How much you need for a down payment on a home, based on which type of mortgage you get

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  • The cash you pay up front when buying a home is your down payment; you'll borrow the remaining money by getting a mortgage.
  • You might need as little as 3% up front for a conventional mortgage, although you'll need a higher down payment for a jumbo mortgage.
  • Some government-backed mortgages, including VA and USDA loans, don't require a down payment at all.
  • Saving more than the minimum down payment comes with perks such as better interest rates and lower monthly payments.
  • Policygenius can help you compare homeowner's insurance policies to find the right coverage for you, at the right price »

What is a down payment?

A down payment is the money you pay up front when you buy a home. You'll take out a mortgage to borrow the rest of the money to buy the house.

For example, you might want to buy a $200,000 house, and you have $20,000 saved for a down payment. You'll take out a mortgage loan for the remaining $180,000.

The amount you'll need for a down payment depends on which type of mortgage you get.

The down payment you'll need for each type of mortgage

There are two basic types of mortgages: conventional and government.

A conventional mortgage is not backed by a government agency, while a government mortgage is secured by the government and the agency compensates your lender should you fail to make mortgage payments.

The minimum down payment depends on whether you choose a conventional or government loan, and which sub-category of loan you get.

Conventional mortgages

There are two types of conventional mortgages:

  • Conforming loan. This is a loan under a certain amount, which is around $500,000 in most parts of the US in 2020. You'll need at least a 10% down payment for most conforming loans, or just 3% if your mortgage is backed by federal-sponsored companies Fannie Mae or Freddie Mac.
  • Nonconforming loan. Also known as a jumbo loan, this is a mortgage for a larger amount. It has stricter eligibility requirements, including the down payment. The amount you'll need depends on the lender. Many require at least 20%, but some ask for less or more. 

Government-backed mortgages

There are three types of government-backed mortgages:

  • FHA loan. This loan has more lenient requirements than a conventional mortgage. You'll need a 3.5% down payment if you have a credit score of 580 or higher, and a 10% down payment with a score between 500 and 579.
  • VA loan. This mortgage is for military families. You don't need any down payment for a VA loan.
  • USDA loan. This loan for low-to-middle income buyers in rural and suburban areas doesn't require any down payment.

Reasons to save for a larger down payment

If you have the minimum down payment required to buy a house, you might decide you're ready to get the ball rolling. But you also may want to consider saving even more for a down payment. Here are some advantages of paying more up front:

  • Lower interest rate. Lenders reward a higher down payment with a lower interest rate. This could save you tens of thousands of dollars over the years.
  • Lower monthly payments. When you take out a 30-year mortgage, for example, the amount you borrow is spread out into monthly payments for 30 years. The less you borrow, the less money you'll pay every month.
  • Less or no mortgage insurance. If you put 20% down on a conventional mortgage, you won't have to pay for private mortgage insurance, which typically costs between 0.2% and 2% of your mortgage amount. Other types of mortgages require different kind of insurance that cost a percentage of your loan, so the less you borrow, the less you'll pay for insurance.

There are always pros to having a bigger down payment. But it's up to you whether you're ready to buy now or want to save more.

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