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Anyone who has written a down payment check knows how unsettling it is to hand over that much money in one shot. Before you can get to that point, you have to save, save, save — and that doesn’t come easily to everyone.

Before you figure out how much to put down on a house, you need to know the basics about what a down payment is and how it factors into your home purchase. Let’s begin.

What is a down payment?

A down payment is the money that you give to the seller at closing when you buy a home. The rest of the purchase price comes from the money you borrow.

Down payments are expressed in percentages. Let’s say you’re buying a $300,000 house. If you put 10 percent down, your down payment is 10 percent of that amount, or $30,000. A 20 percent down payment on that house would be $60,000.

Some loan programs don’t require a down payment, but in most cases, you’ll need to have skin in the game. Let’s explore what that looks like.

How much should you put down on a house?

How much you should put down on a house is a personal decision that mainly depends on your finances and what loan program you use.

If you’ve saved up a good chunk of money over time or have a windfall you can apply to a down payment, you’re ahead of the game. But if you’re just starting out, it could take months or even years to save for a down payment. There are closing costs to consider, too.

Some loan programs allow you to put zero down while others require just 3 percent down for a conventional loan. But there’s a catch: lenders typically charge a higher interest rate to mitigate their risk, which means you’ll pay more interest over the life of the loan.

When you put down more money, your monthly mortgage payment and your loan-to-value ratio will be lower. The LTV ratio, which divides the loan amount by the home’s value, plays a key role in your mortgage approval. It also helps determine how much money you can borrow from a lender.

The 20 percent down payment myth

The notion that you have to put 20 percent down to get a mortgage isn’t true. You have more options than you think.

When you make a down payment of less than 20 percent, though, lenders view you as a riskier borrower. That’s where mortgage insurance comes in. Mortgage insurance is a policy that you pay for, even though it protects the lender. If you fail to repay the loan and end up in foreclosure, the policy reimburses the lender for financial losses.

Mortgage insurance is costly. You can cancel it after gaining at least 20 percent equity in your home in most cases. To avoid it, you’ll need to plunk down at least 20 percent.

A higher down payment can result in getting a lower interest rate and qualifying for a larger loan. The more you put down, the stronger your offer looks to a seller as well.

What is the average down payment on a house?

The average down payment on a house varies depending on the type of buyer, location and home prices in a given area. For example, first-time buyers typically put less money down than repeat buyers, who can use the proceeds from a home sale to make the down payment on their next home.

The median down payment on a house is 13 percent for buyers overall, and 7 percent for first-time buyers, according to the National Association of Realtors’ 2018 Profile of Home Buyers and Sellers.

Your loan program may have certain minimum requirements for a down payment or none at all. But loans that don’t require money down come with fees.

Loan programs and minimum down payment requirements

Maybe you already have a down payment amount in mind. Here’s a look at the minimum requirements of some common loan types.

Conventional mortgage: 3 percent to 5 percent

Fannie Mae and Freddie Mac are companies that propel access to U.S. mortgage credit. They don’t lend money but they back programs offered by conventional lenders. These special programs require just 3 percent down, but they may have income restrictions and more stringent credit requirements.

Lenders require 5 percent to 15 percent down for other types of conventional loans. When you get a conventional mortgage with a down payment of less than 20 percent, you have to get private mortgage insurance, or PMI.

The monthly cost of PMI varies, depending on your credit score, the size of the down payment and the loan amount. Some lenders might waive PMI, but they often charge a higher interest rate to account for the greater risk.

FHA loan: 3.5 percent

For a mortgage insured by the Federal Housing Administration, the minimum down payment is 3.5 percent. That means you’ll receive the maximum financing FHA offers at 97.5 percent, but, you need a FICO score of at least 580.

You can make a higher down payment on an FHA loan. To encourage that, the FHA charges lower borrowing costs if your down payment is 5 percent or more. One difference between the FHA and private mortgage insurance is that the FHA doesn’t charge more to people with lower credit scores.

There’s a notable drawback to putting down less than 10 percent on an FHA loan. When you do this, you cannot cancel annual mortgage insurance premiums. You’ll pay those for the life of the loan or until you refinance or sell.

VA and USDA: 0 percent

The U.S. Department of Veterans Affairs and the U.S. Department of Agriculture guarantee zero-down payment loans for qualified homebuyers.

VA loans are available to most members of the armed forces and veterans. USDA loans are available in designated rural areas. The USDA has maps on its website that show which areas are eligible.

With both loan types, you borrow from a regular lender, but the VA or the USDA guarantees the loan. There is no mortgage insurance, but you pay a guarantee fee.

A down payment you can afford

You’re not alone if you’re bewildered by all the down payment options. This is especially true for first-timers who have saved more than the minimum down payment they’re qualified for.

Keep in mind your down payment can consist of your personal savings plus gifts from relatives and grants from local governments or even employers. Cash gifts can’t be loans, and the gift giver needs to write a gift letter to make that clear. A lender will require documentation to source where the funds came from, too.

It’s important to ensure you’re not depleting (or neglecting to fund) your retirement savings account or your emergency fund to buy a home. Doing so could put you at a disadvantage to retire comfortably later on. Draining your emergency fund isn’t ideal because you might need to make costly repairs after moving in or run into a financial hardship, and you won’t have a cushion to fall back on.

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