The housing market has been turned on its head (or roof) in the pandemic and post-pandemic world, but the biggest hurdle to homeownership remains the same: saving enough money for a down payment.

But how much money do you actually need to put down? The answer is that there’s no exact answer—it depends on numerous variables, including the cost of the home, the type of mortgage, and, of course, how much you can afford.

The old rule used to be 20%. That’s still a solid guideline, but it’s not a requirement. In fact, according to the National Association of Realtors, the median down payment for all home buyers in 2022 was 13%. For buyers aged 32-41, that figure was 10%. And for buyers 31 and younger, it dropped to 8%.

Contrary to popular belief, there’s no universal minimum for down payments. Some homeowners have purchased properties with only a few thousand dollars upfront. Others have had success without putting down a penny.

Minimums, if they exist, are set by the organizations that offer them. Veterans utilizing VA loans can purchase homes with 0% down; the same is true for United States Department of Agriculture (USDA) loans. Conforming loans—mortgages that meet the underwriting guidelines of Fannie Mae and Freddie Mac, as well as the dollar limits set by the Federal Housing Finance Agency (FHFA)—require only 3% for fixed-rate mortgages or 5% for adjustable-rate mortgages. The minimum for Federal Housing Administration (FHA) loans is 3.5%.

Still, in addition to a lower monthly mortgage payment, there are benefits to exceeding the minimums and having a larger down payment:

No private mortgage insurance (PMI) – Borrowers who put down less than 20% are usually required to buy PMI. Unlike most insurances, this type doesn’t protect the purchaser. Instead, it protects the lender if a borrower defaults on a loan. Thankfully, PMI rates are usually low, with an annual payment generally between 0.25% and 1.25% based on the borrower’s credit score, according to MGIC Investment Corporation.

Lower interest rates – The higher your down payment, the less risky you are to lenders, and the more likely you are to receive a lower interest rate, which can save you big bucks in the long run.

A competitive edge – Often, the more you can pay upfront, the better you appear in the eyes of a seller. In today’s competitive real estate market, a larger down payment can increase your chances of landing the home of your dreams.

When searching for a home, it’s easy to get discouraged—but the housing market is starting to look up, and so should you. Once you determine how much you can afford upfront, have a lending expert calculate your buying power by taking you through the pre-approval or pre-qualification process. That’s where we come in. By partnering with us, we can establish your overall budget, guide you every step of the way, and do our best to keep a limited down payment from getting you down.