Many who hope to someday purchase their own home may be dreading coming up with a minimum down payment for a mortgage. Currently, the median existing-home price for the nation is $352,800 as of September 2021. Price is of course higher and lower depending upon where are you live in the country. This number is expected to become even higher as time goes on and the real estate market is staying strong. But the asking price of a home is far less intimidating with the current super low-interest rates that mortgages offer right now. But depending upon the type of mortgage you seek, your down payment requirement could vary.
What is the minimum down payment requirement for a house?
The down payment is the amount of cash you contribute towards the purchase of a home. This is the amount you put down on the home as your share in the ownership. The higher the down payment the less you will need to borrow for the rest of the purchase and the lower your monthly payment will become.
Traditionally most lenders require a down payment for almost every type of home loan they carry. There are some exceptions to rules and certain buyers, but for the most part there are standard requirements across the board that almost every bank requires when setting up a certain type of loan.
- Most conventional loans will require anywhere from 3% to 15% down depending upon the lender and the exact type of conventional loan.
- A jumbo loan can be anywhere from as low as 5% up to 20% depending upon the specific lender. This has a larger requirement range as jumbo loans are not backed by federal entities so banks set their own rules as they cannot sell the loan off to a federal entity.
- An FHA loan most typically will require 3.5% down payment
- With a VA loan there is no down payment required and the same goes with a USDA loan.
How much is the average down payment for a home in America?
Since each type of loan has its own down payment requirements and is set more specifically within the specific terms of the borrower and the bank offering to lend money some may wonder what the average or most common down payment is for a home.
The National Association of Realtors has shown that the average home buyer makes a down payment of 12% on a mortgage loan. For first-time buyers this number changes, 75% of first-time homebuyers do not put down what is considered the traditional amount of 20%. The average first-time homebuyer in America actually puts down around just 6% on the purchase price of a home. For those that currently own a home and are looking to resell their home and find a new one, 16% is the average down payment. Then there are some buyers who are opting to purchase a home entirely with cash. In September 2021, the total number of cash home purchases was 23% of all sales.
Is it worth putting down a larger down payment?
The answer to this question is it really depends upon your personal financial situation. In some cases, it would be a much better idea to pay more of a down payment and secure a lower monthly mortgage payment. But in some cases, it could be next to impossible to secure such a large amount of money. Some loans offer a lower down payment requirement to help those who may have more difficulty finding such a large sum of cash all at once to get into a home and they still receive a fairly good interest rate.
The best method for choosing what you should put down on a home loan is to talk to a mortgage professional. A mortgage broker is very knowledgeable of all of the mortgage loan options available on the market currently and will have a great idea of what might be the best mortgage product available to you for your home purchase.
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