A buyer's guide to choosing a down payment on a house

A major step in the homebuying process is paying the down payment on a house. Deciding how much to put down can be tricky, however, and affects both your mortgage terms and buying experience in a number of ways.

To help you make the best decision, here are some key facts about down payments buyers should know:

Minimum down payment on a house

The required minimum down payment to buy a house depends upon the type of loan you apply for. Conventional loans, while not backed by the government, follow the same regulations as government loans and typically require a minimum of 3% down payment.

FHA loans offered by the Federal housing administration require as little as 3.5% with a solid credit score.

Loans guaranteed by the U.S. Department of Veterans Affairs generally don't require a down payment at all. However, these loans have specific eligibility requirements and can have higher interest rates.

How your down payment affects your offers

When market conditions are competitive, sellers will receive multiple offers for the same property. A larger down payment can give you a competitive edge.

However, it's important to remember closing costs when budgeting for your home purchase. Be careful of opting for a down payment that will leave you unable to afford the other expenses associated with homebuying.

The ‘right' down payment amount is different for everyone

The amount of down payment to offer is different for every situation. With a lower down payment, you may be required to pay private mortgage insurance, increasing your long-term costs. Lower down payments can also mean larger interest rates, which can add up considerably down the road.

Down payment assistance programs are available for first time buyers who need extra help to afford cash up front. Keep this and other options in mind when planning for your home purchase to ensure the best possible financial outcome.