What is a Down Payment? Know Your Options | Wells Fargo

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Down Payment on a House

Making a down payment on a house

Putting 20% down on a home can lower your loan costs, but is not required. You may qualify for a
mortgage with a low down payment or no money down.

What is a down payment?

You pay a percentage of the total cost of your home upfront and the mortgage covers the difference. The size of your down payment can affect your loan options. 

Why save for a larger down payment?

You don’t need a large down payment to buy a house. But, if you pay more up front, you may pay less interest overall, lower your monthly payment, and avoid having to pay mortgage insurance.

How does down payment affect my mortgage amount?

On a $250,000 home, a 20% down payment is $50,000 with a $200,000 mortgage. Try our rate and payment calculator below for more specific loan scenarios.

What if I can’t put 20% down?

You don’t have to. Some mortgage programs require a low down payment or none at all. You may also be eligible for grants or credits available to homebuyers in your community. 

Talk to a home mortgage consultant about down payment options in your area.

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See how down payment affects your mortgage options

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Low down payment loans

These programs require a low down payment. And, you may be able to use grants
or gift funds to help with up-front costs.

yourFirst Mortgage®

Whether it’s your first home or your next, this program can put homebuying within reach with as little as 3% on a conventional fixed-rate mortgage. Talk with a home mortgage consultant about loan amount, type of loan, property type, and homebuyer education requirements to ensure eligibility. 

FHA and VA loans

Government programs also offer low and no down payment options for eligible homebuyers. FHA loans have the benefit of a low down payment, but consider all costs involved, including up-front and long-term mortgage insurance and all fees. Ask your home mortgage consultant to help you compare the overall costs of all your home financing options.

 First-time homebuyers 

Learn more about buying your first home.

Get help with your down payment

Saving for a down payment can be challenging. Look for options that fit your budget.

Explore all of your options, including grants and credits

You may qualify for grants and credits that assist homebuyers with limited cash at closing, through programs such as NeighborhoodLIFT®.  Some of these may be layered with a low down payment loan.

Learn how lenders factor in your down payment

The size of your down payment — along with your credit score, credit history, total debt, and annual income — help lenders determine if you qualify for a loan, and can affect the financing options and interest rates you’re offered. 

You don’t have to put 20% down to get a mortgage 

Low down payment mortgage options allow you to budget for other expenses, but you may have to pay a monthly fee for mortgage insurance, increasing your overall costs.

Keep a little cash handy

After you pay all closing costs, most lenders want you to have enough money left in savings to cover your mortgage payments for a few months. You might also want to have some cash set aside for any unexpected expenses that might come up after you move into your new home.

Talk to a home mortgage consultant about down payment options in your area.

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Making a down payment (video)

Transcript: Making a down payment

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When you're buying a house, in most cases, you'll need to raise a certain amount of money in advance to use as a down payment.  A down payment is money you pay to make up the difference between the price of the home and the amount of the mortgage.

The more money you have available for a down payment on your home, the less you'll have to borrow. This means you can reduce the interest paid and lower your total mortgage costs.

Your choice of down payment can influence what financing options and interest rates are available to you.  The size of your down payment impacts your mortgage amount.

A lot of people ask how they can save for a down payment. Here are three tips you may find helpful:

Pay yourself first: When you pay your monthly bills, make the first payment to your savings or investment account.

Better still, set up an automatic transfer from your checking account to a dedicated down payment savings account, so you don't forget.

Spend less, save more: The less you spend on items you don't need, the more you'll save for a down payment.

Finally, Create a spending plan: Record your expenses and compare them to your income. Tracking your spending habits reveals potential areas where you can save.

When you pay yourself first, spend less and save more, and create a spending plan to follow, you're on the right track to saving up for a down payment.

Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A.
© 2014 Wells Fargo Bank, N.A. All rights reserved. NMLSR ID 399801. Equal Housing Lender.

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Mortgage Insurance Premium

A financial obligation a borrower pays to either the FHA or a private insurer to insure the mortgage lender against loss from a borrower’s default. Upfront and monthly mortgage insurance is required on FHA and monthly mortgage insurance is typically required on conforming loans when the down payment is less than 20%.

Conventional conforming mortgage 

A mortgage that is not obtained under a government program (FHA or VA) and satisfies the underwriting guidelines and loan limits set by Fannie Mae or Freddie Mac.