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Is 5% enough to put down on a home?

Making a 5% down payment can be possible, and it could get you into a home sooner than if you saved for 20% down. However, with a lower down payment, you may face a higher rate, larger monthly mortgage payments, and the added expense of mortgage insurance.

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Chelsea Levinson, JD

9/20/2022 · 3 min read

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Key takeaways

  • Many homebuyers believe they need to put down 20%, though the average first-time buyer typically puts down 6–7%. 

  • Making a lower down payment like 5% may allow you to buy a house quicker and free up money for other homebuying expenses like moving and closing costs. 

  • A lower down payment may come with higher mortgage rates, larger monthly payments, and the additional cost of mortgage insurance.  

After years of planning and saving, you’re finally ready to start shopping for your dream home. Yet you find yourself wondering: do I have a large enough down payment? Is 5% down enough? The truth is, there isn’t one down payment that’s right for every homebuyer. But if you’re considering a 5% down payment, there are a few pros and cons to keep in mind. 

Is it possible to make a 5% down payment?

Some buyers think they need to put at least 20% down on a home, but this isn’t always the case. Many buyers put down less. In fact, first-time buyers typically put down an average of 6–7%

For conventional loans, the minimum down payment amount could be 3–5%, depending on factors such as credit score and financials. With FHA loans, qualified buyers can often put down as little as 3.5%. So yes, a 5% down payment may be possible —  if you qualify. 

Pros of a 5% down payment

  • Buy a home quicker: with a 5% down payment, you may be able to buy a home quicker than if you’d tried to save 20%. 

  • Get ahead of appreciation: home prices tend (but are not guaranteed) to appreciate over time, which means the same house could cost you more next year than it costs you today. In some cases, appreciation may outpace what you’re able to save. In 2021, for example, home prices rose by 18.87%, pushing many buyers out of the market. So a 5% down payment today could prevent you from being priced out of the market tomorrow.  

  • Free up money for other costs: putting down 5% rather than 20% could mean having more money on hand for closing costs, home improvements, new furniture, and moving expenses. 

Cons of a 5% down payment   

  • Higher rates: A lower down payment usually comes with a higher mortgage rate to cover the lender’s added risk. This means if you put down 5%, you may pay more for your mortgage over time than if you’d put down 20%.

  • Larger mortgage payments: putting less down will also typically result in a larger monthly mortgage payment. That’s because you’ll borrow a larger amount of money upfront to cover the cost of the home purchase, and you’ll likely pay a higher mortgage rate while you’re at it. 

  • Mortgage insurance: with a 5% down payment, you’ll usually be required to pay for mortgage insurance, which typically costs between 0.5% and 2% of the loan amount annually. 

This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.

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Chelsea Levinson, JDAuthor

Chelsea Levinson, JD, is an award-winning content creator with expertise in real estate, mortgage, and personal finance. She has written for top real estate publications like HomeLight and Bigger Pockets, and has created content for some of the world’s most recognizable brands, including Bank of America, Vox, Comcast, AOL, State Farm Insurance, PBS, Delta Air Lines, Huffington Post, H&R Block and more. When she's not writing, you can find her fixing up her cabin in the Catskills.

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Jena GreeneEditor

Jena Greene is the Managing Editor at Opendoor. She covers real estate, personal finance, money management, and market best practices. Jena is passionate about empowering people to find their dream homes and making the home-buying process a delightful one.