How Much You Should Save For A Down Payment On A House

How Much You Should Save For A Down Payment On A House

Tips & Advice, Buyers

Putting a down payment on a house can be such a wonderful experience. But it can also be stressful, especially if you do not know how much to budget for. 

In 2016, you used to be able to put a 5% down payment down on a home under $1 million. Now you can only put a 5% payment down if the house you are buying is less than $500,000. If the home is more than $500,000, you will pay 5% on the first $500,000, and 10% on the remaining amount.
 

Examples:
 

Price Of Home

Down Payment Amount

Total

$350,000

$17,500

$17,500

$450,000

$22,500

$22,500

$550,000

$25,000 + 10% of remaining 5,000

$30,000

$850,000

$25,000 + 10% of remaining $350,000 

$60,000

$1,000,000

$200,000

$200,000

$2,500,000

$500,000

$500,000

 

After budgeting for your down payment, remember you will also have additional costs such as closing costs, a home inspector, etc.

Closing costs will vary in each case depending on the type of property you are buying or the loans you have. Typically, it will range anywhere from 2-5% of the purchase price.

Your REALTOR® will make sure you understand all the closing costs involved of course, but some of these will be included:

  • Appraisal
  • Attorney Fees
  • Homeowners’ Insurance
  • Property Tax
  • Recording Fees
  • Transfer Taxes
  • and more 

 

Price Of Home

2-5% Of Closing Costs

Total (+ down payment)

$350,000

$7,000 -$17,500

$24,000- $35,000

$450,000

$9,000 - $22,500

$31,500 - $45,000

$550,000

$11,000 - $27,500 

$41,000 - $55,000

$850,000

$17,000 - $42,500 

$77,000 - $102,500

$1,000,000

$20,000 - $50,000

$220,000 - $250,000

$2,500,000

$50,000 - $125,000

$550,000 - $625,000

Remember these are just estimates are not all closing costs apply to every transaction. 
 

How Do I Pay For The Down Payment?

There are different options for people when they do not have the cash up-front. A line of credit is a great way for first-time buyers and young adults to build a credit score. Personal loans can also be made from the bank or a family member.

Sometimes homebuyers will put down more money for their down payment than the suggested percentage. The higher the amount you put down, the lower your mortgage payments will be. Over the long-run, you may be spending more than you planned with the added insurance and interest costs if your down payment is lower.

Always know your budget and play within it. Build a budget chart before putting that payment down on a house so you know what you will be spending each month on your mortgage and what is left over for other costs.