What First-Time Home Buyers Need to Know About Down Payments

A down payment for a home is a vital piece to the home buying process. Not only could it be one of the biggest checks you will write, but it can also significantly affect your personal savings. Your down payment size also affects the type of mortgage you may qualify for. Learning about down payments for a home can feel overwhelming, so we mapped out a few things first-time buyers should know and consider.   

What is a Down Payment?

A down payment is the amount of cash you commit towards the purchase of a home, showing both the lender and seller that you have the means to make the purchase. A down payment is required for the majority of mortgage loans, and the amount will vary depending on the type of mortgage you are interested in.

Estimating a Down Payment

The type of loan you go with will ultimately determine the down payment requirement. While some buyers aim to put down more in order to avoid paying private mortgage insurance (PMI), this is not as common. In fact, a recent report from the National Association of REALTORS revealed that the average down payment for a home has decreased over the years. Make sure to discuss a down payment with your mortgage lender, and choose an amount you and your bank account will be comfortable with.

Sources for a Down Payment

There are variety of ways buyers can source funds for a down payment. Here are some acceptable sources to consider:

  • Gifts - Many lenders allow down payment gifts for loan programs.
  • Income Tax Refund – Utilize the funds from your most recent tax refund towards your down payment.
  • 401K – If you have a 401K retirement plan through your workplace, you may be able to tap into it and utilize funds for the down payment.
  • Employer Assistance – Some organizations will offer an employer-sponsored down payment assistance program as part of their employee benefits.
  • Credit Card Points - Fannie Mae recently announced that buyers can utilize credit card rewards points towards a down payment. This is a great option for those who have a lot of points, and are interested in bumping up their down payment amount.
  • First-Time Homebuyer Programs - Many first-time home buyers don’t know that they can qualify for programs that offer down payment assistance. While these programs vary by state, the premise is that these programs allow buyers to make a comfortable down payment, without draining their bank account. If you’re a first-time homebuyer in Wisconsin or Illinois, learning about programs such as WHEDA Loan or the IHDA Grant and Loan Program can help get you closer to your home ownership goals.

Our Mortgage Planners are readily available to help you with all your down payment questions. Our job is to make the available programs easy for you to understand so that you can pick the one that’s right for you. Contact us today to learn more!


Tammy Zurfluh Vice President MortgageTammy Zurfluh

SVP Mortgage Banking

Meet Tammy