This Is the Bare Minimum Down Payment You Should Make, According to Dave Ramsey

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  • When buying a house, you'll typically need to put some money down.
  • A 20% down payment is the ideal choice when possible.
  • Finance expert Dave Ramsey says 10% is the minimum you should put down.

It may be lower than you think.

If you are getting a mortgage to buy a home, you are almost assuredly going to need to make a down payment. This is a percentage of the home's purchase price that you will need to pay for in cash, and almost all mortgage lenders require you to put at least some money down so you aren't borrowing 100% of the home's price. 

But how much, exactly, should you be putting down? While it's possible to get a loan with as little as 3%, doing so usually isn't a good idea. In fact, finance guru Dave Ramsey -- and many financial experts -- suggest that a much higher down payment is required in order to be ready for homeownership.

A 20% down payment is ideal

When feasible, you should put down 20% of your home's cost if you are buying a house. As Ramsey explains on his blog, a 20% down payment allows you to avoid the added unnecessary expense of private mortgage insurance.

Private mortgage insurance is required in most circumstances when you put down less than 20%. The purpose of this insurance is to protect lenders. See, if you put down a small down payment, there's a chance that the home wouldn't sell for enough after foreclosure to allow a lender to recoup all of its costs. Lenders want to be protected against loss, so they will make you buy PMI and pay for it as part of your monthly mortgage payment -- even though you aren't given any protection by this coverage. 

Although Ramsey's blog urges home buyers to put 20% down when possible to avoid PMI, the finance expert also recognizes that you can't always make such a large down payment. And he doesn't necessarily believe having less money to put down means you should put off your homeownership plans.

In fact, Ramsey says that, "We recommend putting down at least 10-20%." So, he has made it clear that he's OK with a smaller down payment than 20% -- but doesn't think it's a good idea to go below 10%.

Ramsey urges you to put down no less than 10% because doing so will save you money in the long run. "Lenders often push home buyers (especially first-time buyers) toward mortgages that require little to nothing down. The problem is, you’ll pay thousands of dollars in extra interest and fees," his blog explains. 

He also indicated that you should only opt for a 10% down payment "if you haven’t saved 20% after two years of intense saving."  

Following Ramsey's advice on this is likely a good move as there are plenty of reasons that a minimum 10% down payment is a good idea. Sticking with this as the minimum threshold means you can reduce the chances of ending up owing more than your home is worth, and you'll also have a wider choice of loans than if you opted for an even smaller down payment. 

So, if you're thinking about buying, start working on saving up your minimum 10% down payment ASAP. You'll be glad you have the money when you have a broader choice of lenders and can get a loan at a more competitive rate than might otherwise be possible.

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