Key Takeaways

• First time home buyers put down between 6%-7% of the home price.
• 20% for a down payment is just a recommended number. A lot of people still put down much less.
• Downpayments vary with loan types. FHA Loans offer 3.5%.

 

How Much Down Payment Is Needed?

First-time home buyers put a down payment of between 6% and 7% of the home’s selling price. The 20% payment is the standard when it comes to down payments but it is not required. This is because there is a significant number of people who try to avoid Private Mortgage Insurance (PMI) if they put down 20% or more. But if you cannot afford the 20%, then there is no worry; there are programs to help you if you are qualified for the loan.

 

How Many People Choose 20% and How Many Opt to Pay Below a 20% Downpayment?

​In 2024, the traditional 20% down payment is no longer the norm for most homebuyers. Recent data indicates that only about 43% of buyers put down 20% or more on their home purchases. In other words, 57% of the buyers are choosing down payments below 20%. 28% of buyers are putting down 5% or even lower, which is great news for people who do not have the funds yet to secure a 20% down payment. This also suggests more and more people rely on lower down payment options available.

 

Loan Types Available

• Conventional Loans: If qualified, borrowers are entitled to 3% as downpayment.
• FHA Loans: Federal Housing Administration Loans or FHA loans only require a minimum of 3.5%.
• VA and USDA Loans: Eligible military service members, veterans, and rural homebuyers may qualify for loans with no down payment required.

Important note to remember: The larger the down payment, the better your mortgage terms generally become. Higher down payments can lower your monthly mortgage payment and help you avoid PMI altogether. Lower downpayments are harder to be qualified for and will require more paperworks and proof that you can pay.

 

Demographics and Average Income of First-Time Buyers

 

Average Age: The typical first-time homebuyer in 2024 is 35 years old. This age group often represents people who have been working for a while, have gained some financial stability, and are ready to make the major step of buying a home.

Household Income: The median household income for first-time buyers in 2024 is $96,000 annually. This is an important figure as it helps to determine what type of home they can afford. With this income, many buyers are aiming for properties that align with their growing financial capabilities and future goals, such as starting a family or securing a stable long-term investment.

Marital Status: The marital status of first-time homebuyers shows a mix of relationship statuses. Around 50% are married couples, indicating that many are buying homes together as part of their shared life journey. Approximately 17% are single females, reflecting an increasing number of women who are financially independent and able to purchase homes on their own. Around 10% are single males, and the remaining portion consists of unmarried couples who are embarking on this important milestone together.

Family Status: Nearly one-third (31%) of first-time homebuyers have children under the age of 18 living at home. This is an important statistic as it highlights that many first-time buyers are purchasing homes with growing families in mind. With children, buyers often look for more space, better schools, and family-friendly neighborhoods, influencing the types of homes and locations they are most interested in.

 

Average Down Payment Percentages

As of Q4 2024, the average down payment across the United States was approximately 14.4%, with a median amount of around $30,250. Here's how it typically breaks down:

• First-time buyers: Around 6% down payment.
• Repeat buyers: Around 17% down payment.

While 20% is a strong benchmark for avoiding extra fees like PMI, it is no longer the strict standard, especially with so many first-time buyer assistance programs available.

 

Average Down Payment by State

Highest Median Down Payment:
San Jose, California leads the nation with a median down payment of $386,000, accounting for approximately 25% of the home's purchase price. This high figure reflects the area's expensive housing market and competitive real estate environment.

Lowest Median Down Payment:
Virginia Beach, Virginia has the lowest median down payment at $10,033, which is about 3% of the home's purchase price. This lower percentage makes it more accessible for first-time buyers to enter the housing market in this region.

Below is the full list of median down payment per state:

 

 

Factors That Affect How Much Down Payment You Need

1. Credit Score: Higher credit scores can qualify you for loans with lower down payment options.
2. Debt-to-Income Ratio (DTI): Lower DTI ratios can improve your loan terms and lower required down payments.
3. Local Housing Market: Hotter markets may require higher offers and larger down payments to stay competitive.
4. Loan Type and Lender Requirements: Specific mortgage products have different down payment standards.

 

Examples of Down Payments at Different Price Points

• $250,000 Home:
  • 5% down = $12,500
• $350,000 Home:
  • 3% down = $10,500
• $500,000 Home:
  • 20% down = $100,000

 

The Real Impact of Less Than 20% Down

• Private Mortgage Insurance (PMI): This is required if the down payment you’ll be having is below 20%. This is because the loan amount is greater when the applicant is qualified for below 20%. This poses a greater risk for the lenders and ensures their financial protection should the home buyer defaults in the monthly payments
• Monthly Cost Impact: When you reach 20% equity of the home’s value then you can have the PMI removed. But, until then, your monthly payments have additional costs.

 

Smart Strategies to Save for a Down Payment

• Automate Savings: Set up a separate savings account.
• Cut Expenses: Eliminate non-essential spending.
• Use Gift Funds: Financial gifts from family can often be applied toward your down payment.
• 401(k) Loans: Use carefully if permitted by your employer.

 

FAQ’s

How much should a first-time homebuyer put down?

6% to 7%.

Is it necessary to put 20% down on a house?

No.

What happens if I put less than 20% down?

You will pay PMI or Private Mortgage Insurance. The process will be harder than putting 20% down.

Are there programs that help with down payments?

Yes.

Can I buy a house with no money down?

Yes. VA and USDA programs allow you to do so considering you qualify but it will not be as easy as putting 20% down.