Guide to Mortgage Down Payments

20% Down Isn't Actually Required

A common myth is that you need 20% down to buy a home -- in reality, many loan programs allow significantly less. The real tradeoff isn't eligibility, it's cost: a smaller down payment usually means PMI and a larger loan (more total interest over the life of the mortgage).

Calculating Your Down Payment

Use the Mortgage Down Payment Calculator to see your down payment amount and resulting loan size at different percentages, or the Down Payment Percentage Calculator if you already know your dollar amount and want to see what percentage it represents.

The 20% Threshold and PMI

20% down remains meaningful for one specific reason: it's the threshold at which PMI is typically no longer required on a conventional loan. See the PMI Calculator and our full PMI guide to see what a smaller down payment would actually cost you in ongoing PMI.

The Case for Putting Down Less

Buying sooner (rather than waiting years to save 20%) can make sense in an appreciating market, and keeping more cash on hand preserves your emergency fund and other financial flexibility -- PMI is a real cost, but not necessarily a dealbreaker.

The Case for Putting Down More

A larger down payment means a smaller loan, less total interest, no PMI, and a lower monthly payment -- all real, ongoing savings that compound over the life of a 15-30 year loan.

A Worked Comparison With Illustrative Numbers

Consider a hypothetical $350,000 home. With 5 percent down, the down payment is $17,500 and the loan is $332,500. With 10 percent down, the down payment is $35,000 and the loan is $315,000. With 20 percent down, it's $70,000 and the loan is $280,000. The difference in loan size between 5 and 20 percent is $52,500, which at any given interest rate translates into a noticeably smaller monthly payment and less interest over time. The lower-down-payment version, though, may also include monthly mortgage insurance. Those numbers are simply to show the shape of the trade-off; your actual costs depend on your rate, credit profile, and loan type, so use the calculators with real quotes.

Common Loan Programs and Their Down Payment Ideas

• Conventional loans: many lenders offer options with relatively low minimums, often with private mortgage insurance until enough equity builds.
• FHA loans: government-insured loans that are often popular with first-time buyers and can have lower minimum down payments, but they come with their own mortgage insurance rules.
• VA loans: available to eligible veterans and service members, and often need no down payment.
• USDA loans: designed for eligible rural and some suburban areas, and may also allow no down payment for qualifying buyers.

Eligibility rules, minimums, and insurance costs change and depend on your situation, so confirm details with a lender or the relevant agency's official website.

Costs Beyond the Down Payment

A frequent mistake is saving exactly the down payment and forgetting everything else. You'll also need closing costs, which commonly include lender fees, appraisal, title insurance, and prepaid items such as homeowners insurance and property taxes. You'll want to set aside money for moving, initial repairs, and a working emergency fund after you close. A useful exercise is to ask a lender for a Loan Estimate, a standardized document that lays out expected closing costs, and add that to your savings target.

Where Down Payment Money Can Come From

• Personal savings, which lenders generally want to see sitting in your accounts for a period of time.
• Gifts from family, which usually require a gift letter and documentation of the source.
• State and local down payment assistance programs, which vary widely by location and often have income or first-time-buyer requirements.
• Retirement account withdrawals or loans, which can carry taxes, penalties, or long-term costs, so review the rules carefully first.

Common Mistakes

• Draining all savings for the down payment and being left with no buffer for repairs or a job disruption.
• Making large unexplained deposits or opening new credit lines shortly before closing, which can complicate underwriting.
• Comparing loans by monthly payment alone without looking at total cost, including mortgage insurance and interest.
• Assuming the seller or agent's quoted figures are final. Always ask the lender for written estimates.

How to Decide What's Right for You

Start by deciding how much monthly payment fits comfortably in your budget, then work backward. Ask a lender or a HUD-approved housing counselor to show you a few scenarios side by side, for example, 5, 10, and 20 percent down, with the resulting monthly payment, mortgage insurance, and cash needed at closing. Weigh those against how much cash reserve you want to keep. First-time buyer education courses, often offered by nonprofit housing counseling agencies, can also be a low-cost way to review your options.

A Quick Readiness Checklist

Before house hunting, check your credit reports for errors, gather recent pay stubs and tax documents, and ask a lender for a pre-approval so you know your realistic price range. Keep your savings in accessible accounts, avoid large purchases on credit, and keep records of where every deposit came from. Finally, decide in advance on the minimum cash cushion you want to keep after closing, and treat that as off-limits when calculating how much you can put down.

Rent Versus Wait: A Fair Question

Some buyers wonder whether to keep renting while saving more. There's no single answer. Waiting can grow your down payment and improve your credit, but home prices and rates may move in either direction, and rent continues in the meantime. A helpful step is to compare your total monthly cost of owning, including taxes, insurance, maintenance, and mortgage insurance, with your current rent. If the numbers fit comfortably and you plan to stay for several years, buying with a modest down payment can be reasonable.

Frequently Asked Questions