How much is 5 down payment on a house

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Despite signs of a cooling housing market, home prices are still relatively high, resulting in bigger down payments. 

Over the past year, average down payments in the country's 50 biggest metros have grown by more than 35%, according to a LendingTree report, based on 30-year fixed-rate mortgage data from Jan. 1 through Oct. 10, 2022.

While high home prices and interest rates may push some buyers to the sidelines, those still in the market may have "deeper resources," particularly if they're downsizing, explained Keith Gumbinger, vice president of mortgage website HSH.

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Here are the top five metros with the largest down payments.

5 metros with the biggest down payments

In 2022, these five metros have had the highest down payments based on LendingTree mortgage data from from Jan. 1 through Oct. 10, 2022.

1. San Jose, California: $142,006
2. San Francisco, California: $131,631
3. Los Angeles, California: $104,749
4. San Diego, California: $98,593
5. Seattle, Washington: $96,056

With higher average mortgages and annual household incomes, it's not surprising these metros topped the list. And these down payments represent a large share of yearly earnings.

How a bigger down payment lowers mortgage costs

"In general, the more you can afford to put down, the lower your ultimate costs are going to be," said Gumbinger.

A larger down payment means a smaller mortgage, which can "certainly help offset the cost of rising interest rates to a degree," he said.

While certain kinds of mortgages allow down payments as low as 3%, you'll have to pay mortgage insurance on loans with less than 20% down, and you may see higher interest rates, Gumbinger said.

The average interest rate for 30-year fixed-rate mortgages of $647,200 or less is still above 7% for loans with a 20% down payment.

"More is generally better because that helps to lower your costs overall," he added.

In 2021, the median down payment was 13%, with nearly 4 in 10 using proceeds from a previous home sale, according to a 2022 report from the National Association of Realtors.

With high prices, many buyers struggle to put down 20%

Despite softening demand, home prices are still "significantly higher than two years ago," with many buyers struggling to put 10% or 20% down, said Melissa Cohn, regional vice president at William Raveis Mortgage.

The median home sales price was $454,900 during the third quarter of 2022, compared to $337,500 during the third quarter of 2020, according to Federal Reserve data.

Many buyers take advantage of lower down payment options, she said, such as 3% or 5% for conventional mortgages or 3.5% for Federal Housing Administration loans.

"With a smaller down payment, it's more expensive every which way," Cohn said. "But for many people, it's the only way they can afford to get into their home." 

While smaller down payments mean higher interest rates and mortgage insurance, home buyers may reduce these expenses in the future, she said. When interest rates drop, there may be a chance to refinance, and buyers may remove mortgage insurance once they reach 20% equity in the home, Cohn said.

The three calculations below offer different ways to help calculate an estimated down payment.

Use the Upfront Cash Available

If the amount of upfront cash available and down payment percentages are known, use the calculator below to calculate an estimate for an affordable home price.

Use the Home Price

If the home price and down payment percentages are known, use the calculator below to calculate an estimate for an amount needed in cash available for upfront costs.

Use the Home Price and Upfront Cash Available

If the home price and amount of upfront cash available are known, use the calculator below to calculate an estimate for a down payment percentage.

What is a Down Payment?

A down payment is the upfront portion of a payment that is often required to finalize the purchase of items that are typically more expensive, such as a home or a car. When purchasing a home, after a down payment is paid by a home-buyer, any remaining balance will be amortized as a mortgage loan that must be fulfilled by the buyer. In other words, the purchase price of a house should equal the total amount of the mortgage loan and the down payment. Often, a down payment for a home is expressed as a percentage of the purchase price. As an example, for a $250,000 home, a down payment of 3.5% is $8,750, while 20% is $50,000.

Closing Costs

It is important to remember that a down payment only makes up one upfront payment during a home purchase, even though it is often the most substantial. There are also many other costs that may be involved, such as upfront points of the loan, insurance, lender's title insurance, inspection fee, appraisal fee, and a survey fee. A very rough estimate for the amount needed to cover closing costs is 3% of the purchase price, which is set as the default for the calculator.

Different Loans, Different Down Payment Requirements

In the U.S., most conventional loans adhere to guidelines and requirements set by Freddie Mac and Fannie Mae, which are two government-sponsored corporations that purchase loans from lenders. Conventional loans normally require a down payment of 20%, but some lenders may go lower, such as 10%, 5%, or 3% at the very least. If the down payment is lower than 20%, borrowers will be asked to purchase Private Mortgage Insurance (PMI) to protect the mortgage lenders. The PMI is normally paid as a monthly fee added to the mortgage until the balance of the loan falls below 80 or 78% of the home purchase price.

