How Much Down Payment Do You Really Need to Buy a Home?

By the Mercury Team

So you found a house that fits your lifestyle, and you’re ready to make an offer and start making that home your own. But before you ever put in an offer or start a bidding war, you’ll need to think through every financial aspect of the process. That starts with your down payment. Here’s what you need to know about how much you should put down, the average down payment on a house in the U.S., and ways to get assistance should you need it.

How Much Is a Down Payment on a House?

A down payment is the portion of a home’s purchase price, usually a percentage, that you pay upfront, with the remainder financed through a mortgage. Let’s say you want to buy a $350,000 house. If you put 10% down, you’d be paying $35,000 upfront. A 20% down payment means $70,000. The amount you have to put down on a home will depend on the type of loan you plan to take out, as well as your credit profile and, ultimately, how much money you can afford to pay right away.

What Is the Average Down Payment on a House?

According to a 2026 report from the National Association of Realtors (NAR), first-time homebuyers are putting an average of 10% down, while repeat buyers put down an average down payment of 23%. The same report found that 31% of first-time buyers said that saving for a down payment was the most difficult step of the homebuying process.

Our own research bears that out, too. In fact, about 32% of millennials and Gen Z who don’t currently own a home are unsure if they’ll ever own one. And they almost unanimously believe that their generation faces a tougher path to homeownership than previous generations.

Minimum Down Payment Requirements by Loan Type

Different mortgage programs have different down payment rules, however. The NAR report found that 51% of first-time buyers used conventional loans, while 28% took advantage of FHA loans, and only 8% used a VA loan.

Conventional Loans

If you choose a conventional loan, it means you’re getting a loan issued by a private lender, like your bank, credit union, or a traditional mortgage lender. This type of loan typically requires as little as 3% down for qualified buyers, especially first-time homeowners. However, putting less than 20% down usually means paying private mortgage insurance (PMI), which will increase your monthly cost.

FHA Loans

Loans backed by the Federal Housing Administration allow down payments as low as 3.5%, making them popular with buyers who have lower credit scores or limited savings. FHA loans require mortgage insurance premiums for the life of the loan in most cases.

VA and USDA Loans

Eligible buyers may qualify for 0% down loans through the Department of Veterans Affairs (VA) or the United States Department of Agriculture (USDA). VA loans are available to qualified service members and veterans, while USDA loans help buyers in eligible rural and suburban areas with income limits.

How Your Down Payment Impacts Your Monthly Mortgage

Your down payment on a home directly affects your loan size, monthly payment, and insurance costs. A larger down payment reduces the amount you borrow, which lowers your principal and interest payments. It can also eliminate PMI, potentially saving hundreds of dollars per month. On the other hand, a smaller down payment may allow you to buy sooner but results in higher ongoing costs.

Pros and Cons of Putting 20% Down

Putting a 20% down payment on a house has clear advantages, but it also comes with some downsides:

Pros:

• No private mortgage insurance (PMI): You can avoid paying PMI, which protects the lender but adds to your monthly costs.
• Lower monthly payments: A larger down payment on a house reduces the loan amount, so your monthly mortgage payments are smaller.
• Better interest rates: Lenders often offer lower rates to borrowers with bigger down payments.
• More equity from day one: You start with 20% ownership of your home, giving you more financial stability and flexibility.
• Stronger offer in competitive markets: Sellers may favor buyers who can make a larger down payment.

Cons:

• Ties up cash: Putting 20% down requires a significant upfront sum, reducing money available for emergencies, investments, or renovations.
• Slower entry into homeownership: Saving for 20% can delay buying a home, especially in high-cost markets.
• Opportunity cost: The money used for the down payment could potentially earn more if invested elsewhere.
• Risk if home value drops: If the market falls, a large down payment on a house won’t protect you from losing equity.

Savings Strategies for a Down Payment

Many buyers often combine multiple strategies to reach their down payment goal. These may include:

• Setting up automatic savings transfers.
• Using high-yield savings accounts.
• Reducing discretionary spending.
• Applying for down payment assistance programs offered by state and local housing agencies.
• Using gifts from family members, which are allowed under most loan programs, with the right documentation.

Down Payment vs. Other Upfront Homebuying Costs

The down payment isn’t the only upfront expense to plan for. When buying a house, keep in mind that closing costs typically range from 2% to 5% of the purchase price and include lender fees, title insurance, taxes, and escrow funding. Check with your realtor before you make an offer to see if you can negotiate down some of the closing costs from the seller.

How Homeowners Insurance Fits Into Your Budget

Homeowners insurance is often due at closing, and then you pay it monthly through escrow. Your insurance premium will vary based on your location, home value, and risk factors, and these directly affect your total housing payment. Reach out to an insurance agent before you make an offer on a property so you have an accurate estimate of affordability. Also ask about discounts for things like bundling your homeowners with car insurance and paying your insurance bill up front.

In the end, the “right” down payment is the one that gets you into a home comfortably, without sacrificing your financial safety net. Reach out to Mercury today to get a fast, free quote on homeowners insurance.

FAQs About Down Payments

Can I buy a house with no down payment?

Yes. VA and USDA loans allow qualified buyers to purchase a home with zero down, though eligibility requirements apply.

Is it better to put more money down or keep cash for emergencies?

It depends on your financial stability. Many experts recommend keeping three to six months of expenses in savings, even if that means putting less down.

Does a larger down payment lower my interest rate?

Sometimes. While credit score and market conditions matter most, a higher down payment can reduce lender risk and may result in better loan terms.