The American dream for many is buying a home, one of the most significant and vital investments in our lifetime. Many people will need a mortgage when purchasing a home, and most mortgages, although not all, require a down payment.
We have gathered some information to help you better understand down payments and some ways to save money for your dream home.
What is a Down Payment?
A down payment is a sum a buyer pays upfront in a real estate transaction. Down payments are a portion of the total purchase price, ranging from 3.5% to 20%.
The larger the down payment, the less you will need to borrow from your mortgage lender.
Related: What is a Down Payment?
How Much Money Do You Need for a Down Payment?
A 20% down payment can make buying a home seem impossible. Luckily, most mortgage lenders do not require 20% at closing.
The required down payment amount is typically determined by the type of mortgage you choose and the type of property you buy.
Different loans have different requirements for down payments as long as you meet specific criteria.
Conventional home loans
Conventional loans, such as non-conforming, fixed-rate, and adjustable-rate, require down payments as low as 3%, given that borrowers meet specific income limits.
You will generally need a credit score of at least 620 and a reliable income.
FHA loan
The Federal Housing Administration backs FHA home loans and requires a 3.5% down payment and a minimum credit score of 580.
VA loan
VA loans are backed by the United States Department of Veterans Affairs (VA) and are available to borrowers who meet the criteria for military service established by the VA. VA loans offer competitive rates with low or no down payments and do not require mortgage insurance.
Jumbo loans
Jumbo loans require as low as a 10% down payment. These loans are ideal for borrowers in the higher income bracket who are beginning to build their assets, such as owning a luxury home.
USDA loan
USDA loans, backed by the Rural Development Guaranteed Housing Loan Program, offer mortgages with no down payment and allow you to finance 100% of the property value.
Keep Down Payment Savings in the Right Accounts
Money saved toward a down payment needs to be kept in a secure account. Here are a few options to consider:
- Traditional Savings Account: A savings account offers the most stable place to save for a down payment. It’s insured by the FDIC or NCUA and offers a low-risk option.
- High-Yield Savings Account: This savings account offers a higher interest rate. It is still insured by the FDIC or NCUA but offers a much higher variable interest rate when compared to a regular savings account. High-yield savings accounts are low risk but may lack some easy accessibility due to being more familiar with online banks instead of physical banks.
- Certificates of Deposit: This option allows the depositor to leave a set sum of money with the bank or other financial institution in exchange for a stable, non-volatile return. Money is available for withdrawal after the investment period, though the account usually includes a penalty for early withdrawal. Certificates of deposit are available with a large variety of investment periods and interest rates to match your requirements.
- Investment Account: Any stock or bond investment account can be used to save and grow money for a down payment. Bonds are generally considered low risk, while stocks are higher risk with higher growth potential. Homebuyers may consider investment accounts early on before switching to a more stable account type closer to the purchase date.
Saving for a Down Payment
Potential homeowners have plenty of options for saving for a down payment. We have gathered some ideas and other creative ways for you to consider when needing help coming up with the cash needed for a down payment. For more tips, see Tips to Save Money for a Mortgage Down Payment.
Get a Part-Time Job
If you already have a full-time job, getting a part-time job may not be ideal. However, potential borrowers could collect extra cash fairly quickly, allowing you to purchase your dream home sooner than later.
Get rid of some of your belongings
Whether renting a home or a current homeowner, it is easy to accumulate things over time. Having a yard sale or selling some of your used goods online, such as electronics, furniture, or clothes, can help make some easy and quick cash towards a down payment.
Cut Back Spending
Downsizing your lifestyle is another quick way to help save money for a down payment. Moving into a smaller home with cheaper utilities, cutting back on dining out, buying coffee, or scaling back on luxury items are options to help save money for a down payment.
Related: Tips to Save for a Mortgage Down Payment
Marimark Mortgage
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. In addition, we’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application or contact us.

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