Mortgage Down Payment: What is it and How Much Do You Need?

Ready to swap paying rent for building home equity? The first step to homeownership is saving for a down payment. Learn how down payments work, how much you'll need, and tips to boost your savings.
 

Jump to a question:

What is a down payment on a home?
Is a 20% down payment necessary?
How can I determine how much to put down on a house?
What are the advantages of a larger down payment?
What are the advantages of a smaller down payment?
How can I save for a down payment?
What is a down payment assistance program?
I want to buy land now and build a home later. How much is the down payment on a lot loan?
Who pays closing costs?
 

What is a down payment on a home?

A down payment is the amount of the home’s purchase price that you pay upfront in cash. For example, if you put 5% down on a house that costs $100,000, your down payment would be $5,000. You can work with a lender like Landmark to cover the balance of the purchase. You’ll repay the lender you chose through your monthly mortgage payments.
 

Is a 20% down payment necessary?

You may have heard of the 20% rule. A lot of people think you need to put 20% down to get a home loan. However, the 20% threshold is what most lenders use to determine if you need private mortgage insurance (PMI).

The reality is you don't have to put that much down. At Landmark, we offer loans with down payments as little as 3%. And depending on the loan program, you might be able to get your down payment covered. That way you would have to put $0 down up front.
 

How can I determine how much to put down on a house?

To decide how much you need to save for your down payment, start by estimating your budget for a home. You can use our Mortgage Qualifier Calculator to approximate how much house you can afford. Once you have an estimate of your home buying budget, you can calculate what percentage you feel comfortable putting down. You can also use our Monthly Mortgage Payment Calculator to see how different down payment sizes can impact your monthly payments.
 

What are the advantages of a larger down payment?

If you're able to save for a larger down payment, you can benefit from:

• A better mortgage rate: You may qualify for a lower interest rate. The less money you borrow, the less risk to the lender.
• More equity in your home: The more money you put down on your home, the more you'll own outright. Not only will that increase your wealth, but you'll also increase the equity you can tap into later. You might be able to get a home equity loan or home equity line of credit (HELOC) sooner, due to that equity. That can give you access to extra funds for home improvements or other expenses.
• Lower monthly payments: You may have a lower monthly payment, giving you more breathing room in your budget. Additionally, if you put 20% or more down, you won't need to pay private mortgage insurance (PMI).
• Less interest: You will likely end up paying less interest over the life of the loan.
• More competitive offer: A larger down payment can make your offer more appealing to the home seller in a competitive market. What are the advantages of a smaller down payment? Depending on your circumstances, a smaller down payment might make sense for you.

What are the advantages of a smaller down payment?

Depending on your circumstances a smaller down payment might make sense for you.

• Home affordability: When home prices are high, having a low down payment can make homeownership a reality.
• Preserve your savings: With a smaller down payment, you'll be able to keep some of your money in savings. That can come in handy for home repairs, furnishings and other expenses.
• Investment opportunities: Instead of putting more money down on a house, you might prefer to put your funds somewhere you have a better chance of getting a higher rate of return. For example, you may want to diversify your investment portfolio with stocks or bonds. Or perhaps if you want to start your own business, you might want to put less down on your mortgage so you can free up more money for start-up expenses.

How can I save for a down payment?

Saving for a down payment is an important part of the homeownership journey for many first-time homebuyers. To help you reach your savings goal, here are some effective strategies to consider:

• Set up automatic transfers. Consider setting up bi-weekly transfers from your checking to your savings each paycheck in Digital Banking. That way you'll gradually grow your savings without having to think about it!
• Cut back on non-essential spending until you meet your goal. Perhaps drop a streaming service, eat more meals at home, brew your own coffee and skip buying those shoes if you don’t need them. Put the extra money you aren't spending into savings.
• Receive some extra money outside of your normal income? You can put your tax refund, work bonus or cash gifts from your wedding toward your down payment.
• Make your savings work harder for you. Consider opening a higher-rate account such as a certificate or money market to maximize your savings.
• Pick up a side gig to bring in some extra money. Consider selling crafts, tutoring, pet sitting, providing childcare or flipping furniture.

What is a down payment assistance program?

Down payment assistance (DPA) programs are designed to help aspiring homeowners cover the cost of a down payment. As a credit union, we strive to make home ownership more affordable. We offer loan programs that can help reduce your down payment or cover it completely.

• First-Time Homebuyer Program: With our First-Time Homebuyer program, you can put as little as 3% down¹. We’ll also cover up to $1,000 in closing costs.
• WHEDA: With a Wisconsin Housing and Economic Authority (WHEDA) loan , you can put as little as 3% down². Or you can use a DPA program to cover down payment and/or closing costs.

I want to buy land now and build a home later. How much is the down payment on a lot loan?

Land can be a great investment. As the saying goes: location, location, location. You might be interested in securing the perfect plot of land, even if you aren’t ready to build yet. At Landmark, we require 20% down for a lot loan. Learn more about lot loans and construction loans.
 

Who pays closing costs?

Closing costs include your down payment as well as other taxes and fees. Both the buyer and the seller pay closing costs.

We’re here to help you every step of the way on your path to homeownership. Have questions about down payments, PMI, closing costs or anything else mortgage related? Chat with one of our knowledgeable loan officers. And if you’re ready to make a move, apply online.

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