Introduction

Buying a $2 million house is a significant investment, and one of the most crucial decisions you must make is determining your down payment. A down payment can range widely, depending on the type of mortgage and your financial situation. In this article, we will explore the typical down payment amounts for a $2 million house and provide insights into the factors that influence this amount.

Typical Down Payments

Typically, a down payment on a house can range from 3% to 20% of the purchase price. For a $2 million house, this translates to:

Most buyers aim for at least a 20% down payment to avoid private mortgage insurance (PMI) and to secure better loan terms. However, some loan programs may allow for lower down payments, especially for first-time homebuyers.

Adjusting Down Payment Requirements

When considering a $2 million house, you will face an additional challenge with regards to down payment requirements. FHA loans, which are the most common and affordable, typically only go up to $1 million in certain more expensive states. Therefore, you might need to look for an independent mortgage lender who sets their own rules. I would guess they would require a 10% to 20% down payment, depending on your credit rating.

Non-Conventional Financing

Many people buying houses at this price rely on non-conventional financing. One option is to borrow against the margin in their investment accounts. This method is often preferred because it is less expensive and beneficial when it comes to taxes. Additionally, this approach allows you to avoid the high costs associated with traditional mortgage lending.

Factors Influencing Down Payment

The actual down payment can vary based on several factors, including your creditworthiness and financial situation. Depending on these factors, the deposit can range from 0% to 2 million dollars. To get a more accurate figure, consult a mortgage broker who can assess your financial history and provide personalized advice.

As a general rule, if you are planning to mortgage a $2 million house, you will need 400,000 for a down payment and then pay the remaining $1.6 million over 30 years. However, purchasing at retail price means paying $2 million wholesale, you might be able to negotiate a price as low as $800,000.

Some buyers, particularly those in high-tech industries, can put down 20% or more. They often do this by selling their last house at an inflated price. This strategy works well if you are a highly-paid tech professional with substantial equity from your current house, which is expected to sell quickly or is already in escrow.