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If you’re wondering what the average down payment on a house is, or how to make a down payment on a house – we can help.

Buying a home is the largest purchase most people ever make, and the down payment process can be tricky – it can be difficult to know how much you’ll need, or what the average down payment on a house for a first-time buyer is.

Luckily, there are tools to help you navigate the process as a first-time buyer – like First Merchants’ house down payment calculator. Why a down payment calculator? A down payment calculator can help you build your home-buying budget, so you’ll know exactly how much you need to save for a down payment and how much your monthly mortgage payment will be at current interest rates.

In this guide, we’ll walk you through the down payment process, as well as give you examples of how our down payment calculator can help you determine your homebuying budget.

Explore our other mortgage calculators.

What is a downpayment?

What is the down payment on a house? Since the typical homebuyer doesn’t have the savings required to purchase a house with cash, they borrow the funding from a bank or lending agency, usually in the form of a mortgage.

A down payment is a certain amount of money you pay upfront when purchasing a house – after you’ve chosen a lender and gone through the pre-approval process – to demonstrate that you have the financial stability required to manage a mortgage.

A larger down payment can mean a lower monthly mortgage payment – and even a shorter loan term, depending on the percentage down.

Read our Homebuying 101 Guide.

What is the optimal down payment amount for a house?

Financial experts recommend 20 percent of the purchase price of the home you want to buy as the typical down payment on a house.

If you’re wondering, “Do I need the full down payment before making an offer on a house?” The short answer is: sometimes, but not always. We’ll go over the conditions under which a lender would accept a smaller down payment later in this article.

If you want to know, “How much of a down payment do I need for a house?” The amount you choose to put down on your home will depend on your home’s purchase price, your budget, and how much you can afford in monthly payments.

Typically, you’ll want to avoid maxing out your monthly budget just to pay your mortgage – this is often called being “house poor.” In other words: don’t break the bank or sacrifice emergency savings to pay your mortgage. If possible, adjust your homebuying budget – or put off purchasing a house for a few more years so that you can save up for a larger down payment percentage, which will lower your monthly mortgage payment.

If you’re wondering:

  • How much down payment for a 100k house: $20,000 with a 20% down payment
  • How much down payment for a 300k house: $60,000 with a 20% down payment
  • How much down payment for a 500k house: $100,000 with a 20% down payment

Our guide to making a down payment on a house

Once you’ve figured out how much you’d like to put down, the process of making a down payment on a house is actually fairly simple.

After you’ve had an offer accepted on a house, your down payment amount will be due at closing. Your lender may have an option to submit this payment earlier, but if not, you will need to secure a certified check – also known as a cashier’s check – from your bank or request a wire transfer to the company handling your mortgage closing.

Please note that a cashier’s check is not a personal check. Unlike a personal check, which in some ways is a promise to pay the amount later, a cashier’s check certifies that you have all the money necessary at the present moment, and functions in a similar manner to cash. Once you acquire a certified check for a certain amount, it is no longer in your account – it is “contained” in the cashier’s check. The only way to get a cashier’s check is to go to the bank that holds your account and request one from the teller.

When you go to sign your closing papers, bring your cashier’s check – or proof of a wire transfer – with you, and submit it to the company handling your closing. Depending on how you went about shopping for a home and obtaining a mortgage, that could be your lender or a specialized title company that handles home closings, deeds, and title transfers.

Questions about other parts of the homebuying process? Our Homebuyers Journey will walk you through.

What is the minimum down payment on a house?

What is the minimum down payment for a house? It depends.

There are a lot of options when it comes to securing a mortgage that will impact how many years you’ll make monthly payments, and what percentage down payment for a house you’ll pay.

As mentioned previously, 20 percent is the recommended amount, as it will help you avoid additional fees like Private Mortgage Insurance (PMI). PMI is federally required insurance applied to mortgages that close with less than 10 percent down. Its goal is to protect borrowers and lenders in the event of a foreclosure. It does, however, increase your monthly payment. Most lenders will require that you pay PMI if you put down less than 20 percent until your loan-to-value reaches 80 percent

However, you can secure a mortgage with a much lower down payment percentage – some loans will let you move forward with as little as 3 to 3.5 percent.

How much is 3.5% down payment on a house?

  • How much down payment for a 100k house: $3,500 with a 3.5% down payment
  • How much down payment for a 300k house: $10,500 with a 3.5% down payment
  • How much down payment for a 500k house: $17,500 with a 3.5% down payment

However, many require 5 percent or more. You’ll want to carefully consider the type of mortgage you are getting – FHA, Conventional, VA, or other – and familiarize yourself with their downpayment requirements. Compare mortgage options.

