Model house with row of coins for financing.

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Skyrocketing home values may make it more difficult for buyers to put 20% down on a home, particularly for first-time home buyers and those finding themselves in intense bidding wars paying above asking price to get the home they want.

A 20% down payment on an entry-level single-family home in the Los Angeles area, for example, could reach levels of from $200,000 to $400,000. And bidding wars are pushing home prices even higher, requiring buyers to bring more funds to closing.

David Rae, a certified financial planner, wrote an article for about how first-time buyers who made a 5% down payment were able to keep bidding on the home, and paid about 33% above the asking price.

“Waiting for a larger down payment could mean missing out on their ideal home or what seems like an ever-increasing home price to base the 20% down payment against,” Rae notes.

But smaller down payments do mean larger mortgage payments, and they could lead to a higher interest rate. A 20% down payment can also help buyers avoid paying private mortgage insurance. But it’s not a requirement to get a mortgage—a myth the real estate market has long tried to dispute.

The average down payment among buyers is 12%, according to the “2021 National Association of REALTORS® Home Buyer and Seller Generational Trends” report. Younger buyer age groups tend to put down the least.

Median percent downpayment by age of buyers.

Mortgage rates are at historical low averages, helping to offset higher home prices and allow home buyers to save as they finance their home.

Lenders may have specific down payment requirements to get the best term mortgage interest rate given a buyer’s individual financial picture. But for conventional loans and the Federal Housing Administration, it is possible for a qualified buyer to snag a down payment as low as 3% or 3.5%.

“The reality is you can buy a home without a 20% down payment,” writes Rae for “If you are just rushing out to buy a house without the ability to save for a down payment, you are asking for trouble. … For those with strong financial habits, stable incomes, and adequate savings, choosing not to put down 20% (or more) may sometimes be a wise choice.”

Sources of downpayment by buyer age.