Down Payments 101: How Much Do I Need to Save for a House?

What is a down payment?

If you are buying a home, the first sum of money that you will contribute toward the purchase is your down payment. This is an upfront cost that represents your initial investment in a home. A larger down payment indicates to lenders that you are committed to the sale and they can feel confident in approving your mortgage. If you are able to provide a down payment of 20% or more, you may even end up saving money on interest because you are likely to be approved for a lower mortgage interest rate.

How to calculate your down payment

Your down payment is calculated based on a percentage of the total purchase price. The rest of the balance will then be financed by your mortgage loan.

To find a down payment amount, you can multiply the purchase price by the down payment percentage amount. Here is an example using a home listed at $300,000 with a 20% down payment:

300,000 x 20% = 60,000.

This would mean that in order to put down 20% on the home purchase, you will need to save at least $60,000. That said, you will not necessarily have to provide a 20% down payment to complete your home purchase because different lenders and mortgage types have varying down payment requirements.

How much is a down payment on a house?

The exact amount you will have to pay for your down payment will depend on what type of mortgage you choose, your lender’s requirements, and your credit score. Here is an overview of the minimum down payment amounts associated with three common home loans, conventional loans, Federal Housing Administration (FHA) loans, and U.S. Department of Veterans Affairs (VA) loans: 

• For conventional loans, there are programs that allow a borrower to purchase a home with less than 20% down. Some lenders require a down payment as low as 3%. However, a down payment of at least 20% typically allows you to get the best interest rate and avoid paying for mortgage insurance. 

• FHA loans require a down payment minimum as low as 3.5%. This is because FHA loans are meant to assist first-time buyers or those who may not qualify for conventional loans. However, due to their low down payment qualifications, FHA loans almost always require a mortgage insurance premium (MIP). This means you will have to account for an up-front MIP payment at closing, followed by monthly payments that are factored into your mortgage payments.

• VA loans are home loans offered by the U.S. Department of Veterans Affairs with no down payment and no private mortgage insurance (PMI) for current and retired military members, those that have completed service in the National Guard, or are an eligible surviving spouse of a veteran.

Remember that mortgage down payment requirements and guidelines can vary based on location, loan type, and individual lender policies. It is smart to consult with a mortgage professional or financial advisor who can provide personalized advice based on your specific situation, goals, and needs.

What is the average down payment on a house?

According to a February 2025 report from Redfin, the median down payment for homebuyers is about 16% of the purchase price. A 20% down payment is typically recommended, but when housing prices are climbing this can feel out of reach for many borrowers.

For those that qualify, government-backed loans from programs listed above have more flexible down payment options than conventional loans. This can make it easier for curious homebuyers to become confident homeowners.

What are the advantages of a higher down payment?

It can be beneficial to take your time saving up the funds for a larger down payment, regardless of the mortgage you decide is right for your needs. Some of the advantages of providing a larger down payment amount include:

• Lower loan amount: Reducing the amount you need to borrow for a home loan can result in lower monthly mortgage payments.

• Equity and ownership: Can create instant equity, giving you an ownership stake in your property.

• Better loan terms: Can secure you a lower interest rate and reduce or eliminate any mortgage insurance premiums.

• No PMI: If your down payment is 20% or more of your home’s price, you will not be required to pay for mortgage insurance.

How to save for a down payment (and other homebuying expenses)

Saving up for a down payment on a home may seem challenging, but with a little patience and discipline, you can find ways to put away money for a modest down payment.

Remember, you do not have to save up 20%. Even if you are only able to put away 5% of the sale price of your home, you will be in a better position than you would be with nothing to put down. Here are good ways to get started:

• Make a budget: Keep track of monthly expenses. Then identify areas where you can save or reduce spending.

• Automate your savings: Set up automatic transfers to a savings account that you will not touch until your goals are met.

• Down payment assistance programs: Many programs can provide financial assistance to homebuyers on a local, state, or national level. Seek out first-time homebuyer programs for first-time homebuyers. Keep in mind that different programs will have varying requirements based on income, location, or particular groups of people, such as veterans.

• Gifted down payments: In some cases, buyers can receive a down payment as a gift from a loved one. Lenders usually have specific guidelines regarding the use of gifted funds, so make sure you understand the requirements. You will likely be required to provide a letter of explanation (LOE) as a part of your mortgage application process.

At the end of the day, the down payment you provide will depend upon how much you already have in savings and what other things you might need that money for. Get started by thinking about your financial circumstances and goals, and that will help you see what makes the most sense for you and your loved ones. Happy shopping!

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