How Much Down Payment to Buy a House?
4 Ways to Save More for a Down Payment
Reduce Your Spending
Buying a home is a major decision. Consider delaying big purchases like a new car with hefty payments. Saving money wherever possible is key. Remember, every penny saved adds up!
Pay Off Credit Cards or High-Interest Debt
For example, if you are paying 24% interest on your credit card on $1000 owed, that is an extra $240 fee that you could have saved towards your down payment.
Get a Second Job
A second job may really put a strain on your emotional or personal well-being, but if it means the difference between buying the home of your dreams, maybe it’s worth doing for a few years.
Set up a Regular Savings Deduction
Automate savings from each paycheck to build your down payment fund faster. Live within your means and avoid credit card debt. You'll be amazed at how quickly your savings grow!
Typical Down Payment for Residential Properties
Loan Types |
Minimum Typically Needed |
|---|---|
| Conventional | 10% down payment |
| Jumbo | 10% down payment |
| FHA | 3.5% for credit scores of 580+ 10% for credit scores of 500+ |
| Non-Prime | 10% down payment |
| Reverse | Based on age. See details |
Above rates may change or not be available at the time of loan commitment or lock-in.
Typical Down Payment for Investment Properties
Loan Types |
Typical Down Payment |
|---|---|
| Conventional | 15% |
| Jumbo | 20% |
| Non-Prime | 20% |
Frequently Asked Questions(FAQs)
When searching for your ideal home, acting swiftly is crucial. Properties in lower price ranges tend to sell fast, often attracting multiple offers.
To stand out, consider offering a substantial down payment, as sellers favor buyers with strong financial positions.
A sizable down payment signals to sellers your readiness for final loan approval and minimizes the need for negotiation. Additionally, it may trump offers seeking seller assistance with closing costs or offering below the asking price, making you a more appealing buyer.
When you are pre-approved for a mortgage, a lender will tell you the maximum loan amount for which you qualify, based on responses in your application. Your mortgage application asks about your estimated down payment amount, income, employment, debts, and assets. A lender also pulls your credit report and credit score. All of these factors influence a lender’s decision about whether to lend you money for a home purchase, how much money, and under what terms and conditions.
As a general guideline, many prospective homeowners can afford to mortgage a property that costs between 2 and 2.5 times their gross income. For example, if you earn $100,000 per year, you can afford a house between $200,000 and $250,000.
Rather than simply borrowing the maximum loan amount a lender approves, you’re better served by evaluating your estimated monthly mortgage payment. Say you get approved for a $300,000 loan. If your monthly mortgage payment and other monthly debts exceed 43% of your gross monthly income you might have trouble repaying your loan if times get tight. In other words, be cautious about buying more house than you can reasonably afford.
If you’ve been renting for some time, you likely have a strong handle on the monthly mortgage payment you can afford. Renters should keep in mind that owning a home or condo includes additional expenses such as property taxes, maintenance, insurance, possible Home Owners Association (HOA) dues, and unexpected repairs.
Beyond buying a house, you may also want to contribute to other financial goals such as saving for retirement, starting a family, shoring up an emergency savings fund, and paying down debt. Taking on too high of a monthly mortgage payment will eat up cash that could otherwise go toward some of these important goals.