Connect with us

Hi, what are you looking for?

Loan And Finance

How Much Should I Put Down on a Mortgage Loan?

The number one hurdle first-time homebuyers face is the down payment.

While having 20% to put down is a huge plus and will make your payments much cheaper, not everyone has this much sitting in a bank account.

This article will give you some ideas on how you can save for a house, mortgage programs that require small down payments, and how you can use gift money for a down payment.

Rate Search: Check Today’s Mortgage Rates

Down Payment Requirements by Mortgage Type

The amount you need to put down will depend on the type of loan you get. FHA loans, for example, require a 3.5% down payment. In comparison, other loans such as USDA and VA offer 100% financing.

1. What should a first-time buyer consider when deciding how much money to put down on a house?

A first-time home buyer should check their savings, retirement, and investment accounts to see how much they can afford a down payment. You don’t want to put down more than you have to unless it equates to significant savings.

2. How does your credit score affect how much you need to put down?

Advertisement. Scroll to continue reading.

saving up for a mortgage down payment

Credit scores are the biggest factor in the amount needed for a down payment. The lower your credit score, the higher your down payment will have to be. For instance, a borrower with a credit score between 500- 579 will need 10% down to obtain an FHA loan. Borrowers with a 580 or higher credit score can be approved with just 3.5% down. It is essential to make sure your credit scores are as high as possible. Please read our article on how to increase your credit scores in 30 days.

3. What are the pros and cons to consider when putting less than 20% down?


  • More money in savings in case you need it
  • Ability to diversify investments instead of most of your money tied up in a house
  • In the event you have to foreclose, you will not lose as much money


  • Higher monthly mortgage payments
  • paying more interest over the life of the loan
  • You will be required to pay mortgage insurance, which is roughly an average of $2000 annually
  • Higher interest rates. Rates are slightly higher for loans with less than 20% down
  • Closing costs and lender fees will be higher

4. What are the advantages of putting 20% down on a home loan?


  • You don’t need PMI with conventional loans. With an 80% LTV, conventional loans don’t require PMI.
  • Instant home equity
  • Lower monthly mortgage payments
  • Low-interest rates
  • Increase chances of qualifying
  • Better loan terms


  • Less money in savings
  • More money is tied up in the home.
  • Huge loss in the event of default

5. What options should a buyer who can’t put down 20% consider? For example, are down payment assistance programs something buyers should be looking into?

There are many options for first-time homebuyers who don’t have a 20% down payment. For one, FHA loans are popular among first-time homebuyers because they require just 3.5% down and a credit score of 580.

There are also first-time homebuyer grants and down payment assistance programs available. Borrowers should also check their local county website to find out if there are any programs.

VA loans – This is a loan for Veterans; there are many benefits of VA loans. Including no downpayment and no mortgage insurance, which equals big savings.

USDA loans: An excellent loan for homebuyers in rural areas is a USDA mortgage. USDA loans offer 100% financing, so you need no down payment.

Conventional loans: Many lenders offer a 5% – 10% down payment for conventional loans. There are 3% down conventional 97 programs available.

6. How much should buyers be allocated for the additional costs of buying, i.e., escrow for taxes, insurance, closing costs, etc.?

PMI fees are usually 0.85% of the total loan amount. Property taxes vary across each state in the U.S. you should look up the property tax percentage in your county or state.

For example, Texas has 2.5% property taxes; a $200,000 home will pay $5000 annually in property taxes and 0.85% for MIP, which is $1700, which comes to $6700 per year.

Closing costs are between 2-and 5% of the loan amount. Many factors come into play, such as credit scores, down payment, and the price of the house.

Advertisement. Scroll to continue reading.

7. What are some effective ways buyers can come up with the down payment funds they need?

Borrowers can use their retirement and investment accounts to fund the down payment.

Most of the mortgages mentioned here allow the down payment to be a gift from a friend or family member. It also allows the down payment to be a gift from a relative, company, or friend.

There are also piggyback mortgage loans available, like an 80-10-10 piggyback loan where you pay 10% down and get a loan for the other 10%.

Check out the various grants and down payment assistance programs on the HUD website or your local city website.

8. How to save for a house down payment fast?

To save money for a down payment on a mortgage you need to limit your spending. If you can increase your income with a second job or a side hustle, you can put some money away. Saving for a mortgage is something most homeowners had to do at some point. Here are a few things you can do to save up for the down payment.

  • Sell stuff you don’t need on Craigslist
  • Get a second or third job
  • Stop eating out
  • Be frugal with your spending
  • Make a budget
  • Sell your car and get a cheaper one
  • Get a roommate

9. What do first-time buyers need to know about down payment gifts?

Many mortgages mentioned in this article allow the down payment to be gifted from a relative, company, or friend. The person gifting the downpayment needs to show bank statements proving the money gifted came from their savings and was not lent to them. You can read more about the down payment gift rules and guidelines.

Speak to lenders to find out which type of mortgage is best for you

Click to comment

Leave a Reply


Online Business Success

ISLAMABAD: Information Minister Marriyum Aurangzeb announced Thursday the federal government has devised an economic plan in a bid to take the country out of...

Loan And Finance

Authored by Pool Re Our new cyber terrorism series explores how terrorist organisations are harnessing the Internet to radicalise and train potential recruits, disseminate...

Loan And Finance

Business & FinanceDealsEnergyGovernmentPolitics 09 May 2022, 3:12 pm. 1 minute Reuters reported exclusively that the Canadian government is in discussion with the companies behind...


In brief: Under-pressure Netflix has just got some more bad news: a new survey suggests that not only is the streaming giant losing customers,...

Online Business Success

By Solomon Thimothy, OneIMS President | On a mission to help as many entrepreneurs start and scale their businesses. Connect with him at

Top Stories

The United States Department of Commerce is calling for submissions on how it can establish a framework that will bolster American economic competitiveness in...


You May Also Like


Introductions get a lot of attention. I’ve explored the topic of how to write them even though as a reader, I always skip them....

SEO Guide

There are all kinds of pictures of the world on the internet, but to find one of these specific pictures that you want to...

Online Business Success

The internet is now our nervous system. We are constantly streaming and buying and watching and liking, our brains locked into the global information...

Online Business Success

You can think of link building in many ways. I like to call it tedious, painful, and a test of patience. It’s also necessary...