What is a down payment?
A down payment is a portion of the cost of a home, paid up front. Generally, the more you put down, the lower your interest rate and monthly payment.
Why? Because the down payment is effectively your investment in your home. When you put more money down, you're taking on a portion of risk from the lender, who can reciprocate by giving you better mortgage rates.
To get the lowest mortgage rates, you'll typically need a down payment of at least 20 percent of the home's purchase price.
However, it's not uncommon to purchase a home with a down payment of 15 percent, 10 percent, or even less. Some government-backed loans, like FHA mortgages and VA loans, may be available to qualified home buyers with little or no down payment. However, with some of these loans, you may be required to pay for mortgage insurance - an extra monthly expense you'll need to pay along with your mortgage payment. It's a good idea to understand the different types of mortgage loans and their requirements
There's one more good reason to make a higher down payment - simply put, the more you pay up front, the less you'll owe on your mortgage. Because the amount of your down payment is subtracted from the total cost of a house, your loan amount will be smaller with a larger down payment - and so will your monthly payments. You can use our mortgage payment calculator to estimate your monthly payments based on the amount you borrow.