How Much Is a Down Payment on a $1 Million Home?

A down payment is the initial cash contribution a buyer makes towards a home’s purchase price. This amount reduces the mortgage loan’s principal balance, decreasing the total borrowed from a lender. It demonstrates a buyer’s financial commitment and mitigates lender risk by establishing immediate equity. For a $1 million home, the down payment is a substantial financial outlay.

Calculating the Down Payment for a $1 Million Home

The down payment for a $1 million home varies based on the percentage a buyer puts down. For example, a 5% down payment is $50,000, leaving a $950,000 mortgage. A 10% down payment is $100,000, reducing the loan to $900,000.

A 20% down payment on a $1 million home requires $200,000, resulting in an $800,000 mortgage. This 20% threshold is a benchmark in conventional lending because it allows borrowers to avoid Private Mortgage Insurance (PMI). PMI is an additional monthly cost that protects the lender if a borrower defaults, and it is required for conventional loans when the down payment is less than 20%.

Opting for a 25% down payment means $250,000 upfront, leading to a $750,000 loan. A 30% down payment translates to $300,000, bringing the mortgage to $700,000. Larger down payments reduce the monthly mortgage payment and total interest paid, but require a greater immediate cash outlay.

Factors Influencing Your Down Payment

The down payment for a $1 million home is influenced by the loan type and borrower’s financial profile. Conventional loans require a minimum down payment from 3% to 5% for eligible borrowers. However, a $1 million home often falls into the jumbo loan category, where lenders may impose higher down payment requirements.

Jumbo loans, used for amounts exceeding conforming loan limits set by the Federal Housing Finance Agency (FHFA), generally demand larger down payments, often starting at 10% to 20%. Some lenders might offer jumbo loans with a 10% down payment, but they may require excellent credit scores and substantial financial reserves. The conforming loan limit for a single-family home in most of the United States in 2025 is $766,550, meaning a $1 million home purchase would require a jumbo loan.

Government-backed loans also have unique down payment rules. VA loans, available to eligible service members, veterans, and surviving spouses, often allow for 0% down payment. FHA loans, insured by the Federal Housing Administration, permit down payments as low as 3.5%, but their loan limits are lower than conventional or jumbo loans, making them less common for $1 million properties. A borrower’s credit score, debt-to-income (DTI) ratio, and lender’s underwriting criteria also play a role, as a stronger financial profile can qualify a borrower for a lower down payment or more favorable loan terms.

Beyond the Down Payment: Additional Upfront Costs

Beyond the down payment, prospective homeowners must prepare for additional upfront costs due at closing when purchasing a $1 million home. These expenses, known as closing costs, are separate from the down payment but paid concurrently. Closing costs typically amount to 2% to 5% of the loan amount.

Common closing costs include loan origination fees, appraisal fees, and title insurance premiums. Attorney fees may also be incurred for legal representation during closing, depending on state requirements.

Additional fees include recording fees and escrow fees. Buyers are also required to prepay certain expenses. This includes property taxes, homeowner’s insurance premiums for the first year, and potentially homeowner’s association (HOA) fees.

These prepaid items ensure the property is insured and taxes are current from closing. Factoring in these costs is important, as they can add tens of thousands of dollars to the total cash needed to close on a $1 million home, often ranging from $20,000 to $50,000 or more. Budgeting for both the down payment and these additional costs provides a comprehensive financial picture.

Strategies for Funding Your Down Payment

Funding a substantial down payment for a $1 million home often involves leveraging various financial resources. Many buyers rely on personal savings, accumulated through disciplined budgeting and investment. Proceeds from the sale of a previous home also represent a common source of down payment funds.

Family members can provide financial assistance through gifts. When receiving gift funds, lenders require a gift letter, specifying the money is a true gift with no expectation of repayment. The Internal Revenue Service (IRS) annual gift tax exclusion limit in 2025 allows an individual to gift up to $19,000 without tax implications for the donor or requiring a gift tax return.

Borrowers may also consider accessing funds from their 401(k) retirement accounts, either through a loan or a hardship withdrawal. A 401(k) loan allows individuals to borrow from their vested balance, typically up to 50% or $50,000, whichever is less, and repay themselves with interest. Hardship withdrawals are subject to income tax and may incur a 10% early withdrawal penalty if the borrower is under 59½ years old. Down payment assistance programs are generally designed for lower-value homes or specific borrower populations, making them less applicable for a $1 million property.