How Much to Put Down on a 1 Million Dollar House?

Purchasing a home involves extensive financial preparation, especially for high-value properties. The down payment is the initial upfront cash contribution towards the purchase price. For a $1 million home, this amount can be substantial, requiring careful consideration of financial strategies. Understanding the implications of different down payment amounts is important for navigating high-value home acquisition. It influences both the initial outlay and long-term financial commitments.

Common Down Payment Expectations for a Million-Dollar Home

Traditionally, a 20% down payment has been the benchmark for home purchases, and for a $1 million home, this would equate to $200,000. This percentage is often recommended because it can help borrowers avoid Private Mortgage Insurance (PMI) and potentially secure more favorable interest rates. Putting down 20% also establishes immediate equity in the property, which can provide a stronger financial position from the start.

However, options exist for lower down payments, though they often come with different considerations, particularly for properties of this value. For instance, conventional loans typically have conforming loan limits, which are set annually and for 2025 generally stand at $806,500 in most areas for a single-unit property. A $1 million home would exceed this limit, requiring a jumbo loan. Jumbo loans are designed for mortgage amounts that surpass conventional conforming limits and usually require a minimum down payment of at least 10%, with some lenders requiring 20% to 30%.

For eligible veterans, VA loans offer the benefit of potentially requiring no down payment, even for high-value properties, provided the veteran has full entitlement. If a veteran does not have full entitlement, loan limits may apply, which for 2025 range from $806,500 in standard counties to $1,209,750 in high-cost areas. FHA loans allow down payments as low as 3.5%, but their loan limits for 2025 typically range from $524,225 to $1,209,750 for single-family homes, depending on the specific county. While a $1 million home might fall within FHA limits in a very high-cost area, it would be at the upper end of their program.

Key Factors Determining Your Down Payment

The specific amount you ultimately put down on a $1 million home is influenced by individual financial factors and lender requirements. The type of mortgage loan chosen plays a significant role in determining the minimum down payment. Jumbo loans, necessary for homes exceeding conforming loan limits, often carry stricter requirements due to the increased risk they pose to lenders.

A borrower’s financial profile is also a major determinant. Lenders assess credit scores, debt-to-income (DTI) ratios, and overall financial stability when underwriting a loan. For jumbo mortgages, lenders often require higher credit scores, frequently 700 or above, and a lower DTI ratio, commonly 43% or less, to ensure the borrower can comfortably manage the larger payments. Some lenders may also require borrowers to hold substantial cash reserves, such as enough to cover 12 months of mortgage payments, in addition to the down payment and closing costs.

Lender-specific requirements, sometimes referred to as “overlays,” can also influence the down payment amount. These are additional criteria a lender may impose beyond standard loan program guidelines. For high-value mortgages, these overlays can mandate a higher down payment than general minimums, reflecting the lender’s risk assessment. Property type can also impact overall lending terms and requirements for high-value properties.

How Your Down Payment Affects Your Mortgage

The size of your down payment directly impacts the structure and cost of your mortgage over its lifetime. A larger down payment reduces the principal loan amount, which subsequently leads to lower monthly mortgage payments. For example, on a $1 million home, a 20% down payment results in an $800,000 loan, while a 10% down payment means a $900,000 loan. Assuming a 30-year fixed rate at 7%, the monthly principal and interest payment for an $800,000 loan would be approximately $5,322.44, compared to about $5,987.75 for a $900,000 loan.

A larger down payment also significantly reduces the total interest paid over the loan’s term. Using the same example, the total interest paid on the $800,000 loan would be approximately $1,116,078.40, whereas on the $900,000 loan, it would be around $1,255,590. This difference of over $139,000 highlights the long-term savings associated with a higher upfront investment.

For conventional loans where less than 20% is put down, Private Mortgage Insurance (PMI) is required. PMI protects the lender in case the borrower defaults and is an additional monthly cost, usually ranging from 0.46% to 1.5% of the original loan amount annually. For a $900,000 loan at 0.75% PMI, this would add approximately $562.50 to the monthly payment. PMI can be canceled once the loan-to-value (LTV) ratio reaches 80% or 78% of the home’s original value. Jumbo loans often do not require PMI if the down payment meets the lender’s specific requirements.

Beyond the Down Payment: Other Homebuying Costs

Beyond the down payment, prospective homeowners must budget for several other significant expenses when purchasing a $1 million home. Closing costs are a collection of fees paid at the close of the real estate transaction, typically ranging from 2% to 5% of the home’s purchase price. For a $1 million home, this could amount to $20,000 to $50,000 in additional funds needed at closing.

These costs encompass various charges, including:

• Loan origination fees
• Appraisal fees
• Title insurance
• Escrow fees
• Recording fees

Buyers also often pre-pay certain expenses, such as a portion of the annual property taxes and homeowner’s insurance premiums, which are typically held in an escrow account by the lender.

Once the home purchase is complete, ongoing costs become a regular part of homeownership. Property taxes are assessed annually by local authorities and are usually paid monthly as part of the mortgage payment. Homeowner’s insurance, protecting against damage and liability, is another recurring expense. If the property is part of a planned community, Homeowners Association (HOA) fees may also be required, covering the maintenance of common areas and amenities. Other costs include moving expenses, potential initial repairs or renovations to customize the home, and the cost of furnishing a new, larger living space.