What is the minimum down payment on a house?
When it comes to buying a house, I feel like the amount of your down payment is one of the biggest myths out there! I address this question a lot (in fact, I have a whole video about down payments and other first time home buyer myths on my YouTube channel if you’d rather watch that), but I think it deserves its own post here, because the minimum down payment on a house is obviously a big factor in buying a home.
How much do you need for a down payment?
If you’re thinking you need 20% down to buy a house…well, that’s not exactly the case! Most minimum down payment requirements actually start at around 0% to 5% down.
In general, there are four main types of loans used to buy a house:
FHA
VA
Conventional
USDA
FHA Loans
With an FHA loan, the minimum down payment required is only 3.5%.
VA Loans
VA loans are available to military personnel and veterans, and come with a minimum down payment requirement of 0%!
Conventional Loans
I’d say conventional loans are probably what people are most familiar with. But the minimum down payment requirement on a conventional loan is only 3%!
USDA Loans
USDA loans also have a 0% down payment requirement. These types of loans have some specific income and location restrictions, so it’s something you’ll want to check into beforehand.
So what is the minimum down payment required?
So, none of these loan types require a 20% down payment! In general, the minimum down payment requirement starts at around 3% for most people.
Let’s break this down. On a $250,000 house, a 3% down payment comes out to $7,500. (20% of $250,000, on the other hand, backs out to $50,000.) Obviously, a down payment in the 3% range makes buying a home a lot more attainable!
Where did the 20% down payment myth come from?
I think the whole myth that you have to have a 20% down payment to buy a house comes from private mortgage insurance. This is because the 20% mark is the threshold for not needing to have private mortgage insurance (or PMI).
On a conventional loan, for example, you’ll have PMI if you put down less than 20%. But really, that’s just the case for conventional loans, because if you have an FHA loan, you’ll have PMI for the entire life of the loan.
What is private mortgage insurance?
Private mortgage insurance is something that lenders generally require when you put down less than 20%. This is because they’re lending you more money to pay for the house, which in turn creates more risk for them. The PMI is an additional fee on top of your mortgage payments that helps offset some of the risk for your lender to loan you the money.
If you have a conventional loan, you' can generally stop paying PMI when you reach enough equity to equal 20% of your home’s value.
How much is private mortgage insurance?
Your credit score and your loan to value (or LTV) ratio can influence the amount of private mortgage insurance you’ll pay. (For example, if your down payment on a house is 10%, your LTV is 90%.)
In general, it’s estimated that you’ll pay $30 to $70 per month in PMI for every $100,000 borrowed.
Sticking with the $250,000 home from our example earlier, let’s average it out and say it’s $50 per month in PMI for every $100,000 borrowed. This would mean you would pay $125 in PMI per month.
Bottom Line
If you have more questions on the minimum down payment on a house or want to see what you might qualify for, it’s always best to ask your REALTOR® or lender for more specific information!
And just for a quick disclaimer: I’m not a lender or mortgage officer and am licensed as a real estate agent in Nevada, so this is all from personal experience! I always recommend consulting with a lender or mortgage professional for more information.
I’m always happy to help with any questions you might have! Feel free to send me a message here.
If you’re thinking about buying a home but aren’t sure where to start, check out my free home buying guide! I created it to help home buyers understand what the process to get started buying a home is and what my tips are for setting you up for success as early as possible. You can check it out here!
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