Saving for a down payment on a house can be challenging, especially for first-time homebuyers. However, the standard minimum down payments for various types of mortgages might be more affordable than you think. Here’s what you need to know about the average down payment for first-time buyers.

Many first-time homebuyers mistakenly believe they must put down 20 percent to qualify for a mortgage. Fortunately, that’s not the case.

According to the National Association of Realtors (NAR), the typical down payment for a first-time homebuyer was 8 percent in 2023. For a $400,000 home, an 8 percent down payment totals $32,000.

In contrast, repeat buyers typically made a 19 percent down payment in 2023, which amounts to $76,000 on a $400,000 home. Additionally, 38 percent of first-time buyers reported to NAR that the down payment was the most challenging part of buying a home.

The amount you should dedicate to a down payment depends on your financial situation, comfort level, and other factors.

If you can put down 20 percent, you’ll avoid mortgage insurance and potentially secure a lower interest rate, leading to significant savings. However, you shouldn’t deplete all your funds to achieve this. It’s crucial to maintain an emergency cushion and set aside money for closing costs, as well as expenses like furniture, moving, and any home repairs after you move.

Even if your first-time homebuyer down payment isn’t 20 percent, buying might still make sense. Since your savings rate may never match the growth in home prices, putting down just 3 percent—the minimum required with certain first-time buyer programs—might be worth it to become a homeowner, even if it means paying mortgage insurance temporarily. Once you have enough equity (usually 20 percent), you can ask your servicer to remove the mortgage insurance.

  • Own a home sooner: You can take possession of a home and start building equity sooner than if you waited to save more cash.
  • Move in on your timeline: Saving for a large down payment takes time. A lower down payment can allow you to buy a home when you need to.
  • Keep more money in your pocket: Moving into a house comes with costs like repairs, remodels, and furniture. With a lower down payment, you can keep more of your money to cover these expenses.
  • Get into a home before prices rise further: Saving a 20 percent down payment could take years, and during that time, home prices and interest rates might increase.
  • Maintain an emergency fund: You don’t want to drain your savings for a large down payment. By putting down a smaller amount, you can ideally retain enough to maintain your emergency fund for unexpected expenses.
  • Mortgage insurance requirements: Many conventional loan programs require mortgage insurance if homebuyers put down less than 20 percent. This can cost an extra $30-$70 per $100,000 borrowed each month, according to Freddie Mac.
  • Less equity: A smaller down payment means you start with less equity in your home. If property values drop, you could end up underwater on your mortgage, owing more than your home is worth. Additionally, it will take longer to build enough equity to borrow against it.
  • Higher interest rate: A higher loan-to-value ratio makes your mortgage riskier for the lender, leading to a higher interest rate.
  • Bigger monthly payments: A lower down payment means a larger loan balance to pay off, resulting in higher monthly payments.

The smaller your down payment, the easier it is to save for it. Here are some strategies to achieve a lower down payment:

Several loan programs require only a minimal down payment for first-time homebuyers. Here’s a quick overview of some of your options:

Loan typeDown payment minimumCredit score minimumDebt-to-income (DTI) ratio maximum
Conventional loan3%620Up to 45%
FHA loan3.5%580*Up to 50%
VA loans0%Usually 620Up to 41%
USDA loan0%Usually 640Up to 41%
*can be 500 with a 10% down payment

While a lower down payment can make homeownership more accessible, remember that if you put down less than 20 percent on a conventional loan, you’ll need to pay for private mortgage insurance (PMI). PMI protects the lender if you default on the loan. Additionally, a smaller down payment often means you won’t qualify for the lowest possible mortgage rate.

Many states and local municipalities offer down payment assistance programs for first-time homebuyers, such as:

  • Grants: These are essentially gifts that can help cover your down payment and closing costs. You never have to repay a grant.
  • Forgivable loans: These are second mortgages with a zero percent interest rate for a specific number of years. You don’t have to repay this loan unless you move, sell, or refinance within the set timeframe.
  • Deferred payment loans: Similar to forgivable loans, these are second mortgages with a zero percent or low interest rate that can be used for a down payment. However, you’ll need to repay the loan when you move, sell, or refinance.

To find out if you’re eligible for down payment assistance, ask your mortgage lender which programs it accepts and whether you qualify.

Difficulty saving enough money isn’t the only reason the average down payment for a first-time homebuyer is typically below 20 percent. Many people choose to put down less to keep more money available for:

  • Closing costs: These include expenses needed to process your loan, such as origination, appraisal, and title fees. Closing costs range from 2 to 5 percent of the home’s purchase price.
  • Cash reserves: While not every borrower needs reserves, having savings set aside can be crucial if you encounter financial difficulties. Some lenders may require reserves, which can range from one to six months’ worth of mortgage payments, to ensure you can cover your mortgage in case of unexpected financial challenges.