Pros and cons of making a larger down payment

So, is there any limit to making a down payment on a house? Nope! While many lenders specify a minimum payment amount, there is no maximum limit. You can even pay the full purchase price, if you’d like – this is often referred to as paying “in cash.”

Paying a larger down payment amount can be preferable because it will lower the total amount you’re borrowing – which can mean a smaller monthly payment and a shorter loan term and. It will also help you avoid monthly mortgage add-ons like PMI.

However, saving up for a larger down payment can mean that you’re putting off buying a house for longer, which means you may miss out on good markets. Like anything, the homebuying and mortgage markets are fluid. If you save up to have a larger down payment in the future, are you missing out on a period of low mortgage interest rates? Or will you be at risk of searching for a house in an incredibly competitive market?

If you currently own your home, will the time it takes you to save for a larger down payment mean you could potentially be selling your house in a slow market, where few people are looking to purchase a house?

These are all things to consider as you move forward in your homebuying journey.

Down payment assistance programs

Need help with a down payment? Some lenders offer mortgage options with built-in down payment assistance, like First Merchants’ Next Horizon Mortgage program, which is designed for first-time homebuyers. Next Horizon clients may be eligible for down payment assistance or no money down – and those qualifying for this innovative program do not need to pay PMI.

You may also qualify for specific mortgage types like an FHA mortgage, which allow you to purchase a home with a smaller down payment. Talk to your local attentive mortgage lender to see if you’re eligible for down payment assistance – or speak to one of our welcoming Community Home Lending Officers about a Next Horizon Mortgage.


Is there any limit to making a down payment on a house?

Nope! While many lenders specify a minimum payment amount, there is no maximum limit. You can even pay the full purchase price, if you’d like – this is often referred to as paying “in cash.”

Do I need full down payment before making an offer on a house?

It depends on your lender. Some lenders will want to see proof of those funds in your account to push your mortgage application through to closing – and you will definitely need the full down payment amount by the time you close. So, while you can talk to your lender about their specific requirements, it is best to already have the down payment amount in hand when you put in your offer – as you can suffer penalties such as losing your earnest money if you don’t have the full down payment ready to go at closing.

Can you use line of credit for down payment?

This is not advised. In fact, many mortgage contracts have a clause built-in that states you are not using another loan or line of credit to cover the amount you owe at closing or to pay off your mortgage.

What is the difference between FHA and conventional loans?

An FHA insured loan is backed by the US Federal Housing Administration and includes private mortgage insurance. An FHA mortgage typically has a lower credit score requirement and allows you to have a smaller down payment amount. It is designed to help first-time homebuyers and those with low-to-middle income purchase a home. Be aware that not every lender offers FHA mortgages.

A Conventional loan, on the other hand, has higher credit score requirements, and also requires buyers to put more money down – typically 10 to 20 percent. However, a conventional loan does not automatically carry PMI, which means you may end up with a lower monthly payment.

Explore different loan offerings.

Can you borrow from 401k for down payment on house?

Yes. You can borrow money from your 401(k) if you are purchasing a primary residence. This is one of the few allowed instances where you can borrow money from your 401(k) penalty free – though you may have to pay the money back over time.

Can you buy a house without a down payment?

Some programs, like First Merchants’ Next Horizon Mortgage program, Veterans Affairs (VA) loans, USDA Rural Development loans among others, have options where you can qualify for a mortgage with no down payment. This may involve applying for a grant or other funding source. Talk to your local Community Home Lender for more information about programs you could qualify for.

What happens to your down payment if you decide not to buy?

If you decide not to complete your purchase, nothing will happen to your down payment, as you typically do not pay it until you sign your papers at closing. However, you may lose your earnest money – an amount you put down when you make an offer on your home to show the buyer that you intend to follow through with the purchase. The earnest money amount is often subtracted from the sale price of the house, but it does not make up your down payment.

Be aware, however, that once an offer has been accepted and you’ve signed a sale agreement, there are only a few instances where you can withdraw from the process without penalty. Depending on the house, sale amount, market, buyer, and other factors, you could be opening yourself up to legal ramifications if withdrawing your offer doesn’t fall within these guidelines.

Broadly speaking, acceptable reasons to halt the sale process include discovering something wrong with the house within the allotted due diligence period and changes to employment status – though other situations may qualify. Be sure to read your paperwork carefully before signing any document, or if you are having second thoughts.

Can I change my down payment before closing?

You can, however it is not typically advised. Be aware that changing your down payment amount can result in delays in the process. Your loan will likely need to be rewritten to accommodate for the change – and, if the amount is less than initially planned, you could be at risk of losing your loan approval.

How can we help?

We’re happy to chat with you about making a down payment – whether you have questions about the process, would like help saving up for a down payment, or want to know more about the great mortgage offerings we have available. Find your local attentive mortgage expert and we’ll help you get started!