How Much Is a Down Payment on a House?

What Is a Down Payment?

Buying a home is one of the most significant financial steps you can take, and understanding your down payment is key to making it happen. A down payment is the portion of the home’s purchase price you pay upfront at closing, usually expressed as a percentage. This upfront investment shows lenders you’re financially committed, reduces their risk, and builds instant equity in your home. For example, on a $300,000 home, 5% down equals $15,000. The size of your down payment can influence your interest rate, monthly payments, and whether you’ll need mortgage insurance—making it one of the most important numbers to plan for when buying a home.

2024–25 Down Payment Trends

Knowing the latest trends helps you compare your situation to the market and choose the right loan type. Recent data shows down payments have risen compared to pre-pandemic norms:

• In 2024, the average down payment reached 14.4% of the purchase price—a median figure of $29,900.
• Q4 2024 median down payment was $30,250.
• January 2025 saw the median down payment hit $54,310, roughly 15% of the median home price.
• NAR data for late 2024 reported 18% median for all buyers, 9% for first-time buyers, and 23% for repeat buyers.
• In early 2025, the typical down payment was $62,468 (15% of the purchase price).

These increases are driven by higher home prices, elevated interest rates, and competitive market conditions.

Minimum Down Payment Requirements by Loan Type

FHA Loans

The Federal Housing Administration (FHA) loan program is a popular choice for buyers who may not have perfect credit or large savings. With just 3.5% down for borrowers with credit scores of 580 or higher, FHA loans make homeownership more accessible. Benefits include:

• Lower Credit Score Requirements: FHA loans are available to borrowers with credit scores as low as 500 (with 10% down).
• Flexible Debt-to-Income Ratios: Lenders can approve higher DTIs compared to many conventional loans.
• Assumable Loans: FHA loans can be transferred to a qualified buyer if you sell, potentially making your home more attractive in a high-interest market.
• Competitive Interest Rates: Even with low down payment requirements, FHA loan interest rates are often competitive with conventional options. Although FHA loans require mortgage insurance for the life of the loan when less than 10% is put down (unless refinanced to a Conventional loan with 20% or more equity) the program’s accessibility and flexibility frequently outweigh the added cost, particularly for first-time buyers.

The Role of Private Mortgage Insurance in Homeownership

In 2024, over 800,000 households purchased homes using low down payment loans backed by private mortgage insurance (PMI). Of these:

• 65% were first-time buyers.
• Nearly 35% had incomes under $75,000.
• The average loan size was $362,632.

Refinancing to Remove Mortgage Insurance

FHA mortgage insurance premiums (MIP) are generally permanent for the life of the loan with less than 10% down. However, if interest rates drop in the future, you may have the option to refinance into a conventional loan to remove MIP entirely. If Conventional is not an option, the FHA streamline allows existing FHA borrowers to reduce their rate with minimal documentation.

Conventional loan borrowers with PMI can often request its removal once they reach 20% equity with a new appraisal, or by paying down their loan balance to 78% of the original purchase price or appraisal, whichever was lower. Approval for refinancing depends on market conditions, creditworthiness, and lender requirements at the time, so neither case guarantees it.

How Down Payments Affect Your Mortgage

• Monthly Payment: Larger down payments reduce the loan balance, lowering monthly costs.
• Interest Rate: Bigger down payments often secure lower rates.
• PMI: Conventional loans require PMI under 20% down; FHA loans require mortgage insurance regardless of amount.
• Loan Approval: A stronger down payment can offset weaker credit or higher DTI.

Down Payment Assistance Programs

By late 2024, there were 2,466 active assistance programs in the U.S., a 7% increase year-over-year. On average, these programs reduce a buyer’s loan-to-value (LTV) ratio by 6%, helping more people qualify for homes.

Arizona Programs:

• HOME+: Up to 5% assistance for down payment and closing costs.
• Pathway to Purchase: Up to $20,000 for eligible buyers in select cities.
• Arizona Industrial Development Authority: Competitive-rate mortgages with assistance options.

Tips for Saving for a Down Payment

• Open a separate savings account.
• Automate deposits from each paycheck.
• Reduce discretionary expenses.
• Take on side income.
• Accept documented family gifts.
• Consider borrowing from retirement accounts (check IRS rules).
• Sell unused assets.