How Much of a Down Payment is Needed for a House?

Reading Time: 4 minutes

 If you’d like to own a house, you may be wondering how much you’ll need to save for a down payment.  Solarity Credit Union makes homeownership an achievable dream. That’s why they’ve assembled some information that you can use to figure out how much of a down payment is needed for you to buy a house.

According to a 2019 Fannie Mae survey, Americans often over-estimate down payment requirements and the difficulty of obtaining a home mortgage. Read this and you might find that, for what you’re paying in rent right now, you can afford to purchase a home of your own.

What Are My Options?

Most of us don’t have enough cash on hand to buy something as expensive as a house outright. So, if you’re in the market for a new home, you’re most likely looking for a home loan. Home loans, or mortgages, typically come in two categories:

  1. Conventional loans
  2. Government-backed loans

Conventional Loans

Conventional loans are the most common method used to purchase a new house. In the past, it was traditional for lenders to ask that potential homeowners pay 20% of the property’s price as a down payment. As house prices have risen, however, saving for a 20% down payment has become a more and more formidable task. In Washington State, the average cost of a new house is around $270,000. Buying a home at that price would require you to save $54,000 for a down payment. That’s a lot of money by any standard.

Luckily, there are now more options available. This is especially true for first-time homebuyers. There are incentives and programs that exist to make first-time homeownership easier. If you’re looking into buying your first home, make sure to ask your lender whether any of these programs might work for you.

Either way, you may be able to purchase a home right now for a very low down payment or even no down payment. A low down payment would be somewhere between 3% to 5% of the property’s cost instead of 20%. That would turn that $54,000 down payment into a down payment of between $8,000 and $13,500. If this is more your speed, here’s how it would work:


If you aren’t able to save 20% for a down payment needed for a house, you can qualify for something called private mortgage insurance, or PMI. PMI is a type of insurance, paid for by the homeowner, that helps to protect the lender if the borrower becomes unable to pay. The lower your down payment, the higher the risk is to the lender. PMI helps reduce that risk and makes homeownership a possibility for more people.

If you use PMI to help purchase a home, it will increase your monthly home loan payment. The good news is that you won’t need to pay PMI forever. You can ask your lender to remove your PMI payments when your loan balance falls to 80% of your home’s original value. Another piece of good news is that, if you have good credit, your PMI payments are likely to be lower.

Your credit score, your lender, and the terms of your loan will determine how much your PMI adds to your mortgage every month. The average cost is 0.55% to 2.25% of the original loan amount, which could add a few hundred dollars to your loan payments during the early years of your mortgage.

Government-Backed Loans

Less commonly, you may qualify for a government-backed loan, such as an FHA or a VA loan. FHA loans are backed by the Federal Housing Administration while VA loans are backed by the Department of Veterans Affairs. FHA loans are offered by many lenders and are a great option for folks who don’t have the ability to save for a 20% down payment. FHA loans can offer down payment requirements as low as 3.5%. Much like conventional loans, FHA loans include an additional monthly charge for PMI, but it may be offered at a lower rate because it is a government-backed loan.

VA home loans are available to veterans and surviving spouses of service members both during their military service and after their service has been completed. The VA’s benefits are determined in part by length of service and duty status. If you’re an active service member, surviving spouse, or retired veteran, you may want to consider speaking with someone at Veterans Affairs to see if this type of government-backed loan is right for you.

Meet With an Expert

One of the things you can do to get an idea of what type of down payment structure will work for you is to apply for pre-approval or pre-qualification. Applying for pre-approval doesn’t obligate you to buy anything, but it can be very helpful when it comes to knowing how much you should save for the down payment needed for a house. Online mortgage calculators can also help you figure out what you can afford. Try changing the amount of your down payment in the calculator to see how much it affects your mortgage payment each month.

It may be that saving just a small amount more than you’d planned to put toward your down payment could have a big impact on your monthly costs. It may also show you that, even with a low down payment option, you’d still end up paying less to own a home than you’re paying right now to rent. It’s all very personal, which is why it’s great to work with a lender with great home loan service, such as Solarity Credit Union, that can go over all of the options with you.

If you have any questions, don’t be afraid to ask. Homeownership may be closer than you’d imagined. There is a lot of advice out there on how to save for a home. Solarity Credit Union has experts on hand who can go over every detail with you. Homeownership is a personal journey. A little information can help you get started on your way.

Share This: