Down Payment Calculator

How Much Down Payment Do You Need?

The down payment is the single biggest upfront cost of buying a home — and the biggest savings hurdle for most first-time buyers. The amount you need depends on the loan type, the lender's requirements, and your financial goals.

Here's a quick rundown of common down payment requirements:

• Conventional loan — 3%: The minimum for many first-time buyers with good credit (typically 620+ FICO). On a $350,000 home, that's $10,500 down. PMI is required until you reach 20% equity.
• FHA loan — 3.5%: Backed by the Federal Housing Administration, available with credit scores as low as 580. On a $350,000 home, that's $12,250 down. Requires mortgage insurance premium (MIP) for the life of the loan in most cases.
• Conventional — 20%: The traditional standard that eliminates PMI entirely. On a $350,000 home, that's $70,000. Higher bar but lowest monthly payment and no insurance requirement.
• VA loan — 0%: For eligible veterans and active military. No down payment required, no PMI. Best deal in mortgage financing for those who qualify.
• USDA loan — 0%: For rural and some suburban areas. Income limits apply. No down payment required.

The "right" down payment depends on your timeline, savings rate, local market, and how PMI costs compare to the opportunity cost of a larger down payment. This calculator shows the exact math for any scenario.

20% Down vs 3% Down: The Real Difference

The debate between putting 3% down vs 20% down is one of the most common in personal finance. Here's the honest comparison on a $350,000 home:

3% down ($10,500): You get into the home faster — potentially years sooner. But you borrow $339,500 instead of $280,000, meaning higher monthly payments. You also pay PMI, typically 0.5–1% of the loan amount annually ($140–$283/month on a $340k loan), until you reach 20% equity. On a 30-year mortgage at 7%, your total principal + interest on the larger loan is significantly higher.

20% down ($70,000): No PMI saves you $140–$283/month immediately. Lower loan balance means lower monthly payment and less total interest over the life of the loan. But you tie up $70,000 in home equity that could have been invested. The opportunity cost of the larger down payment — if that $59,500 difference had been invested at 7% annual returns — is real and often underappreciated.

The break-even analysis often surprises people. In a rising housing market, getting in faster with 3% down can outperform waiting to save 20%. In a flat or declining market, the larger down payment provides more protection against being underwater. Run the numbers for your specific situation using this calculator alongside the Rent vs Buy Calculator.

What Is PMI and How to Avoid It

Private Mortgage Insurance (PMI) is a monthly fee charged when you put less than 20% down on a conventional loan. It protects the lender — not you — if you default. It's essentially the price you pay for borrowing with less equity.

Typical PMI costs: 0.5%–1.5% of the loan amount per year, depending on your credit score, LTV ratio, and loan type. On a $315,000 loan (10% down on a $350k home), PMI at 0.75% is about $197/month — that's $2,362/year added to your housing cost.

Ways to avoid or eliminate PMI:

• Put 20% down: The most straightforward way. No PMI from day one.
• 80-10-10 piggyback loan: A second mortgage covers the gap between your down payment and 20%. Complex, but eliminates PMI without a full 20% down.
• Request PMI cancellation: Federal law (Homeowners Protection Act) requires lenders to cancel PMI when your loan balance reaches 80% of the original appraised value. You can also request cancellation proactively with proof of current home value.
• Automatic termination: PMI must terminate automatically when your loan reaches 78% LTV based on the original amortization schedule, even if you haven't requested it.
• Refinance: If your home has appreciated significantly, refinancing when you have 20%+ equity eliminates PMI — though you pay closing costs.

Note: FHA loans have MIP (Mortgage Insurance Premium) that works differently — for loans with less than 10% down after June 2013, MIP lasts the entire loan term. Refinancing to a conventional loan is often the only way out.

How to Save for a Down Payment Faster

The biggest lever is the obvious one: increase your monthly savings amount. This calculator shows exactly how many fewer months you need for each incremental increase. Going from $500/month to $1,000/month doesn't just cut the timeline in half — it can accelerate it more if you're close to the goal.

High-yield savings account: Keep your down payment savings in a HYSA earning 4–5% APY (as of 2024) rather than a standard savings account at 0.01%. On a $30,000 balance, that's $1,200–$1,500/year in interest — essentially free extra savings.

Down payment assistance programs: Many states, counties, and municipalities offer down payment assistance for first-time buyers — grants, forgivable loans, or low-interest second mortgages. The National Council of State Housing Agencies (NCSHA) maintains a database. These programs can cover 3–5% of purchase price, potentially eliminating the down payment savings requirement entirely.

Gift funds: Conventional and FHA loans allow down payment gifts from family members. Document these carefully — lenders require a gift letter stating the funds are not a loan. This can dramatically accelerate timelines for buyers with family support.

First-time homebuyer IRA withdrawal: IRS rules allow first-time homebuyers to withdraw up to $10,000 from traditional or Roth IRAs without the 10% early withdrawal penalty. Traditional IRA withdrawals are still taxable; Roth contributions (not earnings) can always be withdrawn tax and penalty-free.

Down Payment FAQ

Does a larger down payment guarantee a lower mortgage rate?

Not directly, but it helps. Lenders use Loan-to-Value ratio (LTV) in their pricing models. A lower LTV (more equity, larger down payment) typically results in slightly better interest rate offers, especially above the 20% threshold. The bigger impact of a larger down payment is eliminating PMI and having a smaller loan balance, both of which reduce monthly payments significantly.

Is down payment the only upfront cost?

No — closing costs add 2–5% of the purchase price on top of the down payment. On a $350,000 home, that's another $7,000–$17,500 you need at the closing table. Many buyers are blindsided by this. Use the Closing Cost Calculator to estimate the full picture before committing to a home purchase timeline.

What's a good LTV ratio for a mortgage?

Below 80% LTV (20%+ down) is considered the gold standard — no PMI, best pricing, maximum lender options. 80–90% LTV (10–20% down) is acceptable with good credit, though PMI applies. 90–97% LTV (3–10% down) is common for first-time buyers; higher monthly costs but faster path to homeownership. Above 97% LTV requires special programs (VA, USDA) or down payment assistance.

Should I use all my savings for the down payment?

Absolutely not. You need cash reserves after closing for moving costs, immediate repairs, furnishings, and unexpected expenses. Most financial advisors recommend keeping 2–3 months of emergency fund separate from your down payment, plus an estimate for immediate post-purchase costs. Draining all savings for a larger down payment is a common mistake that leaves new homeowners financially vulnerable.