Many first time home buyers believe they have to put 20 percent down on a home. But that’s far from true.
In fact, the average down payment for first time home buyers is only 6 percent. On a $250,000 home purchase, that would be just $15,000.
And there are loan programs that let you buy with even less than 6 percent down. For example:
- FHA loans — 3.5% down
- VA loans — 0% down
- USDA loans — 0% down
- Conventional 97 loans — 3% down
Some of these programs have special requirements, but most are available to the general public. (We’ll get into more specifics about loan programs below.)
The main takeaway here is that down payments are flexible.
Yours should depend on your monthly income, what you currently have saved, how expensive the home is, and what your overall home buying goals are.
Briefly, the pros and cons of bigger versus smaller down payments are:
- Bigger down payment — Lower interest rate and lower monthly payment
- Smaller down payment — Buy a home and start building equity sooner, keep more of your savings intact for emergency expenses
Take a look at your personal finances and home buying goals to figure out the right down payment for you.