What Is The Average Home Down Payment?

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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If you’re planning to buy a new home soon, you’ve probably already thought about how much down payment you’ll need to save. However, it depends on the type of home loan you’re considering, and it may not be as much as you think. In fact, the days of putting at least 20 percent down are long gone, and you can now purchase your dream home with as little as no money down depending on the loan program and qualifications. 

Read on to discover how much the average homeowner put down last year and the minimum down payment requirements by loan type. 

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Statistics About Average Home Down Payment

In 2021, the average home down payment was at 12 percent, according to the 2021 Home Buyers and Sellers Generational Trends Report from the National Association of REALTORS® Research Group. However, you could buy a home with a much lower down payment. 

Minimum Down Payment Requirements

The minimum down payment that is required of you by the lender depends on the type of loan you select. 

Conventional Loans 

This popular home loan requires a down payment of as little as 3 percent. But if you have a high debt-to-income ratio or your credit score is below 620, the lender could require a higher down payment. 

FHA Loans

FHA loans are backed by the Federal Housing Administration and cater to borrowers with past credit challenges or lower incomes. You will need at least 3.5 percent down to qualify, or 10 percent if your credit score is between 500 and 579. 

VA Loans

VA loans, on the other hand, are backed by the U.S. Department of Veterans Affairs and reserved for current and former service members. You must meet strict eligibility requirements but could qualify for a home loan with no money down. 

USDA Loans

USDA loans are made possible by the U.S. Department of Agriculture and available to individuals looking to purchase homes in select suburban or rural areas. So, while you’ll have to move to the outskirts to be eligible for funding, you could buy a home with no money down. 

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Private Mortgage Insurance

If you put a down payment of 20 percent or less, you’ll likely need to purchase private mortgage insurance (PMI). It’s a form of coverage that protects the lender if you default on your home loan. 

How PMI Works

  • Conventional Loans: PMI is mandatory on conventional loans if you make a down payment of less than 20 percent. 
  • FHA Loans: Mortgage insurance premiums (MIPs) are mandatory on FHA loans and remain intact for the loan term unless you refinance into a conventional loan product. 
  • VA Loans: There’s no PMI requirement for VA loans, but you will pay a funding fee either upon purchase or over the life of the loan. 
  • USDA Loans: Like VA loans, USDA loans do not have a PMI requirement, but a guarantee fee is assessed when you take out this type of loan. 

When You Can Drop PMI

Once you have earned at least 20 percent equity in your home, you can typically drop PMI coverage if you have a conventional loan. Now, if you have an FHA loan, you’ll pay PMI until you pay off your mortgage. 

Benefits Of Making a Smaller Down Payment

There are some key advantages of making a smaller down payment: 

  • You can keep more of your hard-earned money in your bank account to cover homeowner maintenance, repairs, upgrades or an unexpected financial emergency. 
  • You can buy the home you want without waiting several months or years until you’ve saved up a hefty down payment. 

Benefits Of Making a Larger Down Payment

If you have the funds to make a larger down payment, it could be worthwhile for many reasons: 

  • You could get approved for a home loan with a lower interest rate. 
  • Your monthly payment will be lower. 
  • You can possibly avoid PMI. 
  • You could save several thousand over the loan term. 

Despite the average home down payment lingering around 12 percent, the amount your lender will require could be much lower. So, don’t stress yourself out if you have very little saved and worry it’ll take too long to achieve your dream of homeownership or purchasing a new home.

Instead, get a quote from LoanDepot to know what types of loans you qualify for and the down payment you’ll need to get approved. You’ll work with one of LoanDepot’s 1,700 lending officers to secure the home loan you need, minus the hassle. 

Even better, you can have peace of mind knowing you’re in good hands. With over 12 years of experience, LoanDepot is accredited by the Better Business Bureaus and has helped fund over $96 billion in home loans.

If you’re ready to purchase the home you deserve, call 888-893-3240 or submit an online inquiry.

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