The amount you’re willing to put toward your new home’s down payment helps your lender determine which type of mortgage suits you best and how much to lend. However, there is no standard answer to how much down payment you need when purchasing a house. While paying too much can have an adverse effect on your savings, paying too little can come with an increased monthly payment, interest, and fees.

In order to determine how much the down payment would work best for you, you need to take the specifics of your situation into account.

Requirements Vary According to Types of Mortgages

If you think you need to pay around 20% of a home’s selling price as a down payment, you’re not far off the mark. This typically holds true for conventional mortgages and comes with its share of benefits. However, you may also qualify for a conventional mortgage by paying 5% to 15% of a home’s price as a down payment by opting to pay for private mortgage insurance (PMI) as well.

Other types of mortgages have their own down payment requirements:

  • U.S. Department of Veterans Affairs (VA) loans – meant for existing and veteran service members and eligible spouses – come with a zero down payment requirement.
  • U.S. Department of Agriculture-backed USDA loans does not require any down payment. These are made available to rural and eligible urban homebuyers.
  • If you qualify for a Federal Housing Administration (FHA) loan, you may pay just 3.5% as a down payment.
  • Jumbo loans require that you pay 10% to 20% as a down payment.

Your creditworthiness can have an effect on the down payment requirement. For example, you may qualify for the 3.5% down payment requirement through an FHA loan only if your credit score is 580 or higher. Otherwise, you need to pay at least 10% as a down payment.

The Affordability Factor

Once a lender pre-approves your mortgage, you get an indication of the maximum loan amount you qualify to borrow. By this stage, you’ve already informed your lender about your income, assets, debts, and an estimated down payment amount. It is only after taking these factors into account and checking your creditworthiness does a lender determines how much to lend to you.