How much down payment do you need to buy a house?

A down payment is the amount of cash a buyer pays for a home up front, with the remainder covered by their mortgage. If you're saving for a house, you've probably been told you need to have enough for a 20% down payment.

But the typical down payment hasn't been that high in decades.

Below, CNBC Select looks at where the 20% recommendation came from, how big your down payment really needs to be and more. 

No, depending on your loan and qualifications, it's possible to put much less down — or even nothing at all.

The 20% down payment rule emerged during the Great Depression, when nearly half of mortgages in urban areas were delinquent. Even as the economy recovered, many lenders still mandated 20% down in the 1950s and 1960s.

The advent of private mortgage insurance in the late 1950s meant lenders could be protected if a borrower defaulted. In 1971, the Federal Home Loan Bank Board allowed savings and loans to approve conventional mortgages with as little as 5% down with PMI.

By 2005, the median down payment was only 13%, according to a Washington Post analysis of National Association of Realtors data.

If you do put down less than 20%, however, you will still likely be required to obtain PMI, which can cost 0.50% of your mortgage on average, and keep it until you have at least 20% equity in your house. 

The size of your down payment depends on the type of loan you get, your mortgage lender and your financial situation. In January 2024, the median down payment was 14.2%, according to data from the real estate data analysis firm ATTOM.

Many buyers make a smaller down payment, especially first-time homebuyers who don't have equity. Qualified first-time buyers can put as little as 3.5% down with an FHA loan, for example.

It's also possible to buy a home with no money down — typically through an alternative lender, like a credit union, or with government-backed mortgages like USDA and VA loans.

To help homebuyers who don't have enough, government agencies and private lenders have down-payment assistance programs. Freddie Mac's DPA One guide includes hundreds that provide grants, low- and no-interest loans and other down-payment support all over the U.S.

Benefits of a smaller down payment

A smaller down payment will get you into your home quicker and leave you more money to cover repairs and insurance and to invest in other financial goals.

Ally Bank has a Fannie Mae-backed HomeReady loan that lets qualified borrowers put down as little as 3% on a fixed-rate mortgage with no lender's fee and an online preapproval process. You'll need at least a 620 credit score to be considered, however, and have an annual income that doesn't exceed 80% of the median income in your area. 

Chase Bank's DreaMaker loan also allows borrowers to make a 3% down payment, and you can earn a discount with a Chase checking or savings account. In some states, Chase will provide qualified applicants with a grant of up to $7,500 toward a down payment or closing costs.

If you do make a smaller down payment, keep in mind you'll start out with less equity in your home.

Benefits of a larger down payment

Having more set aside for a down payment makes borrowers more attractive to mortgage lenders, so it can earn you a lower interest rate and fewer fees. If you have 20% available, you can likely avoid mortgage insurance.

A bigger down payment also means you'll own more equity in the home right away. If you expect to refinance your mortgage, you'll typically need 20% home equity.

If you've set homebuying as a medium- to long-term goal, there are financial products that can grow your money faster so you can afford a healthy down payment (and have something set aside for closing costs and emergencies).

High-yield savings accounts (HYSAs) can earn more than 5% interest while still allowing you to make withdrawals if something unexpected happens. Western Alliance Bank's HYSA currently earns an APR of 5.32%, one of the highest CNBC Select has reviewed. You only need a dollar to open an account, and there's no minimum balance requirement or monthly fees.

If you want extra incentives to save, a UFB Secure Savings account has them: It starts with an APY of up to 5.25% but, if you add a UFB Freedom checking account, you can qualify for an additional 0.20%. You'll need to set up a monthly direct deposit of at least $5,000, maintain a minimum balance of $10,000 and make 10 debit card transactions per statement cycle. Unlike Western Alliance, a UFB account comes with an ATM card with unlimited withdrawals.

The 20% down payment rule hasn't been accurate for years. The median down payment for a first-time homebuyer has been less than 10% for nearly three decades — ultimately, how much you put down is up to you. There are benefits and risks to putting less down. Be sure you understand your finances and these risks before you buy.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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