Potential homebuyers often say saving for a down payment is one of the biggest obstacles to homeownership. But the truth about down payments may be less daunting than many believe.

What is a down payment?

It’s the upfront cash you pay when buying a home with a mortgage loan, usually a percentage of the purchase price. The balance is what you pay over time. A 10% down payment on a $300,000 home, for example, would be $30,000, leaving a loan amount of $270,000.

It’s a common myth that you must put 20% down. According to the National Association of Realtors, first-time homebuyers make average down payments of 9%. Repeat buyers put down 23%, and the overall average is 18%. You can, however, put down far less.

How much down payment do I need?

That depends on factors including loan type, credit score, and your financial situation.

  • Conventional loans often require a minimum 3% down payment.
  • FHA loans generally require a minimum of 3.5% for borrowers with a credit score of 580 or higher. Homebuyers with lower credit scores can anticipate paying around 10%.
  •  VA loans don’t require down payments. They do, however, have comparable one-time funding fees, which typically range between 1.4% and 3.6% of the loan amount.
  •  Jumbo loans, for higher-value homes, often require down payments of 10% or more.

Where can my down payment come from?

For many, the down payment comes from their checking, savings, or investment accounts.

Over a third of all first-time homebuyers use gift cash for down payments. There are gift cash rules:

  • Conventional loans: Family members and romantic partners can give gift cash.
  • FHA loans: You can receive cash from a family member, a close friend, an employer, a labor union, a charitable organization, or an assistance program. There are also over 2,000 down payment assistance programs.
  • VA loans: You can receive gift funds from just about any donor.

How can I come up with a down payment?

It can take years to save for a down payment. Some common steps in reaching your goal include setting a fixed savings amount, reducing your cost of living, and adding an income source.

Don’t let the fear of a down payment stop you from achieving your dream of homeownership. To talk about your down payment options, speak with a member of the Decker Group team at (972) 591-3097 or connect with us online.