Think You Need a 20% Down Payment? Think Again

We’ve all heard that you should put a 20% down payment on a new home, and for many people, that puts purchasing their first house squarely out of reach. In fact, in a recent study, 25% of people said that this was the number one factor holding them back from home ownership. However, this may not be true anymore. In fact, the average down payment on mortgages in the U.S. is only 11% now.

Source: Prosperity Home Mortgage

This does depend on where you borrow from, however. Some lenders require huge down payments, while government-backed loans like FHA, VA, and USDA all featured payments of less than 5%. They’re open to speciality cases, like veterans, first-time buyers, and heads of households in rural areas. Where you’re buying can also be a factor, with higher-cost homes often requiring a higher percentage down payment. This is often because the monthly payments in such a market are simply too high without a lot of money down.

Source: SaveUp

The differences are stark when you break it down in numbers. The average down payment (at 11%, remember) is about $32K. However, in San Francisco County, buyers put down an average of a whopping $326K, which is just around 32% of total cost of housing there. This is one of the highest priced regions in the U.S. – compare it to Tipton County in Tennessee, where the average down payment is $3.5K. And in that county, most of the loans issued are FHA, VA, and USDA.

Bottom line: 20% down isn’t a hard and fast rule, depending on where you’re looking to buy.