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What is a Down Payment?

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A down payment is money you pay upfront toward the purchase of a home. Your down payment combined with your mortgage cover the full purchase price of the home. Down payments are usually expressed as a percentage of the home's price. For example, a 5% down payment on a home that costs $200,000 would be $10,000. The mortgage would cover the remaining $190,000.

Many new home buyers are intimidated by the idea of saving up a large chunk of money for a down payment, but as you'll see below, there are ways to overcome this hurdle.

Is a down payment required?

Most lenders require you to pay between 3% and 20% of the home's purchase price as a down payment. The down payment offers the lender some assurance that you are committed to paying for the house over time. It also provides you an incentive to keep making monthly payments so that you don't lose your investment.

There are a few exceptions1 to the down payment requirement, such as VA loans (for veterans and active military), USDA Rural Development loans, and state or city affordable housing programs. Ask your lender about these options and whether you meet the criteria for a zero down payment loan.

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Tip: Don't let the down payment scare you away from home ownership. There are many ways to overcome the cash hurdle. Ask your lender for options.

How much down payment should I pay on a house?

Many financial experts used to recommend that you put 20% down to purchase a home. Plus, buyers who pay 20% or more as a down payment avoid having to pay for private mortgage insurance (PMI). However, recent data shows that the majority of home buyers put less than 20% down.2 How much you put down will depend on several factors:

  • The price of the home
  • How much savings you have
  • Your desired monthly payment (the more money you pay upfront, the lower your monthly loan payment will be)
  • Your lender's requirements

Some lenders offer lower down payment options to first-time home buyers. Buyers with credit scores of at least 580 may qualify for FHA loans3 (loans insured by the Federal Housing Administration), which only require a minimum of 3.5% down. FHA loans are not limited to first-time home buyers, and there is no minimum income requirement to qualify. There are limits to how large the FHA loan can be, and those limits vary by state and also change from year to year. Ask your lender for more details.

What can I do if I don't have money for a down payment?

A down payment can come from many sources, including your own checking and savings accounts, investment accounts, or gift money from family members. If you're gifted the money for a down payment, you'll have to show documentation that the money was indeed a gift and does not need to be repaid.

Still don't have the money? Experts have highlighted some other creative ways4 to gather money for a down payment, including employer-sponsored housing assistance programs, crowdsourcing a down payment in lieu of wedding gifts, and government assistance programs.

If you have questions about down payments for a mortgage, please contact a Synovus mortgage specialist near you. We're here to help you on your path to homeownership.

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Important Disclosure Information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. Realtor.com. "How to Buy a House With No Money Down." Michele Lerner. Accessed June 12, 2018.  https://www.realtor.com/advice/finance/buy-a-home-with-a-low-or-zero-down-payment/ Back
  2. Zillow Group. "Consumer Housing Trends Report 2017." Accessed June 12, 2018. https://www.zillow.com/report/2017/ Back
  3. U.S. Department of Housing and Urban Development. "Let FHA Loans Help You." Accessed June 13, 2018. https://www.hud.gov/buying/loans Back
  4. House Logic. "5 Surprising (And Useful!) Ways to Save for a Down Payment." Accessed June 12, 2018. https://www.houselogic.com/buy/first-time-home-buyer/down-payment-assistance/?site_ref=spotlight Back