To purchase a resale home in the United States, the buyer must follow these steps: secure pre-approval for a mortgage, identify a property through a licensed real estate agent, negotiate an offer with the seller, complete a home inspection, and close the transaction with a title company. The required down payment typically ranges from 3% to 20% of the home’s purchase price, depending on the loan type and lender. Conventional loans often require 20% down to avoid private mortgage insurance (PMI), while government-backed loans like FHA or VA loans may require as little as 3.5% or 0% down for qualified buyers.

The down payment percentage is determined by the loan-to-value (LTV) ratio, which compares the loan amount to the home’s appraised value. A 20% down payment reduces the LTV to 80%, minimizing the risk of default and enabling access to lower interest rates. According to the Federal Housing Finance Agency (FHFA), homes with 20% down payments have a default rate 50% lower than those with less than 10% down. For example, a 2022 FHFA report found that 20% down payments correlated with a 1.2% average annual default rate, compared to 2.8% for 5-10% down payments. Similarly, FHA loans (3.5% down) require PMI for LTVs above 80%, costing the borrower approximately 0.5-1.5% of the loan amount annually. Data from the U.S. Department of Housing and Urban Development (HUD) shows that 68% of first-time buyers in 2023 used FHA loans, reflecting the lower down payment barrier. Lenders also consider credit scores and income stability, with FICO scores above 720 typically qualifying for the best rates with minimal down payment flexibility. Ultimately, the down payment amount balances affordability, risk mitigation, and long-term financial stability.