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Down Payments: What You Need to Know

March 24, 2023

You Don’t Always Need 20 Percent

You’ve decided you need a new home. There’s just one problem — you don’t have the 20 percent down payment. No worries. Contrary to popular belief, you don’t always need 20 percent down. In fact, you might be able to buy a beautiful new Coventry home with a little as 3.5 percent down.

The Skinny on Down Payments

A down payment is the portion of your home price you pay upfront before financing the rest. The higher your down payment, the less you will need to borrow.


Traditionally, lenders have asked homebuyers to put 20 percent down before loaning them the rest. However, the average down payment is around 12 percent, according to the National Association of Realtors. That means lenders are willing to work with homebuyers to get them into a new home. The average down payment for repeat buyers is 16 percent and first-timers may put down as little as 7 percent on average.

Should You Put Down Less?

If you are willing and able to accept a higher monthly payment, putting less down can be beneficial. It will take you less time to save up the money you need to buy a home. For example, putting 20 percent down on a $300,000 home means saving up $60,000. That might take a while. If you are eligible for a loan allowing you to put 3.5 percent down, you would only need $10,500.

Which Loans Require Smaller Down Payments

There are several types of loans that allow you to put less or no money down. These loans are backed by the federal government so there is less risk to the lender. There are conditions, but it may be worth it to get the home you want.

FHA Loan — With this government-backed loan you can put as little as 3.5 percent down. To qualify, you need a minimum credit score of 580. It is possible to get a loan with a credit score between 500 and 579, but you will be required to put at least 10 percent down.

VA Loan — If you served in the military, you may qualify for a VA loan that requires no down payment. Spouses of active-duty military or veterans who have died in service or have a service-related disability also may be eligible. Veterans should check with the Department of Veterans Affairs to see if they qualify.

USDA Loan — If the home you want is in an approved rural or suburban area, you may qualify for this loan. Members of your household will need to meet income requirements, as well.

Conventional Loan — It is possible to get a loan that allows you to put anywhere from 3 to 5 percent down. If you have a credit score above 620 points, you are more likely to get a better loan percentage. It may come at the cost of a higher interest rate, but it’s worth asking your lender about.

Check With Your Builder

Most builders work with a preferred lender or lenders. Some even have their own mortgage companies. Often, you can get a favorable loan with a lower down payment from them.

The Bottom Line

The bottom line is that you shouldn’t let the lack of a 20 percent down payment stop you from purchasing a new home. Check with your Realtor or loan representative to see what type of loan you qualify for. You could be in your new Coventry home before you know it.

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