While it helps to have a larger down payment, the amount will depend on what you can afford. In order to qualify for certain home loans, you may need to meet minimum down payment requirements. Let's look at how to calculate your down payment and tips on how to save toward that amount.
Your down payment is the amount of the home's sale price you pay up front to the seller before you close on a loan. A mortgage is used to pay the rest.
Generally, buyers are encouraged to pay 20% of the property's price as down payment. If you're buying a house for $250,000, a 20% down payment would work out to $50,000 — meaning your mortgage would cover the remaining $200,000.
A 20% down payment has advantages:
You can still qualify for a conventional loan without a 20% down payment, but chances are you'll need to buy mortgage insurance. There are also other options worth exploring that require a smaller (or no) down payment, like 3.5% minimum for FHA loans, 0% for VA loans and 3% minimum for Citi's HomeRun mortgage.
Identify areas where you can spend less so that you can put more money into your savings. The best way to see where you can cut back is to create a budget. If you haven't already, this is the perfect time to start.