The Pros and Cons of a Low Down Payment

May 11, 2018 | by Katie Claflin

Categories: First Time Buyer, Homeownership

In the past, a 20 percent down payment was considered the standard for households purchasing a home.  According to a September 2017 article on, the average down payment in 1989 was a staggering 23 percent.

But times are changing. Most lenders no longer require 20 percent down, and many lenders and loan products require down payments of only 3.5 to 5 percent.

Citing data collected by the National Association of REALTORS®, the article reports that the median down payment for first-time home buyers in 2017 was just 6 percent.  The median down payment for repeat home buyers was higher at 14 percent, but was still nowhere near the 23 percent average in 1989.

The Pros and Cons of a Low Down Payment

Earlier this year, Down Payment Resource conducted an analysis weighing the pros and cons of lower down payments. They found that a major benefit of a low down payment is that it can get potential home buyers off the sidelines and into homeownership faster.  It can take years for a household to save 20 percent for a down payment. Households that opt for a lower down payment can spend that time building equity in their new home. A lower down payment can also help ensure a home buyer still has money in the bank after closing on their loan.

But there are some cons as well. The lower the down payment, the higher the monthly principal and interest payments.  Home buyers that put down less than 20 percent are also required to pay mortgage insurance.  While mortgage insurance on conventional loans can be canceled when the homeowner’s equity reaches 20 percent, FHA loans require mortgage insurance for the full life of the loan.

The Verdict

While a low down payment isn’t the right choice for everyone, Down Payment Resource argues that home buyers shouldn’t aim for a 20 percent down payment at all costs.  Home prices and interest rates are rising, and the cost of waiting years to buy a home may outweigh the benefit of a larger down payment. Click here to see their full analysis.

How Down Payment Assistance Programs Help

TSAHC’s down payment assistance programs provide a fixed-rate mortgage loan that requires a down payment as low as 3 percent.  TSAHC also offers a grant of up to 5 percent of the loan amount to help with down payment and closing costs.  That means TSAHC’s assistance can cover 100% of the required down payment and then some. This is a significant benefit to households that don’t have much saved for a down payment, but are otherwise ready for the costs and responsibilities of homeownership.

Visit to learn more about TSAHC’s assistance options and take the Eligibility Quiz to see if you qualify.  We recommend contacting one of our participating lenders who can help you determine the best loan and down payment options for your specific financial situation.  Find a list of our participating lenders by clicking here.  

On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.



Nice post and thanks a lot for this content as it comes with a lot of useful details.

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Hi Al, we’d definitely agree that it’s worth exploring all the details of the programs you use to buy a home. This FAQ article might answer your question about refinancing with our down payment assistance programs:

Al Johnson


I am curious to know what the disadvantages might be to get this assistance. From what I heard you cant refinance your home for some many years? Is this true?




It has never been easy to get quick processing to the loan against assets before. There are no prepayment and foreclosure charges.

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