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The Low-Down on Down Payments

A down payment is the amount of money you put down on a home when you purchase it. The balance is typically financed as part of your home loan, and it’s calculated as a percentage of the purchase price. Down payments can vary greatly depending on the type of program and your financial picture. There are programs that require no money down, all the way up to as much as 50% down in some rare instances. So what does this mean for you? 

For most buyers there are low down payment programs available, often allowing for a down payment of under 10%. Additionally, there are grants and assistance programs that can help make up the difference for eligible borrowers. Your loan advisor spends time regularly learning the ins and outs of all of these programs, and knows what is available to you by program, as well as local assistance programs that you might qualify for. 

Bar chart showing the percentage of down payments made by US homeowners in the purchase of their home according to Nerdwallet. Starting from the top bar, the chart shows: (1) 32% put down 5% or less, (2) 16% put down between 6-10%, (3) 23% put down between 11-20%, (4) 18% put down more than 20%, and (5) 10% bought outright. 

Bar chart which show what consumers believe is required for a down payment according to NerdWallet. From left to right: (1) 3% believe 0% is required, (2) 17% believe 1 to 5% is required, (3) 20% believe 6 to 10%, (4) 3% believe 11 to 19%, (5) 13% believe 20%, (6) 3% believe 21%, (7) 40% don't know how much is required, and (8) 2% provided no answer. 


How Much Down Payment do I Need?

There is a long-standing misconception about down payment requirements. A survey from Fannie Mae shows only 17% of consumers know the minimum options are actually less than 5% of the purchase price and 40% don’t know how much they need at all.

The amount of down payment required depends on several factors, but there are a few steadfast programs that apply to most first time buyers. VA loans require no money down in most instances, while FHA loans require 3.5%. A regular conventional loan may require as little as 3% down, but will also require private mortgage insurance (PMI), which should be taken into consideration when looking at what your monthly payments will be.

According to NerdWallet, 32% of homeowners bought their home with 5% or less, while another 16% bought with 6-10% down. 

Are you looking for ways to get that down payment pulled together? Check out our blog article on how to quickly save for a down payment for practical, easy to implement ways to quickly save up!

Down Payment Assistance Programs

While some people have a family member or loved one that can help with a down payment, not everyone does. It’s important to know that there are thousands of down payment assistance programs available, offered regionally or even nationally, with some of them specifically created to help first time buyers. 

Some of these programs are loans, either with monthly payments required or no payments required until you sell the home. Others are grants that don’t have to be repaid, or forgivable loans that are forgiven once the homeowner has met the criteria for the program. We have an entire article to help you check out the differences.

Down Payment Assistance can show up in various ways - we're here to help you determine which are available for you, and help guide you through the process. 

Infographic showing there are 3 types of Down Payment Assistance Programs, which include from left to right: (1) Second Mortgage, (2) Gift or Grant, and (3) Forgivable loan

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