To help low-income buyers in the U.S., the Department of Housing and Urban Development (HUD) requires all Federal Housing Administration (FHA) loans to provide insurance to primary residence home-buyers so that they can purchase a home with a down payment as low as 3.5% and for terms as long as 30 years. However, home-buyers must pay an upfront mortgage insurance premium at closing that is worth 1.75% of the loan amount, on top of the down payment. In addition, monthly mortgage insurance payments last for the life of the loan unless refinanced to a conventional loan. For more information about or to do calculations involving FHA loans, please visit the FHA Loan Calculator.

Also, in the U.S., the Department of Veterans Affairs (VA) has the ability to subsidize VA loans, which do not require a down payment. Only two other entities, the USDA and Navy Federal, allow the purchase of a home without a down payment. For more information about or to do calculations involving VA mortgages, please visit the VA Mortgage Calculator.

Large vs. Small Down Payment

Paying a larger down payment of 20% or more, if possible, usually lead to qualification for lower rates. Therefore a larger down payment will generally result in the lower amount paid on interest for borrowed money. For conventional loans, paying at least a 20% down payment when purchasing a home removes the need for Private Mortgage Insurance (PMI) payments, which are sizable monthly fees that add up over time.

One of the risks associated with making a larger down payment is the possibility of a recession. In the case of a recession, the home value will likely drop, and with it, the relative return on investment of the larger down payment.

Making a smaller down payment also has its benefits, the most obvious being a smaller amount due at closing. Generally, there are a lot of different opportunity costs involved with the funds being used for a down payment; the funds used to make a down payment can't be used to make home improvements to raise the value of the home, pay off high-interest debt, save for retirement, save for an emergency fund, or invest for a chance at a higher return.

Down payment size is also important to lenders; generally, lenders prefer larger down payments. This is because big down payments lower risk by protecting them against the various factors that might reduce the value of the purchased home. In addition, borrowers risk losing their down payment if they can't make payments on a home and end up in foreclosure. As a result, down payments act as an incentive for borrowers to make their mortgage payments, which reduces the risk of default.

Where to Get Down Payment Funds

Savings—Most home-buyers save up for their down payments by setting aside savings until they reach their desired target, whether it's 20% or 3.5%. Having the savings in an interest-bearing account such as a savings account or in Certificates of Deposit (CDs) can provide the opportunity to earn some interest. Although placing down payment savings in higher risk investments such as stocks or bonds can be more profitable, it is also riskier. For more information about or to do calculations involving savings, please visit the Savings Calculator. For more information about or to do calculations involving CDs, please visit the CD Calculator.

Piggyback Loan—In situations where the home-buyer doesn't have sufficient funds to make the required down payment for a home purchase, they can try to split their mortgage into two loans. A piggyback mortgage is when two separate loans are taken out for the same home. Generally, the first mortgage is set at 80% of the home's value and the second loan is for 10%. The remaining 10% comes from the home-buyer's savings as a down payment. This is also called an 80-10-10 loan. Home-buyers may use piggyback mortgages to avoid PMI or jumbo financing.

Down Payment Assistance Programs—Local county or city governments, local housing authorities, and charitable foundations sometimes provide grants to first-time home-buyers. State-wide programs can be found on the HUD website. Down payment assistance is usually only reserved for need-based applicants purchasing a primary residence. Grants can come in the form of money applied to a down payment or an interest-free loan meant to supplement a main mortgage. Applicants usually still need to have decent credit and documented income. Grants may need to be repaid if the home is sold.

Gift Funds—FHA loans allow for the down payment to be a gift from a friend or family member, and the entire down payment can be considered a gift as long as there is a gift letter stating that it is a gift that does not require repayment.

IRA—The principal contributed to a Roth IRA (individual retirement account) can be withdrawn without penalty or tax. In contrast, contributions from a traditional IRA will be subject to regular income tax as well as a 10% penalty if the contributions are withdrawn prior to the age of 59 ½. However, there is an exclusion that allows a person to withdraw $10,000 from both types of IRAs (including earnings for a Roth IRA) without penalty or tax for the purchase, repair, or remodeling of a first home. The funds can also legally be used to purchase a home for a spouse, parents, children, or grandchildren. The only caveat is that the home-buyer is only given 120 days to spend the withdrawn funds, or else they are liable for paying the penalty. Spouses can each individually withdraw $10,000 from their respective IRAs in order to pay $20,000 towards their down payment. The $10,000 limit is a lifetime limit.

401(k)—It is possible to take out a loan for either up to $50,000, or half the value of the 401(k) account, whichever is less. This loan will require repayment with interest, but there will be no tax or penalties on the loan amount. Interest and principal will be paid back to the 401(k) owner. However, taking out a loan, especially a large one, can affect qualification for or ability to repay a mortgage. Most plans only give five years to repay the loan, and borrowing a large amount can result in substantial payback pressure.