How Much Downpayment Do I Need to Buy a Home?

Coming up with enough cash for a downpayment is one of the most common struggles among first-time buyers. But did you know that in most cases, you don’t need to put 20% down on a home, especially your first home? So how much do you need to put down? The answer is different for everyone. Your downpayment depends on your lender, your mortgage type, and your financial situation.

First of all- what is a down payment? 
It’s the percentage of your home price that you will pay upfront. Your downpayment represents the initial amount of equity—or ownership—that you will have in your home.

So, if you’re putting 10% down on a $200,000 home, your down payment will be $20,000. Sound like a lot of money? The good news is that many loan programs allow you to put much less than 10% down on a home.

Each loan program will have its own downpayment requirements: 

FHA- Backed by the Federal Housing Administration, the FHA requires as little as 3.5% down.

VA- Backed by the U.S. Department of Veteran Affairs, these loans are for qualified current, retired and reservist military members (and some surviving spouses) and typically do not require a downpayment for homes that do not exceed the VA limit. 

USDA- Backed by the U.S. Department of Agriculture, these loans are for rural and suburban home buyers and also start at 0% down. 

Conventional- While down payment requirements for Conventional loans differ from lender to lender, we offer Conventional loans starting at just 3% down. This amount may increase depending on your home’s purchase price, the purpose of purchasing the home (primary residence, secondary residence/vacation home, or investment property), your credit score, etc. 

While these loan programs may not always require a 20% down payment, you will be required to pay private mortgage insurance if you put less than 20% down—unless you are using a VA Loan. The private mortgage insurance will protect the lender on their investment in case you are not able to make your monthly payments, and in some cases can be removed once you reach a certain amount of equity in your home. 

So how much should you put down?

This is completely dependent on your situation. Your loan officer can help ask all the right questions to determine what makes sense for you. Just as a general rule of thumb, for every $10,000 you put down, you’re only saving about $50 per month on your mortgage.

While some buyers want their monthly payments to be as minimal as possible, others may feel more comfortable paying a little more each month knowing that they have wiggle room in their savings account.  

What else can I do to get myself ready to buy?
Before you meet with your loan officer to start the process, there are a few things you can do:

1. Renting for at least 12 months before you buy a home looks good to an underwriter. It shows you can handle a mortgage payment each month.
2. It’s also important to show you are responsible by paying your credit card and other bills on time.
3. At any point in the home buying process, you can always call your local loan officer to get tips and information. They're here to help.
4. Our mortgage app is a great way to stay up to date on the loan process and calculate your payments. You can download it in the app store by searching TowneBank Mortgage in the app store.