How Much of a Down Payment Should You Make?

Larger and Smaller Down Payments Both Have Pros and Cons

Most people make a down payment when they buy a house. Your down payment amount can depend on how much cash you have, your mortgage type, and much more. Read on to decide if a larger or smaller down payment makes sense for you!

What Is the Minimum Down Payment for Different Home Loan Types?

• VA loans. If you qualify for a VA loan, you, typically, can buy a home without a down payment. However, your down payment affects how much you will pay for the funding fee that comes with VA loans. Learn more about VA loans.
• FHA loans. FHA loans help make buying houses more affordable. If you qualify for an FHA loan, then you can make a down payment as low as 3.5%. Keep in mind that the cost of mortgage insurance premiums is affected by the size of your down payment. Learn more about FHA loans.
• USDA loans. These loans help people in rural and suburban communities become homeowners. Many who qualify for USDA loans can buy a home without a down payment. Learn more about USDA loans.
• Conventional loans. You do not need a 20% down payment for a Conventional mortgage. Many loans are available with much lower down payments. However, a 20% down payment will help you avoid private mortgage insurance. Learn more about Conventional loans.

Do You Have Money for Emergencies?

Life is full of events like house repairs, car repairs, health problems, and job changes. Financial professionals recommend keeping cash reserves for emergencies. Think about how much money you want to save for unexpected problems before you make a down payment.

How Long Will You Live in the Home?

An important consideration is how long you plan to own your home. If you plan to live in your home for a long time, a larger down payment can help you save money on interest. That's because you will pay the mortgage for many years, and, the less money you borrow, the less interest you pay. If you think you will own the home for just a few years, a larger down payment saves you less.

See for yourself how much a smaller or larger down payment affects your monthly payments and savings with our mortgage down payment calculator!

Last reviewed and updated January 2024 by Freedom Mortgage.