How Much Do I Need for a Down Payment? Advice from Tim Scheib, Des Moines Real Estate Professional with Real Broker
One of the most common concerns for homebuyers in Central Iowa is the down payment. If you’re planning to purchase a home in Des Moines, understanding just how much you’ll need upfront—and what options exist—is critical to a successful buying experience.
The Myth of the 20% Down Payment
For decades, many buyers believed a 20% down payment was mandatory for securing a home. While putting down 20% can be beneficial (lower monthly payments, no private mortgage insurance, and better loan terms), the truth is you don’t necessarily need that amount to get started. In fact, today’s real estate market offers a range of flexible solutions.
Typical Minimums in Des Moines
For most buyers, the minimum down payment is determined by your loan program:
Conventional Loans: Many lenders allow down payments as low as 3–5%. If you qualify as a first-time buyer, some programs may require even less.
FHA Loans: Backed by the Federal Housing Administration and popular among first-time buyers, these loans only require 3.5% down. Credit score requirements are more flexible.
VA and USDA Loans: If you’re a veteran or purchase in designated rural areas (yes, parts of Iowa qualify!), you may be able to buy with zero money down.
WE STILL HAVE NO DOWN PAYMENT OPTIONS FOR ALL!!!
Let’s put this in context. For a $275,000 home in Des Moines:
5% down = $13,750
3.5% down = $9,625
These numbers are much more accessible than the old 20% standard, which would be $55,000.
Don’t Forget Closing Costs
In addition to your down payment, prepare for closing costs—typically 2–4% of the home price. These cover items like title fees, lender charges, home inspections, and escrow accounts. Sometimes, sellers may agree to help pay a portion. Factor this into your savings plan and ask me for strategic negotiation tips.
Private Mortgage Insurance (PMI) We may have NO PMI options!
If your down payment is less than 20%, your lender will almost always require PMI. This protects them if you default, and typically costs 0.3–1.5% of the loan amount annually. Good news: once you reach 20% equity, you can usually remove PMI from your monthly payment.
Down Payment Assistance Programs
Iowa and national sources offer assistance programs designed to help first-time buyers or those with modest household incomes. The Iowa Finance Authority and local banks offer grants, forgivable loans, and low-interest options. I help clients navigate these opportunities and determine eligibility.
Gifted Funds
Did you know you can use gift money for your down payment? Many buyers receive help from relatives, and most loan programs allow it. You’ll just need a gift letter that verifies the funds are a gift, not a loan.
Planning Your Homeownership Path
Before you start home shopping, sit down with a trusted lender—preferably one local to Des Moines who understands area nuances and programs. Together, we’ll analyze your financials, discuss loan choices, and design a strategy tailored to your situation. There’s no one-size-fits-all answer, and my role is to help make sure your cash is set for both the down payment and closing costs.
Building Up Your Savings
If you’re still in saving mode, stay encouraged! Every dollar puts you closer. Consider automated transfers, cutting discretionary expenses, or side hustles for extra cash. Remember, market conditions change and new programs emerge; regular check-ins with me allow you to adjust your roadmap and seize new opportunities.
Empowering Your Next Step
Homeownership is achievable! Whether you have 3% or 20% saved, there’s a path in Des Moines. Let’s talk about your goals, review options, and find the program that’s your best fit. I’ll advocate for your financial interests at every step.
Reach out today, and let’s get started on building your future!