Key takeout
1. No 20% down is required. You don’t need a 20% down payment to buy a house. Many loan options are much less.
2. Access low-down payment loans. FHA, VA, and USDA loans, etc. offer programs with low 0% payments to eligible buyers.
3. Understand trade-offs. Down payments under 20% may require Private Mortgage Insurance (PMI). This is an additional monthly fee that can avoid a larger down payment.
For many aspiring homeowners, saving a 20% down payment feels like an impossible goal. This is a long-standing rule of thumb, but is it still a requirement in today’s housing market? The simple answer is no, you don’t need to put 20% in the house.
A 20% down payment offers profits, but many buyers have managed to get a much lower down payment. According to the National Association of Realtors, the median down payment for first-time home buyers is often single digits. So, if you were wondering, “Do you need to put 20% to buy a house?”, it’s time to let go of that myth.
In a recent episode of Real (Estate) Talk by Redfin, experts Joe Rath and Courtney King discussed some loan options with zero-down or low-down payments. They shared insights into how these programs make homeownership more accessible.
How can I buy a house without a down payment? | redfin #Realestate
20% vs. Small House Down Payment
The biggest advantage of a low down payment is that it makes homeownership more accessible and allows you to enter the market faster. Instead of saving for years, you can start building equity in your home and stop paying rent. There are several loan options that allow this to happen:
Traditional Loans: Many traditional loans require a minimum down payment of 3% to 5%. You will need to pay for your private mortgage insurance (PMI), which can be a valuable trade-off to get in your home early. FHA Loans: FHA loans supported by the Federal Housing Administration are a popular option for first-time buyers and those with low credit scores. For people with a credit score of 580 or above, a down payment of just 3.5% is required. VA and USDA Loans: For those who qualify, these government-backed loans can be game-changers. VA loans (for veterans and service members) and USDA loans (for eligible rural homes) may not require a down payment at all.
Understanding Private Mortgage Insurance (PMI)
If you beat under 20% on a traditional loan, you will almost certainly need to pay a PMI. This is a monthly premium that protects lenders by default on loans. It’s an additional cost, but not a permanent cost. Once you build a 20% share in your home, you can request that you remove the PMI and it will automatically be cancelled when you reach 22% shares.
So, with all these low-down payment options, why is the 20% rule so persistent? Because there are very realistic financial benefits.
No PMI: This is the most important advantage. By lowering 20%, you avoid the monthly additional costs of private mortgage insurance. This will save you a significant amount of money over time. Monthly Payment Reduction: The larger the down payment, the less money you need to borrow. A low loan amount means you reduce your monthly mortgage payments. Low Interest Rates: A bigger down payment signal to lenders that you are a low-risk borrower. This will help you qualify for better interest rates. This will save you thousands of dollars over the lifespan of your loan. Instant Equity: Start with more equity at home from day one and give a bigger financial cushion against market fluctuations.
Minimum down payment requirements
The minimum down payment will vary depending on the mortgage you plan to apply for. Let’s take a look at the minimum down payment requirements.
Loan type minimum down payment with traditional 3% FHA 3.5% with a credit score of at least 580
10% in credit score (500-579)
Jumbo 5-10%, USDA 0%VA 0%second Homes or Investment Real Estate 10% will vary, but will change, but will change
Frequently Asked Questions: Down payment at home
If you’re wondering how much down payment you’ll pay, so do many other future home buyers. That’s why Redfin’s real estate broke some of the most commonly asked questions.
Can I buy a house that doesn’t have money?
Yes, that’s possible! Certain loan programs such as VA loans (for eligible veterans and service members) and USDA loans (for eligible rural real estate) allow you to purchase homes with a 0% down. Some credit unions and certain lender programs may offer lower payment options.
When will you pay the down payment at home?
The down payment is usually paid at the end of your home purchase. The serious money you provide when making an offer is usually credited towards this total upon closing. Work with the title or Escrow Company to complete your payment via wire transfer or cashier check on closing day.
Do I need a down payment to refinance?
No, you don’t usually need a down payment when refinancing a mortgage. You’re not buying a new home. It will replace existing loans. The lender will instead assess the fairness and creditworthiness of your home. However, you will usually need to cover the closure costs associated with refinancing, but you may also be involved in new loans.
What is the standard down payment for a house?
There is no single “correct” amount when it comes to down payments. The ideal percentage for you will depend entirely on your financial situation and homeownership goals. Aiming for a 20% down payment is a wise move if you manage it, but it’s not a requirement to buy a home. There are a variety of options and conversations with trustworthy lenders can help you find the best path.
If you’re ready to explore options, Redfin is a reliable guide.
