How Much Do You Need to Put Down on a Million Dollar Home?

Purchasing a high-value home, such as a million-dollar property, represents a significant financial commitment. A substantial down payment is a fundamental component of this transaction, influencing both the mortgage terms and the overall affordability of the home. Understanding this investment is important for anyone considering a high-value real estate acquisition. The amount required upfront can vary based on several factors.

Determining Your Down Payment Amount

A down payment is the initial sum a homebuyer pays toward the purchase price, directly reducing the amount borrowed through a mortgage. For a million-dollar home, common down payment percentages range from 10% to 30% or more, depending on the lender and loan type. For example, a 10% down payment on a $1,000,000 home is $100,000, while 20% is $200,000.

While a 20% down payment is often considered a standard for conventional loans, it is not always a strict requirement. Putting down 20% or more typically allows borrowers to avoid Private Mortgage Insurance (PMI), an additional monthly cost that protects the lender in case of default. For higher-value properties, lenders may prefer or mandate larger down payments to mitigate increased risk. The specific dollar amount of your down payment directly impacts your loan principal and monthly mortgage payments.

Factors Influencing Your Down Payment

The minimum down payment a lender requires for a high-value home is influenced by a borrower’s financial profile. A strong credit score often positions a borrower more favorably, potentially allowing for more flexible down payment options or better loan terms. Conversely, a lower credit score might necessitate a larger down payment to offset increased risk for the lender. Lenders also evaluate a borrower’s debt-to-income (DTI) ratio, which compares monthly debt obligations to gross monthly income; a lower DTI ratio indicates a greater capacity to manage additional debt.

Employment stability and financial reserves also play a role, as lenders seek assurance of a borrower’s long-term ability to repay a significant mortgage. Some lenders implement “overlays,” which are additional, stricter requirements beyond standard guidelines, especially for high-value loans. These overlays can translate into a need for a larger down payment, even if a borrower qualifies for less under broader industry standards.

Understanding Jumbo Loans

A million-dollar home often falls into the category of a jumbo loan, which is a mortgage that exceeds the conforming loan limits set by government-sponsored enterprises like Fannie Mae and Freddie Mac. For 2025, the baseline conforming loan limit for a single-unit property in most areas of the United States is $806,500. In designated high-cost areas, this limit can extend up to $1,209,750. Any loan amount surpassing these thresholds is considered a jumbo loan, as it cannot be purchased or guaranteed by these government-backed entities.

Jumbo loans are considered to carry a higher risk for lenders due to their larger amounts and absence of government backing. This increased risk often leads to more stringent underwriting criteria and higher minimum down payment requirements compared to conforming loans. While some lenders may offer jumbo loans with a 10% down payment, requirements commonly range from 15% to 40% of the purchase price. Borrowers often need higher credit scores, generally above 700, and substantial cash reserves, sometimes equivalent to six to twelve months of mortgage payments, to qualify.

Beyond the Down Payment: Other Upfront Costs

In addition to the down payment, homebuyers must account for various other upfront costs incurred at closing, which can significantly add to the total cash outlay. These closing costs typically range from 2% to 5% of the loan amount or purchase price, varying based on location, lender, and specific services. For a million-dollar home, if the loan amount is $800,000 (after a 20% down payment), these costs could range from $16,000 to $40,000.

Common closing costs include loan origination fees, typically 0.5% to 1% of the loan amount, which compensate the lender for processing the mortgage application. Appraisal fees, generally $350 to $550, are paid to an independent appraiser to determine the home’s market value; for high-value properties, these fees can be higher, potentially reaching $1,000 or more. Title insurance, protecting both the lender and buyer against defects in the property’s title, usually costs between 0.5% and 1% of the purchase price for combined policies. Other fees may include attorney fees, recording fees, and discount points, which are optional upfront payments to reduce the interest rate.

Beyond these closing costs, buyers also pay prepaid expenses at closing. These are payments for future housing-related costs, often collected to establish an escrow account. Such prepaid items include property taxes and homeowner’s insurance premiums, often covering several months to a year in advance. For instance, a lender might require three months of homeowner’s insurance and property taxes to be paid at closing. These additional upfront costs must be budgeted for, as they represent a notable sum beyond the down payment.