With the current 30-year fixed rate at 6.72% (Freddie Mac, week ending July 31), it’s more important than ever to explore your financing options before you shop for a home.

A knowledgeable mortgage consultant can help you compare programs, run the numbers, and choose the best fit for your needs—so you can focus on finding a home you love instead of stressing over the math.

Source: Realtor. com

https://www.realtor.com/advice/finance/heres-how-much-money-you-need-for-a-down-payment-and-its-not-20/