How Much Should My Down Payment Be on a House?

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Are you ready to purchase your first home? Maybe you are starting a family and need a bigger home? No matter what your reasons are for buying a new home, the down payment represents a significant financial road block for many home buyers and it comes with questions. Put too much down and you may not be able to handle any unexpected expenses down the road. Put down too little and you find yourself overextended on your monthly payments.

With these thoughts in mind, many potential home buyers always ask — how much should my down payment be on a house? The answer to this question can depend on a variety of factors, like the type of loan you have, the closing costs for the home, and your own financial situation. Realtor Jackie Giroux and her team are here to help answer your questions and help find you a home that fits your budget.

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What Is the Average Down Payment on a New Home?

How much should your down payment be? The simplest way to answer this question is to take a closer look at the average down payment for a home. The gold standard for down payments in the past has been 20% of the sale price — but the recommended down payment and actual down payment in most cases will change based on a variety of factors that can include a minimum down payment that varies based on the type of loan.

Data provided by the National Association of Realtors (NAR) has found that the median down payment for all home buyers is 18%. That same data has found that first-time home buyers often put down an average down payment of 9%, which may be tied to those first-time buyers generally purchasing more affordable homes. By comparison, repeat home buyers with more established credit and financial history have an average down payment of 23%. Here in Kansas, the average down payment for a home is 13.3%.

What does that percentage look like in terms of real dollars? When you break down the math, the average down payment of 18% on a home with a median price tag is $71,442. First-time home buyers with an average 9% down payment would pay $35,721 and repeat home buyers with a 23% down payment would pay $91,287 — on average.

What Is the Minimum Down Payment for a Home?

Are you shopping for a home on a tighter budget? You may have questions about minimum down payments. Your minimum down payment will vary based on the type of home loan you have been approved for. The minimum down payment for a conventional home loan typically ranges from 3% to 5% based on your loan carrier. A Federal Housing Administration (FHA) Loan has a minimum down payment of 3.5% that is based on your credit score. VA Home Loans for eligible military veterans and USDA Loans for select rural and agricultural properties have a minimum down payment of 0%.

What Are the Benefits of a Larger Down Payment?

If you are a first-time home buyer trying to decide how much to put down on your first home, you may wonder — why put down 20% when the minimum down payment is 5%? It is a valid question and an important one to ask, but the reality is that a larger down payment carries certain short- and long-term benefits for home buyers.

  • A higher down payment of 20% or more allows home buyers to avoid Private Mortgage Insurance (PMI) fees that protect the lender.

  • A higher down payment reduces the total amount of money you need to borrow from a lender to purchase your home and by extension lowers your monthly mortgage payments.

  • When you put more money down on your home and take out a smaller loan, you will pay less interest over time and save a significant amount of money in the long term.

  • A larger down payment on your home helps potential lenders see how financially stable you are and can help you qualify for a lower interest rate on your home loan.

Are you planning on buying your first home? You may be asking how much your down payment should be and we hope that this quick overview created by Jackie Giroux and her team has answered some of your questions about down payments.

Contact Jackie Giroux today to get started purchasing your dream home!