How Much Do You Really Need for a Down Payment?

Almost every buyer I meet has a number stuck in their head. Usually it is 20 percent. For most first-time buyers, that number is wrong — and it is the single most common reason people put off buying a home longer than they need to.

Why the two numbers are so far apart

This trips people up, so it is worth explaining. Repeat buyers are not better savers. They are rolling equity from a home they just sold straight into the next one. If you sell a house and walk away with $150,000, that money becomes your down payment. First-time buyers are saving from income instead — which is why 10 percent is the more honest benchmark if this is your first purchase.

So when someone tells you the average down payment is over 20 percent, they are quoting a number that mostly describes people who already owned a home.

And 10 percent is the median, not the minimum

Half of first-time buyers put down less than that. Depending on the loan you qualify for, the floor can be considerably lower:

• VA loans — zero down for eligible veterans and active-duty service members.
• USDA loans — zero down in eligible rural areas. More of the outlying valleys qualify than people expect.
• FHA loans — as little as 3.5 percent down with a qualifying credit score.
• Conventional loans — some programs go as low as 3 percent for first-time buyers.
• Utah Housing Corporation — state programs that can assist with the down payment itself for buyers who qualify.

Which of these you can use depends on your credit, income, the property, and where it sits. That is a conversation for a lender, not a website — but the point is that the menu is wider than most people assume.

What putting down less actually costs you

Less down is not free, and you should go in knowing the trade-off:

• Mortgage insurance. Under 20 percent down on a conventional loan usually means PMI on top of your payment. The upside: PMI can typically be removed once you have built enough equity. FHA mortgage insurance often stays for the life of the loan — ask your lender to spell out which applies.
• A bigger loan. More borrowed means a higher payment and more interest over time.
• Less cushion. Starting with little equity means less room to manoeuvre if you need to sell sooner than planned.

None of that makes a smaller down payment wrong. Waiting three years to save an extra 10 percent has its own cost, in rent paid and in whatever the market does while you wait. It is a trade, and the right answer depends on your situation.

The first step is smaller than you think

You do not need to have the money saved to find out what you qualify for. A conversation with a lender takes about twenty minutes and tells you the actual number for your situation — which is almost always more useful than guessing at 20 percent. If you would like an introduction to a lender I trust, just ask.

Loan program details are general and change over time. I am a real estate agent, not a lender — qualification, rates, mortgage insurance and program eligibility are determined by your lender based on your circumstances. This page is not lending, legal, or tax advice.