Did you know that in April 2023, the median price of existing U.S. homes dropped to \$388,800? That’s a decrease of 1.7% from the same month last year.

While that’s welcome news to many home buyers, \$388,800 is still a lot of money. Fortunately, with the right mortgage, you, as a house shopper, don’t have to pay for that entire amount in one go. You can focus on saving up for your house down payment.

So how much down payment should you save up for?

We’ll get to the bottom of that question in this guide, so read on.

## The Ideal House Down Payment

Property pricing is one of the first things you’d want to learn more about buying a house. One reason is that it allows you to determine if you can afford its down payment, much less the entire house.

Ideally, you should aim to make a 20% down payment on a house. So if you’re buying a home priced at \$350,000, you should save at least \$70,000 for its down payment.

## Why Aim for 20 Percent?

Meeting that percentage for a home down payment reduces your total interest payments. Your mortgage lender would apply the interest rate on a smaller loan amount.

Suppose you can put \$70,000 down on a \$350,000 property, which means you only need to borrow \$280,000. Let’s also say your fixed mortgage rate is 3.5%.

In the example above, you’d pay your lender \$816.66 monthly interest fees for the first 12 months (\$280,000 x 0.035 / 12 months). That brings your yearly interest fees to \$9,799.92.

Let’s compare that to making a 10% home down payment (\$35,000) on a \$350,000 property. In this scenario, you’d have to borrow \$315,000. With a 3.5% rate, you’d owe your lender \$918.75 monthly interest fees for the first 12 months or \$11,025 for the entire year.

Another reason to aim for 20% is to reduce your monthly mortgage payments. The more money you put down, the less interest you must pay, and the smaller the loan you need.

Also, a 20% down payment is enough to eliminate private mortgage insurance (PMI). PMI is a typical lender requirement for borrowers making less than a 20% down payment. It usually ranges from 0.5% to 1.5% of the loan amount and is often a yearly payment.

Lastly, the bigger your down payment, the greater your initial home equity.

## What If You Can’t Afford That?

Don’t worry if you can’t, as many lenders require a lower down payment. For instance, you can put down as little as 3.5% if you qualify for an FHA loan or even 0% if you’re eligible for a VA loan. Some conventional loans also only require 5%.

You should also not force yourself to make a 20% down payment if doing so depletes your emergency savings. The last thing you want is to own a home yet have no money to pay your mortgage or home repairs and upkeep. Even worse, you could be in big trouble if you have no savings and a medical emergency occurs at home.

## Start Saving for Your Down Payment

You now know the ideal house down payment is 20% of the property’s price. It’s not always a requirement, although it can benefit you. If you can’t afford 20%, you have other loan options with much lower down payment requirements.

The important thing is to start saving as soon and as much as you can.

Ready for more home-buying guides? Then check out our guide on the key factors to look for in a house!