Can I Afford The Down Payment For A House?

About 70% renters cite the down payment as the #1 obstacle to home ownership! Often, home buyers do not buy because they “can’t afford the down payment.”

One reason for this is a lack of information. There is a persistent myth that the “normal down payment” to buy a home is 20%. That is incorrect. The average down payment in 2019 was 11%. For first-time buyers, the average was 6%.

The myth of the 20% down payment is one of the most damaging. People continue to rent as they try—often in vain—to save up a large sum of money. Meanwhile, they struggle with student loan payments and housing prices that continue to rise.

One-third of the respondents to this CNBC survey (conducted by the Urban Institute) said, “I can’t qualify for a mortgage.”

Here are some facts for your consideration:

The minimum down payment for a conventional loan is 3%. There are down payment assistance programs available in many communities. Some loan programs, such as VA loans for veterans of the U.S. military and USDA loans for rural properties, require no down payment at all.

Many would-be homeowners think they won’t qualify for a mortgage, so they don’t try. Their reluctance comes from a lack of knowledge and a fear of rejection.

The minimum credit score for a conventional loan is 620. A borrower can have significant negative entries on their credit report and still qualify for a mortgage.

Student loans are a burden and affect how much home a buyer can get, but few people understand how lenders decide how much loan a borrower can get.

Lenders evaluate loans based on a borrower’s debt to income ratio (DTI). They add up the total house payment and all monthly debt payments (including student loans in deferral) and divide the total by the borrower’s gross monthly income.

A borrower earning $6,000 will qualify for total debt service of $3,000. If their current monthly debt payments amount to $750, they will qualify for a total house payment of $2,250. At today’s low interest rates, they’d be able to buy a home for about $380,000 with 3% down.

Someone hoping to buy a home for $380,000 would have to find $11,400 for a down payment and a bit more for closing costs. Even those—title, escrow, underwriting, etc.—can be covered by a credit from the seller.

Need help understanding how much you can afford? Learn more and sign-up for the KTO app to find out how much you can afford and to learn about home programs in your area.


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Knowledge To Own (KTO) makes homeownership possible by educating homebuyers with a personalized match to home loan programs.