How much you need for a down payment depends on the loan program, property type, occupancy, credit profile and other qualification requirements. Many homebuyers are surprised to learn that buying a home does not necessarily require a 20% down payment.
Depending on your circumstances, mortgage options may be available with no down payment or with a relatively small down payment. Down payment assistance programs may also help eligible buyers reduce the amount they need to bring to closing.
No Down Payment Mortgage Options
Some qualified borrowers may be able to purchase a primary residence without making a down payment.
- VA loans. Eligible veterans, active-duty service members and certain surviving spouses may qualify for VA financing with no down payment, subject to VA and lender requirements.
- USDA loans. Eligible borrowers purchasing qualifying properties may be able to use USDA financing with no down payment. Income and property-location requirements apply.
- Down payment assistance. Certain state and local homebuyer programs may provide assistance that can cover some or potentially all of a borrower’s required down payment, depending on the program and eligibility requirements.
Low Down Payment Mortgage Options
Homebuyers who do not qualify for a zero-down option may still have several low-down-payment choices.
- Conventional loans. Some qualified buyers may be eligible for conventional financing with as little as 3% down. Requirements vary based on the loan program, borrower profile, occupancy and property type.
- FHA loans. Qualified borrowers may be eligible for FHA financing with a minimum down payment of 3.5%. FHA loans also include mortgage insurance and have additional program requirements.
- First-time homebuyer programs. Some conventional and government-supported programs provide reduced down-payment options or assistance for eligible first-time buyers.
Down Payment Assistance Programs
Homebuyers in Maryland, Washington DC and Virginia may have access to state or local down payment assistance programs. Depending on the program, assistance may be structured as a grant, forgivable loan, deferred loan or repayable second mortgage.
Eligibility can depend on factors such as household income, purchase price, property location, occupancy, homebuyer education and the specific first-mortgage program being used. Program funding and guidelines can also change.
Because these programs vary significantly, it is important to evaluate both the assistance being offered and the terms of the underlying mortgage rather than choosing a program based solely on the amount of assistance.
When a Larger Down Payment May Make Sense
Making the minimum required down payment is not always the best financial strategy. Some buyers choose to put more money down to reduce their loan amount, lower their monthly payment or potentially reduce mortgage insurance costs.
However, putting additional money into the home also reduces the cash you retain after closing. Maintaining adequate savings for emergencies, moving expenses, repairs and other costs of homeownership can be equally important.
Down Payments for Investment Properties and Other Property Types
Down-payment requirements can be higher for investment properties, second homes, multi-unit properties and certain non-conforming or specialized loan programs. The required amount depends on the specific loan program, occupancy, number of units and borrower qualifications.
If you are considering one of these property types, it is important to review the financing requirements before determining how much cash you will need.
Down Payment Is Only Part of the Cash Needed to Buy a Home
Your down payment is not necessarily the total amount of money you will need at closing. Buyers may also need funds for closing costs, prepaid property taxes, homeowners insurance, initial escrow deposits and other transaction-related expenses.
Seller concessions, lender credits and eligible assistance programs may help with certain costs depending on the transaction and loan program.
How Much Should You Put Down?
There is no single down-payment amount that is right for every buyer. The best approach depends on your available savings, monthly-payment goals, loan options and how much money you want to retain after closing.
If you’re planning to buy a home in Maryland, Washington DC or Virginia, I can compare available financing and down payment options and help you understand the estimated cash needed before you begin making offers.
Have questions about your down payment options? Contact me and I’ll be happy to review your situation with you.
Ready to explore your options? Start your prequalification online.
Loan programs, down-payment requirements and assistance-program guidelines are subject to change and depend on borrower and property eligibility. This information is for general educational purposes and is not a commitment to lend.
