Down Payment

As a first-time home buyer, your largest expense will usually be your down payment. This is the first major payment you make toward your home purchase. Your down payment is calculated as a percentage of your new home’s purchase price. For example, if you buy a $200,000 home and you want to put 10% down, you’d bring $20,000 to closing. Your down payment is due when you close on your loan.

Many first-time buyers believe they can’t buy a home unless they put 20% down. This isn’t a requirement – it’s possible to buy a home with as little as 3% down on a conventional loan. Some government-backed mortgages even have 0% down payment requirements. However, there are a few benefits to making a larger down payment:

  • Avoid PMI. If you take out a conventional loan and you put less than 20% down, your lender will require you to pay private mortgage insurance (PMI). It’s added to your monthly payment and protects your lender if you default on your loan. If you have a 20% down payment, you can avoid paying PMI.
  • Secure a lower interest rate. The less money you borrow, the less of a risk you are to your lender. If you have a higher down payment, your lender can offer you a lower interest rate.
  • Qualify for a home loan with a lower credit score. You might still be able to get a mortgage if you have a lower credit score. If you take out an FHA loan and you have at least 3.5% down, you can qualify with a credit score as low as 580 with Rocket Mortgage®.
  • You can lower your monthly payment. Putting more money down lowers what you must pay your lender each month. Taking a little time to save more before you buy can make it easier to handle your mortgage in the coming years.

So, a large down payment isn’t a requirement to buy a home. But it can be helpful and allow you to unlock more mortgage options.


Be prepared to offer a portion of your down payment as earnest money prior to your closing date. Essentially, earnest money proves to the seller that you are serious about the purchase and it will be applied to your down payment or closing costs if the deal is finalized.