How much down payment do you need for a home?
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Financing a home used to mean a 20% down payment but contemporary mortgage options mean you can buy a house with much less down—or even no down payment at all!
While conventional wisdom says that home buyers need a down payment equal to 20% of the purchase price, that guideline no longer holds true. Contemporary mortgage loans that require low down payments—or even no down payment at all—have put homes within reach for more buyers than ever.
Low- and no-money down mortgage options
Lenders have realized that there are many home buyers who earn good incomes but don’t have much saved for a down payment. Also, some borrowers would rather put their money into other investments. As a result, mortgages with smaller down payments have become common. According to the National Association of Realtors, in 2018 the median down payment for home loans was 13% for buyers overall and 7% for first-time buyers.
However, there are options that allow an even lower home down payment. Here are a few examples of Consumers mortgages that put members in homes with just 3% or 5% down and, often, zero down:
- Advanced Medical Mortgages* — 0% down and no PMI for loans up to $750K, or just 5% down if over $750K, for full-time MDs, DOs, PAs, NPs, CRNAs and DMDs.
- At Your Services Mortgages* — 0% down, no PMI, and no lender fees for members who work in public service like police officers, RNs, teachers and more.
- Special programs for first-time buyers — these include low- and no-money down loans that help you keep money on hand for home improvements, furniture or a rainy day. Choose from 0% or 3% down options.
You can explore more home mortgage loans from Consumers here, including FHA loans for borrowers with imperfect credit and VA loans for active military members and veterans.
Why you still might put down 20% on a mortgage
If you have the cash on hand, a 20% down payment makes sense for many borrowers. A higher down payment means you own more equity right from day one, plus your monthly payments will be lower.
Other advantages of making a 20% down payment are:
- You’re more likely to get the loan you want.
- You could get a lower interest rate on your mortgage; therefore, you’ll pay less overall for your loan.
- You can present a strong offer to a buyer who can be more confident in your financial ability.
Traditionally, a 20% down payment meant that borrowers could avoid paying for private mortgage insurance (PMI) which is designed to protect lenders from borrowers who default. These days, however, borrowers can also use no- and low-money down loans to avoid PMI or get it at a lower rate.
Overwhelmed by mortgage options? Help is available!
Sorting through all your mortgage options can be daunting whether you’re a first-time or repeat buyer. A Consumers mortgage loan officer can help you decide which loan is best for you; just call us at 800-991-2221 or contact a local loan officer online.
Consumers helps more than 1,000 members finance land, first and second homes, and home improvement projects each year. When you need a mortgage or home equity line of credit, call us at 800-991-2221. We’re here to help you get the home of your dreams!
All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on credit worthiness, qualifications, and collateral conditions. *Program available on purchase of single-family primary residence on less than 5 acres.