How Much Money Do You Really Need For a Down Payment?

Does saving 20% for a down payment seem like too much?

Have you gone through a financial hardship and think homeownership is out of your reach?

In a survey conducted by Trulia, 74% of Americans said that homeownership is a part of their American Dream. So, what has so many Americans renting instead of owning? Trulia’s Chief Economist, Jed Kolko, explains that the biggest obstacle to homeownership is saving for a down payment. 

Today, we would like to help shed some light on how much money you actually need for a down payment. While the classic response is that you will need 20% down for a mortgage, there are other options.

One of those options is for those who have been through a financial hardship like bankruptcy or foreclosures. Another is for first time home buyers and a third is for veterans.

Let’s look into how much you really need for a down payment on a home.

The Classic 20%

Let’s start with the classic 20% down payment concept since it may be what is holding you back from finally buying a home. There are a lot of benefits to saving the 20% down. Benefits such as:

  • You are more likely to get approved for a mortgage.
  • You will have a smaller monthly payment.
  • You will not have to pay private mortgage insurance.
  • You will have instant equity in your home.

Taking advantage of all those benefits and saving for 20% of your home is a great goal. However, that isn’t the only option.

FHA Loans and First Time Home Buyers

An FHA loan is a mortgage loan that is insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. These loans take the pressure off the lender because they have a lower risk if a borrower defaults since the government has insured them. The benefits of an FHA Loan are:

  • The down payment required for an FHA loan is 3.5%.
  • These are the easiest kind of loans to qualify for.
  • Your credit does not have to be perfect to qualify.

Would this be a good program for you? Please find out more by reading, FHA Loans and Qualifications for First Time Home Buyers.

FHA Back to Work Program

Many of us are still feeling the hardships from this most recent housing crisis even as the market comes back to life. The good news is that there is help.

In 2013, a program was launched called the FHA Back to Work Program. This program allows for those Americans who went through a financial hardship to only wait 12 months to qualify for a mortgage loan. Prior to this program these same individuals would have waited 3 years.

If you would like to learn more about how this program can get you back into homeownership, please visit, FHA Back to Work Program Gives Families Hope.

Loans Through the VA or Department of Agriculture

Loans through either the VA or the Department of Agriculture require no down payment. Each program has its own qualifications.

For more information on the VA Loans, please visit, U.S. Department of Veterans Affairs.

For more information on the USDA loans, please check out United States Department of Agriculture Rural Development.


Here are three different options to purchasing a home other than saving for the classic 20% down payment. The American Dream of owning your home isn’t a farfetched idea anymore. It is a tangible, realistic, and achievable dream.

If you have any questions, we would love to hear from you and answer those questions. Please give our office a call at 248-348-7200 to start your search for your home.