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How Much You'll Need for a Down Payment in 2023

Updated: Jun 30, 2023

Home, keys and a down payment

According to the National Association of Realtors, the average down payment on a home in 2017 was 5 percent. While that number has risen and fallen over the years, it's important to remember that it's always been just an average. That means that while some of your friends or family might be able to put down 20 percent or more on their home, others will be relying on mortgage insurance if they want to buy at all. This article will explore how much you'll need for a down payment in 2023 based off your current financial situation and what your monthly payments will look like with a 5 percent or 20 percent down payment.

The current state of the housing market

What was once a sellers market is now cooling down, and the median home prices are finally coming back down to earth. In fact, the 20% down payment might not be as necessary as it used to be. The Federal Housing Administration currently allows borrowers to put down just 3.5%. However, with interest rates on the rise and more buyers entering the market, this may not last long. In 2021 and 2022, we saw the markets favoring sellers, but as interest rates continue to rise and more homes are being built, this could (and likely will) change. That being said, you should still aim to put down at least 10%, if not 20%. This will ensure that you have enough of an investment in your home, and it will make it easier to secure the best mortgage terms.

How much you should expect to pay for a down payment

Are you planning to purchase a home in 2023? If so, you may have heard that the standard down payment is 20%. While this was once the norm, today it's far from it. With the availability of 100% financing for VA and USDA loans, and 3.5% for FHA buyers, you can purchase a home without having to put down a large amount of money up front.

Credit unions also offer financing with no down payment required. Depending on your income and credit score, you may be able to qualify for special assistance programs that offer low or zero down payment financing. Speak with a lender to determine what options are available to you.

As you weigh the pros and cons of different down payment options, consider how much cash you'll need to have available for closing costs and other associated expenses. You'll also want to make sure that you don't take on too much debt—which could make it difficult to manage your mortgage payments.

Overall, there are plenty of ways to finance your home purchase in 2023—so don't get stuck on the myth that you need 20% down to buy a home. With the help of a lender, you can find the best option for your individual situation.

The benefits of making a higher down payment

Making a higher down payment on your home can be a wise decision and has several benefits. A larger down payment will reduce the amount of principal you need to borrow, meaning that you'll have to pay back less overall, which can help to reduce your monthly mortgage payments.

Additionally, by putting down a larger down payment you can avoid having to purchase private mortgage insurance (PMI) which is usually required when you put down less than 20% of the purchase price of the home. PMI protects the lender in case you default on the loan and can add hundreds of dollars onto your monthly payments.

Finally, a larger down payment will lower your debt-to-income ratio, making it easier to qualify for a home loan. A good debt-to-income ratio is essential for getting a loan as it is seen as an indicator of how well you will manage your finances.

Making a higher down payment might mean taking more time to save up and can reduce the amount you're able to borrow from the lender. However, the benefits of having a lower mortgage rate and lower monthly payments can be significant and can make all the difference in whether you can afford to purchase the home of your dreams.

It's important to do your research and figure out what works best for you before deciding on a down payment amount for your new home. Keep in mind that while 20% is still the standard down payment amount in 2023, it's not necessarily the only option. Put in as much as you can afford and reap the benefits of owning a home with a lower monthly mortgage payment!

The risks of making a lower down payment

When it comes to purchasing a home, it is important to consider the amount of money you will need for a down payment. For many years, the traditional down payment was 20%, and while this is still the case in many areas, it is important to consider the risks associated with making a lower down payment.

If you opt to make a smaller down payment, then you will likely be charged more interest in the long run. This is because you are seen as a higher-risk borrower, as you do not have as much money invested in the property. Additionally, the smaller your down payment, the higher your monthly payments will be. This could mean that your debt-to-income (DTI) ratio increases, making it more difficult to secure a loan or other forms of financing.

Making a smaller down payment can also put you at risk of being underwater on your mortgage if the value of your home decreases. If this happens, then you would owe more than your home is worth, meaning that you could find yourself unable to sell your home or refinance your loan.

It is important to consider all of these risks when deciding how much money you should use for a down payment. While making a smaller down payment might be appealing in the short-term, the long-term consequences can be significant. Consider all of your options carefully before deciding how much money to put down on your home.

What to do if you can't afford a down payment

When it comes to buying a home in 2023, you may have some sticker shock when you realize how much you need for a down payment. The traditional standard is 20% of the total home purchase price. This means if you want to buy a $200,000 home, you’ll need to come up with $40,000 as a down payment. But if you can’t afford a 20% down payment, don’t worry — there are still options available to help you buy your dream home.

Your lender is an invaluable resource when it comes to figuring out how much you can afford in monthly mortgage payments. Once they know your budget, they can help you explore options like 100% loans or 100% Loan-to-Value (LTV) financing. This means that your down payment could be as low as 0%, though you will likely still need to cover closing costs, such as attorney fees, lender costs and other expenses.

It’s important to understand the risks associated with these types of financing options, so make sure to discuss them with your lender before moving forward. Keep in mind that if you have no money down, you’ll start out underwater on the loan, meaning your loan amount is more than the market value of the home. You may also have to pay Private Mortgage Insurance (PMI) which is a type of insurance that protects the lender in case of default.

You should also look into special financing programs available through the government, such as FHA loans or VA loans, which can help lower your down payment costs. Or, if you have family members willing to help, they may be able to provide a gift of equity or a loan guarantee so you can purchase a home with a minimal down payment.

No matter how you decide to finance your home purchase, it’s important to create a budget and make sure it fits your long-term financial goals. With some careful planning and savvy research, you can find an affordable way to purchase your dream home in 2023.


All real estate is local. In order to make confident real estate decisions, we believe it is important for you to have timely and neighborhood-specific information. If you would like more information about buying a home in NC, our experts at EXP Realty are here to help. Contact us today to speak with a EXP agent about buying homes or land in North Carolina.

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