A down payment is the amount of cash you put toward the sale price of a
home. It reduces the amount of money you will have to borrow.
How Much Down Payment Do I Need?
Depending on the type of loan, mortgage lenders require a minimum down
payment, generally ranging between 5 and 20 percent of the purchase
price. Some first-time homebuyer programs, and loans backed by the
Federal Housing Administration, offer mortgages with down payments as
low as 3 percent. Down payment requirements for cooperatives are likely
to be higher than 20 percent.
Is It Better to Put More Money Down and Borrow Less?
Putting down more cash upfront reduces the amount of money you have to
borrow, which means a lower monthly payment. And if you put down at
least 20 percent, your lender won’t require you to purchase mortgage
insurance, which also reduces your monthly costs. On the other hand, if
putting down 20 percent will drain your savings, leaving you without
cash for emergencies, it may be better to make a lower down payment.
For more information on buying a home, check out the Consumer Financial
Protection Bureau’s detailed online guide,
Owning a Home.
