The Ultimate Guide to Down Payments

Down payments are a big part of purchasing a home. You can’t buy anything without putting some money upfront, so it is important to know the basics about down payments before you go into the process. This blog post will cover everything you need to know about down payment requirements and what your options are when looking for financing. We’ll also discuss how much you should put down, what type of mortgage has the best rates, and how much that monthly payment could be over time!

What is a down payment and why do I need one?

The one thing you will need to purchase a house is money. How much money depends completely on how big of a loan you are approved for and what your lender requires as the down payment amount. For most loans, this number ranges between three percent (lower rates) or 20% (higher rates). If you put less than 20%, then you will be required to pay for Private Mortgage Insurance (PMI), which costs an extra $50-$100 per month.

Your down payment is essentially how much money you put towards the purchase of your home upfront, before financing kicks in and makes monthly payments on a set schedule until it’s paid off. The more money you have saved up, the less you will have to borrow and thus pay back over time.

The lower your down payment, the more money you can potentially borrow and spend on other parts of making a home livable such as renovations or new appliances. However, taking out a larger loan means that you’ll be paying extra interest charges and may not save much in monthly payments.

Down Payment Requirements

The requirements for down payments vary by loan type and lender. You can get a general idea of what your minimum needs to be based on the chart below:

Jumbo loans (loans over $453,100 in most areas) may require more than 20% for some lenders.

You should always work with one of our Mortgage Bankers at HomeCity. They will be able to tell you exactly what down payment amount your lender will require to fund the loan so that you can save accordingly!

*Keep in mind, if your credit score is below 620-640, it may be difficult for you to qualify for a home loan at all !

If this sounds like more than just 20% of the cost of your home, don’t worry. You can still purchase a house! There are other options that you could look into if you need to borrow more than 20%.

One option is an FHA Loan, which requires as little as three percent down but comes with costly monthly mortgage insurance (or PMI) charged by the government for the life of the loan.

Types of Mortgages

There are several types of mortgages to choose from. Each one is determined by the lender and will have its own set of pros and cons.

Conventional Loans

These are loans that are backed by Fannie Mae or Freddie Mac, which means they follow guidelines set out by these agencies in terms of maximum rates allowed for certain loan amounts. Conventional loans can be used for purchase or refinance and usually require a down payment of ten to twenty percent. They also come with PMI which you will have to pay monthly until your balance reaches eighty percent of the original value of the home.

FHA Loans

These are Federal Housing Authority-backed mortgages, which means they follow guidelines created by the federal government when it comes to maximum rates allowed for specific loan amounts. These loans are perfect if you have a lower than average credit score or don’t want to put down more than three percent of your home purchase price in order to avoid paying private mortgage insurance (PMI).

VA Loans

This is another type of Federal Housing Authority backed mortgage that is perfect for service members (active or retired) who are looking to purchase a home. This type of loan requires no down payment, which means you can literally walk into the dealership with nothing but your keys and drive off with a new car! That’s right; VA loans do not require any money down at all, making them ideal if you are looking to buy a new home with no money upfront.

Calculating Monthly Payments Over Time

There’s no denying that paying for a home is expensive, and it only gets more costly the longer you wait to start making monthly payments.  If you’re not ready to commit to monthly mortgage payments just yet, consider renting out your new property until you save enough money for a down payment or decide on how much of your own cash you want to invest in the home.

If you decide that now is the right time for you and your family to purchase a new house, make sure you keep these tips in mind.


In conclusion, down payment requirements vary by loan type. Down payments can also be determined by the lender based on credit score, previous debt obligations, and monthly income.

If you’re looking for a way to purchase your first home but don’t have enough money saved up for a standard 20% down payment, there are several options available that will allow you to get the keys to your new house and start making monthly payments sooner than later.

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