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Down payments & PMI

Typically, buyers put down 5 to 20% of the purchase price but this can be as little as 3%. Buyers putting down less than 20% are required to pay Private Mortgage Insurance (PMI) monthly until they build up 20% equity in their home.


The reality of down payments

A recent Freddie Mac survey found that nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.

What most people don’t realize is that you have choices when it comes to your down payment, even the possibility of putting as little as 3% down through Freddie Mac's Home Possible® or HomeOneā„  mortgages.

Where PMI comes in

If you make a down payment of less than 20%, you'll have to pay Private Mortgage Insurance (PMI) each month until you build up 20% equity in your home. Take the time to understand PMI as the cost can be relatively small in comparison to the value of being able to secure a 30-year fixed-rate mortgage sooner rather than later.

Read more about PMI

Funding your down payment

While most buyers use personal savings to finance down payments, there are many other options, including gifts or loans from relatives. In addition, many state, county, and city governments offer down payment assistance programs to people in their communities who are well qualified and ready for homeownership.

70% Savings, inheritence, retirement accounts, other assets
23% Gift or loan from family or friend
31% Proceeds from sale of previous property
10% Assistance or loan from nonprofit or government agency
4% Second lien, home equity loan, or equity line of credit

Carefully evaluate your finances to determine how much you can afford and talk with your lender or housing professional about the down payment option that makes best sense for you.

Tools and Resources

Calculator: Down Payments

Research how much of a down payment you should consider

Step-by-Step Mortgage Guide

Understand the mortgage process, from application to closing

CreditSmart: Module 11: Becoming a Homeowner

Get practical information on how to prepare to obtain a mortgage and own a home

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