How Much Down Payment Do I Need for a House?

How Much Down Payment Do I Need for a House?

Purchasing a home is an exciting milestone but it can be difficult to determine how much you can actually afford. The key to making the most of your money is determining your maximum mortgage affordability. Knowing this will help you make a smart decision on how much house you should buy and what type of mortgage you should choose. Here’s a quick guide on how to calculate your maximum mortgage affordability. 

Calculating Your Income  
The first step in determining your maximum mortgage affordability is calculating your income. This number should include any income that you or any other person who will be on the loan (such as a spouse) receives from wages, investments, alimony, Social Security, or another source. You'll also need to factor in taxes and other deductions that are taken out of each paycheck so that you have an accurate picture of your total income each month. In general, lenders look for borrowers with a debt-to-income ratio of 43% or lower; so if your total monthly debt payments exceed 43% of your gross monthly income, you may want to consider reducing some debt before applying for a loan. 

Determining Your Debt Load 
Next up is calculating your total monthly debt load (also known as recurring debt). This includes all mortgages and other loans such as credit cards and student loans. It's important to include all debts because lenders often need to know this information when making decisions about approving or denying loan applications. When adding up these numbers, don’t forget about items such as car payments and child support payments which could significantly reduce the amount of money available for a potential house payment each month. 

Figuring Out Your Maximum Mortgage Affordability 
Now comes the fun part—figuring out how much house you can actually afford! Generally speaking, lenders recommend borrowers limit their housing expenses (including taxes, insurance, etc.) at 28% of their gross monthly income and total debts at no more than 36%. By taking into account both types of expenses along with any down payment savings goals you have set for yourself, you'll be able to get an estimate of the maximum dollar amount that would make sense for you when purchasing a home. Keep in mind that this figure is just an estimated guideline and does not guarantee approval from any particular lender —other factors such as credit score are considered by underwriters when evaluating loans..  

The amount of money you need for a down payment on a house depends on several factors, including the type of mortgage you get and the price of the home. Here are some general guidelines:

  1. Conventional loans: These loans, which are not insured by the government, typically require a down payment of at least 5% of the purchase price of the home. However, some lenders may require a down payment of up to 20%.

  2. FHA loans: These loans, which are insured by the Federal Housing Administration (FHA), typically require a down payment of at least 3.5% of the purchase price of the home.

  3. VA loans: These loans, which are guaranteed by the Department of Veterans Affairs (VA), are available to eligible military veterans and active duty service members. VA loans typically do not require a down payment.

  4. USDA loans: These loans, which are backed by the United States Department of Agriculture (USDA), are available to homebuyers in rural areas and certain suburban areas. USDA loans typically do not require a down payment.

Keep in mind that these are just general guidelines, and the specific down payment requirements may vary depending on your lender, the type of mortgage you get, and other factors. It's a good idea to talk to a mortgage lender to find out what you'll need for a down payment on a house.


When it comes time to purchase a home there are many things to consider—where do I want to live? What kind of house do I want? How much am I willing/able to spend? While these questions may seem daunting at first glance, breaking them down into smaller steps makes them much easier manage. Start by calculating your maximum mortgage affordability based on your overall income and debt load so that you can make informed decisions throughout the entire buying process. With this knowledge in hand, you’ll be ready to embark on the path towards homeownership!

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