Dollars and cents falling on green background

Does a Down Payment Matter to the Seller?

The Short Version

  • How much your down payment matters to a seller can range from “not a bit” to “it’s why we took the offer.” Knowing the difference can give you an edge as a home buyer
  • Show a seller you're serious about buying their home by making a bigger earnest money deposit
  • The size of your down payment can signal the likelihood and timeliness of a home sale

Contents

See what mortgage you qualify for

NMLS #3030

*See what you qualify for

We teamed up with Rocket Mortgage to help you get house-hunting sooner! Answer a few questions to get your commitment-free, personalized rate 💸

Get Started by selecting an option below

What kind of loan are you interested in?

What to expect

Tell us what you need and a representative from Rocket Mortgage will give you a call. You’ll have support at every step.

What kind of property do you want to purchase? What kind of property do you own?

Why we’re asking

Rocket Mortgage® can provide a more accurate rate estimate if they know what kind of property you’re interested in.

NMLS #3030
How do you use your property? How would you use this property?

Why we’re asking

Having a little more information upfront helps Rocket Mortgage® provide a personalized rate faster.

NMLS #3030
When are you planning to buy?

Still House Hunting?

Hope you find your dream home soon! In the meantime, it’s never too early to know your rate.

NMLS #3030
Are you a first-time home buyer?

It’s all good:

Whether it’s your first – or second property – Rocket Mortgage® can provide you with a rate estimate.

NMLS #3030
Do you have a second mortgage?

It’s all good

If you have a second mortgage, it’s no problem. Letting us know helps to customize your rate.

NMLS #3030
What is your credit score?

Don’t know your score?

Don’t sweat it! Make your best guess. Credit scores range from 300 (low) to 850 (excellent).

NMLS #3030

Tell us a bit more about you

What happens next?

A representative from Rocket Mortgage® will be in touch to discuss your commitment-free, personalized rate. Then you can decide whether you’d like to lock it in!

NMLS #3030

Enter your contact info so we can get in touch

By submitting your contact information you agree to our Terms of Use and our Security and Privacy Policy. You also expressly consent to having Rocket Mortgage, our Family of Companies, and potentially our mortgage partners contact you about your inquiry by text message or phone (including automatic telephone dialing system or an artificial or prerecorded voice) to the residential or cellular telephone number you have provided, even if that telephone number is on a corporate, state, or national Do Not Call Registry. You do not have to agree to receive such calls or messages as a condition of getting any services from Rocket Mortgage or its affiliates. By communicating with us by phone, you consent to calls being recorded and monitored.

NMLS #3030
Your information has been sent!

A home loan expert from Rocket Mortgage® will reach out to you soon with your personalized rate.

Your information has been sent!

A refinance expert from Rocket Mortgage® will reach out to you soon with your personalized rate.

When it comes to down payments – size can matter. 

The size of your down payment can impact many aspects of your home buying journey: the loans you’re eligible for, your interest rate, your monthly mortgage payments, your closing costs and how much you’ll need to pay upfront at closing.

But does the size of your down payment matter to a seller?

How much your down payment matters to a seller can range from “not a bit” to “it’s why we took the offer.” Knowing the difference can give you an edge as a home buyer, helping you decide how much to put down on a home.

So when does the size of your down payment matter to the seller? Let’s take a closer look!

How Much Is a Typical Down Payment? 

You have likely heard that it’s typical and that you’re expected to make a 20% down payment for a conventional mortgage loan. If you put down anything less than 20%, you’ll need to pay private mortgage insurance (PMI). 

With government-backed loans, like Federal Housing Administration (FHA) loans, the minimum down payment can be as low as 3.5% for first-time home buyers. Department of Veterans Affairs (VA) loans (which are for eligible veterans, military and spouses) and U.S. Department of Agriculture (USDA) loans (which are for home purchases in rural areas) offer 0% down payments.

But the seller will probably be less interested in the minimum amount you can put down to qualify for a loan and more interested in the amount you are willing to put down to buy their home.

Based on data gathered by the National Association of REALTORS®,[1] let’s consider the average down payment buyers make regardless of loan type:

  • Since 2018, the average down payment for first-time home buyers has ranged between 6% and 7% of a home’s purchase price. 
  • For repeat home buyers, the average down payment has increased to 17% in recent years.

These are broad averages, but they should give you a general idea of the size of down payments other home buyers are making – and how your down payment might compare.

Now that we know some general trends regarding down payments, let’s figure out when the size of your down payment does – and doesn’t – matter to sellers.

Why Do Sellers Care About Your Down Payment?

The size of your down payment can signal the likelihood and timeliness of a home sale.

Assumptions and perception

For some sellers, especially those who aren’t schooled in all the new loan products that allow you to make low- or no-money-down payments, a smaller down payment might carry an unfair stigma. A seller might question your financial readiness to purchase their home and be approved for a loan if your offer includes a low down payment. 

A seller will likely gravitate toward the offer with a larger down payment because they believe there’s less chance a defect or repair will crop up during the appraisal or inspection that will wreck the deal. A seller might be under the mistaken impression that your smaller down payment is a sign that your cash reserves are thin, and you might ask them to shoulder repair costs at the first sign of damage.

A larger down payment can make a big difference if a seller is fielding several similar offers. They may be more inclined to choose the offer with the larger down payment because it seems like the safer bet.

How to Strengthen Your Offer Without Making a Larger Down Payment

Despite the hurdles, a smaller down payment isn’t a deal breaker. Here are a few ways to strengthen your offer without paying more out of pocket.

Get preapproved

Make your offer even more attractive by getting preapproved for a mortgage to show the seller your financing is in order. A preapproval letter is proof your credit history and finances have been reviewed by a lender, and they have agreed to lend you a certain amount of money if your loan is approved.

Increase your earnest money deposit

If you want to show a seller you’re serious about buying their home, make a bigger earnest money deposit. The heftier deposit should increase their confidence in your ability to close on the loan.

Strengthen your credit score

Sellers are big fans of strong credit scores. Strengthen your credit score to make your offer more attractive to a seller. Some sellers may take a higher credit score as a sign that your loan is more likely to close without any hitches.

When Money Down Matters 

The size of your down payment may be the key that unlocks the door to homeownership when a seller is juggling multiple offers or the housing market is competitive.

The seller will likely prioritize offer amounts, loan types and desired closing dates over down payment amounts, but in a strong seller’s market, a larger down payment might give you leverage over your competition. In a buyer’s market, the seller may not get many offers and might be motivated to accept what they can get.

Your real estate agent can help you find ways to make your offer more attractive. You can achieve home buying success with a small down payment.

Take the first step toward buying a home.

Get approved. See what you qualify for. Start house hunting.

  1. National Association of REALTORS®. “Tackling Home Financing and Down Payment Misconceptions.” Retrieved August 2022 from https://www.nar.realtor/blogs/economists-outlook/tackling-home-financing-and-down-payment-misconceptions

You Should Also Check Out…