How Much Should I Save for a Down Payment?

A down payment is the money you pay upfront to buy a home. As a first-time home-buyer, how much money do you need for a down payment

Ideally, you should have 20% of the home’s price as your down payment. However, that is not a rule. It is possible to put down as little as 3.5% even to zero down payment. 

How Do I Know How Much Down Payment to Make?

It is good to remember that the larger the down payment you can make, the more lending companies consider you a good risk, and the more likely you are to qualify for a home or mortgage loan with a low-interest rate.

Ensure you are not putting all your funds into your down payment. Your emergency fund is for emergencies. If you put all your money into your house upfront and suddenly discover an expensive repair is needed, you won’t have the funds to cover it.

You should first play around with the mortgage calculator when deciding how much down payment to make. This very useful tool lets you know what your future mortgage payment will be. All you need to do is enter some basic information, such as your down payment amount, length and interest rate of your loan, and the property’s price. As you enter different amounts for your down payment, you will see how it affects your monthly mortgage payment. 

Use this information to make sure you will have enough every month for your needs, wants, and some for savings and repairs. 

Advantages of a Large Down Payment

Putting down a large amount has some advantages. 

  • The more you pay upfront, the better you look to lenders.
  • Lenders are more likely to give you a good interest rate.
  • Your monthly payments will be lower.
  • You will not need to pay for Private Mortgage Insurance.

Disadvantages of a Large Down Payment

There are always two sides to consider. Here are a couple of downsides to a large upfront payment. You may have less money on hand for emergencies. New homes come with a lot of surprises. Even if you have the home inspected before purchasing it, it is likely that something was missed and needs an immediate and often expensive repair. If you put all your money into a down payment, that may be difficult.

Another downside is time. Most people have a hard time saving. It is a time-consuming process. You may spend more time saving for a large down payment than you would like.

Average Down Payment on a House

On average, Americans pay about 6% of the home’s price as their down payment. A great deal depends on the lender, your financial history, and the area of the country you are in. 

Keep in mind that lower down payments, ones under 20%, usually mean you have to pay for Private Mortgage Insurance (PMI) in addition to your mortgage payment. This can be quite costly. PMI is insurance for the lender that the loan will be repaid if you, for some reason, default on your home loan.

If you get a government-backed loan, it is possible for you to pay even less than the average, maybe even zero. For these low and no down payment loans, you need to qualify for either a VA loan or a USDA loan. 

With these low or no down payment loans, you are generally still required to pay the closing costs. You need to speak to your lender for details on whether you should apply for a conventional, VA, USDA, or other type of loan.

How to Save Up for a Down Payment

If you are ready to own a home, you’ll need to save up for a down payment. Here are a few tips to help you figure out how to do that.

Set a goal. Play around with the mortgage calculator and figure out the best down payment amount for you. You need a goal post to aim for.

Make a budget. Look at ALL of your expenses. Is there anything you can cut? Are there some subscriptions you don’t really use or need? Are you willing to cut back on a few things now in order to enjoy owning your own home later?

Pay off any debt. Another way to cut extra expenses is to cut extra payments. Once you get the credit cards or car loan paid off, that is money that can go directly into your down payment fund. An added bonus is the less debt you have, the better you look to lenders.

Start a side hustle. If you have some extra time, turn it into extra cash. Maybe you could work a few hours somewhere else on your day off from your regular job for a while.

Look into first-time homebuyer programs. There are many programs out there designed to help first-time home buyers. There may be one that can help you. 

Have a portion of your pay automatically go to your savings. Most banks have an option that automatically takes a portion of your income and places it into a separate account. If you don’t see it in your regular account, you are less likely to spend it.


There is no one answer to how much a down payment should be. The determining factors are your financial situation, your lender, the type of loan you are applying for, where you are in the country, and many more.

Use a mortgage calculator to determine what the best down payment amount is for you. Don’t forget to budget for possible home repairs or emergencies after you have moved into your new home.

MortgageWorks offers financing for new home purchase, refinance, home equity, investment property, construction, and a wide variety of loan program options to fit your every need.

Servicing the state of California and the entire Coachella Valley, including Palm Springs, Cathedral City, Rancho Mirage, Indian Wells, Palm Desert, Desert Hot Springs, La Quinta, Indio, and Coachella. Call Art today @ (760) 883-5700

* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.