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What is the average down payment on a house?

It might not be as high as you think

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Many people are all too eager to start their home search, but the idea of saving up 20% for a down payment seems like an insurmountable task. In fact, 13% of buyers reported that saving for a down payment was the hardest part of the mortgage process in a National Association of Realtors (NAR) survey released in 2023.

However, just because this “20% rule” has been recommended for years, it doesn’t mean you have to follow it to secure your dream home.

Find out how much you really need to save to make homeownership a reality — it might be a lot less than you think.

Key insights

  • Putting down 20% is not a rule — just a recommendation to avoid private mortgage insurance.
  • VA and USDA loans don’t require any down payment.
  • Don’t let saving for a down payment derail you from buying a home.

The 20% rule

Jason Lerner, an area development manager at George Mason Mortgage, a lender based in Fairfax, Virginia, explains that the 20% down payment has traditionally been an important number to avoid private mortgage insurance (PMI).

“Mortgage insurance has become much more affordable and, depending on the program and the homebuyer’s qualifications, monthly mortgage insurance now may be tens of dollars instead of hundreds of dollars in the past,” he said.

Additionally, Lerner says that this popular “20% down payment” figure should not keep people from buying a home. He says he has had clients who put off their home search to save this money, only to find themselves in a less desirable position later on.

» MORE: How to get rid of PMI

What is the minimum down payment on a house?

A down payment is required for most types of home loans, with the exception of a few government-backed mortgages. Here’s a look at down payment requirements for some common types of mortgages.

Loan typeMinimum down payment
Conventional loan At least 3%; varies by lender
Jumbo loan Usually at least 10%; varies by lender
FHA loan At least 3.5%
VA loan No down payment required
USDA loan No down payment required

Conventional loans, which are loans not insured by the government, have down payment requirements that are specific to each lender. You’ll have to put at least 3% down, and if you put down less than 20%, you will usually have to pay for PMI. Jumbo loans require a higher down payment because of the larger loan amount and greater degree of risk for the lender.

An FHA loan requires a down payment of as little as 3.5% if you have a credit score of at least 580. If your credit score is from 500 to 579, you have to put down at least 10%.

VA loans, which are available to veterans, current service members and surviving spouses, are available with no down payment. Similarly, USDA loans, designed for low- and moderate-income applicants and properties in rural areas, have no down payment requirement.

» MORE: What does clear to close mean?

What is the typical down payment on a house?

The median down payment on a home from July 2021 to June 2022 was only 14%, according to the NAR survey. However, for buyers ages 24 to 42, the median down payment was between 8% and 11%.

"The trend for several years has been for homebuyers to make smaller down payments,” Lerner said. “Many of my clients with the ability to make a large down payment are still choosing to make a smaller down payment.

“Depending upon the program, making a down payment of less than 20% can actually improve the interest rate slightly. Rates are determined by risk, and because a buyer making less than a 20% down payment will have mortgage insurance, the loan is considered less risky because the mortgage insurance adds an additional layer of protection from a buyer defaulting on their mortgage.”

How much should you put down on a house?

The amount you should put down on a house depends on a variety of factors:

Putting down a higher down payment has its advantages: You are borrowing less money, you have lower monthly payments, and you pay less interest over the life of the loan. You also reduce the amount of mortgage insurance you owe or avoid it altogether. Another benefit is that sellers may see your offer as more attractive.

Depending upon the program, making a down payment of less than 20% can actually improve the interest rate slightly.”

But there are also reasons you may not want to put down a large down payment: It might require you to wait longer until you can enter the housing market, or it could deplete your savings that you need for other purposes or emergencies.

» MORE: How to get down payment assistance

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    What is PMI?

    PMI is private mortgage insurance, an additional monthly cost that borrowers will have to pay alongside their mortgage payment if they put 20% or less down on a conventional mortgage. The purpose of PMI is to protect the lender in case the borrower defaults on the loan. While it can be an added expense, it can also help borrowers get into a home sooner if they are unable to save for a 20% down payment. Once your equity reaches 20%, you can request that your servicer cancel PMI. It must automatically cancel PMI once your principal balance reaches 78% of the value of the home, according to the Consumer Financial Protection Bureau.

    Can I use gifted money as a down payment?

    Yes, you can use gifted money as a down payment. Gift funds can be a great way to help first-time homebuyers who may not have enough savings for a down payment. However, it's important to note that the money needs to be a gift, not a loan, which means the borrower doesn't have to repay it. Lenders typically require documentation, such as a gift letter, to verify that the money is indeed a gift and not a loan.

    Can I borrow money for a down payment?

    While it's sometimes possible to borrow money for a down payment, it's generally not recommended. Borrowing money for a down payment can increase your debt-to-income ratio and make it harder to qualify for a mortgage. Additionally, lenders may view borrowing for a down payment as a risky financial move, and it can affect your ability to repay the loan. Instead, it's better to focus on saving for a down payment or exploring down payment assistance programs.

    Is there a limit on how much money someone can gift for a down payment?

    There is no limit to how much someone can provide as a gift for down payment funds for use on a primary residence. However, there may be tax implications for the person doing the gifting if the amount exceeds the annual exclusion.

    Bottom line

    Having a 20% down payment isn’t a hard-and-fast rule for buying a home, so homeownership could be closer than you think. Knowing how much extra PMI will cost and which loan types you qualify for can help you figure out how much you need to save before going house hunting.

    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. National Association of REALTORS, “2023 Home Buyers and Sellers Generational Trends Report." Accessed Aug. 28, 2023.
    2. Consumer Financial Protection Bureau, “When can I remove private mortgage insurance (PMI) from my loan?” Accessed Aug. 28, 2023.
    3. IRS, “What's New - Estate and Gift Tax.” Accessed Aug. 28, 2023.
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