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For many Americans, buying a home is a dream that feels out of reach, beginning with the intimidating down payment due at the time the home is purchased. With the high cost of rent and other living expenses, many people are not well-positioned to save for a down payment on a home. But how much do home buyers really need for a down payment? Is it necessary to save 20% for a down payment on a home before searching for the perfect home? United Federal Credit Union Mortgage Advisor Kyle Henke has advice for home buyers, and his answers may surprise you.

“Contributing less than 20% for a down payment does not necessarily put homebuyers at a disadvantage,” said Mortgage Advisor Kyle Henke. “I recommend saving at least 3% of the home’s purchase price before beginning your home search. It's nicer to have more of a down payment if you can, but it's not necessarily a barrier to home ownership.”

Henke has ten years of credit union experience, helping Members design customized financial plans to achieve their dream of buying a home and making home ownership affordable and attainable. Based in Granger, Indiana, Henke works at United Federal Credit Union’s Toscana Park branch.

Mortgage advisors like Henke help Members design a personalized financial plan, explain the ins and outs of mortgage loans, secure down payment assistance, and clarify common misunderstandings, like how much money you need for a down payment on a house. So what’s the minimum down payment on a mortgage?

“There are some myths out there where a lot of people think, hey, I need 20% down and that's really just not the case. You know, a lot of first-time home buyer programs with Fannie Mae, and also Freddie Mac, allow for 3% down as the minimum.”

What’s the average down payment on a home? According to a report conducted by Mortgage Research Center, in 2024, the median down payment on a home in the U.S. was 18%. But when looking at first-time homebuyers only, this group averaged a much lower down payment for their home, half of the overall average, at just 9%. That number may sound a lot more realistic for those saving up to buy their first home.

“One of the biggest regrets a homebuyer might have is putting too much down,” Henke said. This could be a mistake if it means taking out their entire savings to increase the down payment, and while mortgage advisors like Henke want to help Members purchase their first home, they’re also keeping in mind the bigger financial picture.

“We don't want to use all your income and all of your cash reserves. We want to have a little safety net there, for three to six months of expenses,” he said.

It’s important to review large monthly expenses, funds for unexpected future home repairs, and emergency funds. Having savings set aside for these categories is important. After excluding savings for these costs, the number that’s left may not be as strong as you’d like for a down payment, but don’t be discouraged!

You have options when it comes to deciding how much to commit to a down payment and accessing down payment assistance. United’s mortgage advisors are available to help answer your questions and create a customized plan that best works for your financial situation.

Find a local mortgage advisor and get started on your home buying journey.

For Members who dream of owning a home but don’t know where to start, Henke recommends starting off by accessing their credit report and making an appointment with a local United mortgage advisor.

Before deciding how much to include in your down payment, Henke says Members should review their credit report and submit an online application to get preapproved for a mortgage loan, to see where they stand. Getting the information from these two items will get home buyers started on their journey.

“If people have questions about their credit report, they can go online and access their credit report, and that's kind of a good place where they can start. So they can kind of see what their credit profile looks like. I would say the first step, if anybody's even thinking about buying a house or they say ‘hey, my rent's too high, I don't like paying rent,’ is really to go ahead and go forward with that pre-approval process with a mortgage advisor. This really allows someone to get a good understanding of where they're at, and the steps they need to take in order to get in that home that they want.”

Mortgage advisors can help Members understand what their credit score means for mortgage and down payment loans. Henke said, “I would advise people sooner, rather than later, to sit down with a mortgage advisor and come up with a good plan. What can we do to purchase that?”

“If they go onto our website, they can find a mortgage advisor in any of our states. And set up either a one-on-one, or a phone call, a video conference, an online application to really get that ball rolling.”

It’s important to keep in mind that the amount of money a home buyer contributes to a down payment on a house will have a direct impact on monthly mortgage payments. A smaller down payment can lead to larger monthly mortgage payments, and a larger mortgage loan overall. Members can help get that monthly cost lowered by working with a mortgage advisor and taking advantage of down payment loans if they qualify.

In cases where the home buyer decides to contribute a down payment of less than 20%, the mortgage lender may require adding private mortgage insurance (PMI) which can increase monthly costs for homeowners.

Crunch the numbers with United’s free down payment and mortgage loan calculator to give you an idea of what you can afford.

This is available if a Member doesn’t have money for a down payment but doesn’t want to wait 5-10 years to save up to contribute a higher down payment before buying. This could increase the monthly cost but may be well worth it to get ahead of future rising home prices.

“Private mortgage insurance is required when you put less than 20% down on a conventional mortgage,” Henke explained. “It is based off of credit score and loan-to-value and your kind of overall credit profile. One would expect to pay an additional $100 to $200 a month for that private mortgage insurance.”

So, when is the right time to meet with a mortgage advisor and begin taking steps towards purchasing a home? “It’s never too early to start. I think anytime is good to start getting an understanding of where you're at in your credit journey. Maybe now is not the time to buy a home, but maybe it's better in six or 12 months,” Henke said.

If you like to do your own research before speaking with an advisor, United offers free down payment and mortgage loan calculators that show estimated monthly mortgage payments based on the home price, down payment, and other factors.

Get familiar with the numbers and when you’re ready, book an appointment with a mortgage advisor.