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First-Time Homeowner Down Payment: What’s Typical?

Mai Browne Updated: October 3, 2023 • 5 min read
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A down payment is a significant portion of the purchase price of a home. It's important to know how much you need to save up before you start looking. The amount of your down payment will affect the type of mortgage you qualify for and the interest rate you'll pay. So, it's important to have a good understanding of your down payment options before you start shopping for a mortgage.

By implementing these strategies and adopting a long-term saving mindset, first-time homebuyers can steadily work towards their down payment goal.

Understanding Down Payments

A down payment is the amount of money you will pay upfront when you buy a home. The more money you put down, the lower your monthly mortgage payments will be.

There are two main reasons why a down payment is important.

  1. It shows the lender that you are serious about buying a home and that you have the financial resources to do so.
  2. It reduces the amount of money you need to borrow, which can lower your interest rate and monthly payments.

If you can afford to make a large down payment, you will be in a better position to buy a home. You will have lower monthly payments, and you may be able to avoid paying mortgage insurance.

Average Down Payment for First-Time Homebuyers

The average down payment is about 6% for first-time homes, according to the National Association of Realtors (NAR). So, for a $400,000 home, a 6% down payment would be $24,000.

This percentage serves as a general guideline, but it's crucial to keep in mind that several factors influence the average down payment amount. These factors include: 

  • Location: In areas with higher housing costs or in competitive real estate markets, the average down payment tends to be higher. For example, metropolitan areas or regions with high demand may require a larger down payment compared to rural or less expensive areas.
  • Market conditions: Market conditions, including supply and demand, can influence the average down payment. In a seller's market where there is high demand and limited housing inventory, buyers may need to provide a larger down payment to make their offers more competitive.
  • Loan type: Different loan programs have varying down payment requirements, which can impact the average down payment for first-time homebuyers. 

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Down Payment Requirements by Loan Program

As we covered, the down payment requirement for your home is dependent on your loan type. As a first-time homebuyer, it's important to know your options:

  • The Federal Housing Administration (FHA) loan typically requires a first-time home buyer deposit of 3.5% of the purchase price. An FHA loan can be a great option for you if you expect to be able to contribute a lower than usual down payment.
  • The Veterans Affairs (VA) loan offers eligible veterans and service members the opportunity to secure a mortgage with little to no down payment required. This is an ideal perk if you served and fit the eligibility requirements. 
  • Conventional loans, on the other hand, often necessitate down payments ranging from 5% to 20%. Each loan program has its own advantages and disadvantages. You should carefully consider their individual circumstances before selecting the most suitable option.

Alternative Financing Options for Down Payments

For homebuyers facing challenges wrangling the funds for a down payment, several alternative financing options exist: 

  • Down payment assistance programs: There are several government and private programs that can help you cover the down payment and closing costs on a home. These can help you get into a home sooner and build equity faster. Beyond FHA, VA and USDA loans, many states and city governments offer their own programs. For more information, visit the US Department of Urban Development's Resources.
  • Employer homeownership programs: Some employers offer programs that help employees with the cost of buying a home. These programs can provide down payment assistance, closing cost assistance, and homebuyer education. Ask your HR department if they offer this as part of your HR benefits.

If you don't have a large down payment saved up, these alternative financing options can help you get into a home sooner.

However, it's important to understand that beyond the down payment, there are other costs associated with homeownership, including closing fees, title fees, and appraisals. These additional expenses can quickly add up to 3 - 5% of the home price, so they must be factored into your overall budget.

For more information, check out our detailed Guide to How Much it Costs to Buy a House.

Tips for Saving for a Down Payment

Saving for a down payment requires planning and disciplined saving habits. Here are some practical tips to help save up for a down payment:

  1. Automate savings. Set up automatic transfers from your checking account to a designated savings account specifically dedicated to the down payment. This ensures consistent contributions without the temptation to spend your money elsewhere.
  2. Reduce unnecessary expenses. Review your budget and identify areas where you can cut back on unnecessary expenses. This may involve making small sacrifices in your daily routine or finding more cost-effective alternatives for certain services.
  3. Explore additional income sources. Consider taking up a side gig or freelance work to supplement your primary income. The side hustle economy is profitable, and this can be anything from driving for a ridesharing business to selling items online.
  4. Use gifts from friends and family. If you're fortunate enough to have friends or family members willing to contribute towards your down payment, gratefully accept their assistance. However, ensure that any gifts comply with the requirements set forth by the chosen loan program and consult with a financial advisor or mortgage professional for guidance.

By implementing these strategies and adopting a long-term saving mindset, first-time homebuyers can steadily work towards their down payment goal.



In conclusion, the down payment requirement is a significant aspect of the homebuying process, particularly for first-time homebuyers. While the average down payment for first-time homebuyers may vary depending on factors such as location, market conditions, and loan programs, it is essential to explore options that best suit individual financial circumstances.

Understanding the impact of down payments on mortgage financing, considering alternative financing options, and implementing effective savings strategies are key steps to successfully navigate this aspect of homeownership. By doing thorough research, you can achieve your goal of homeownership.

Written by Mai Browne linkedin-icon

Mai Browne has 20+ years of experience working at and writing for Fortune 500 companies, financial services firms, and professional services firms, including three of the Big 4. She has also written for Money Magazine, The Journal of Accountancy, and other publications.