How much should I put down on a house?

The right down payment depends on your loan program, cash reserves, and monthly budget. Conventional loans allow as little as 3% down, FHA requires 3.5%, and VA/USDA loans offer 0% down options for eligible buyers. Putting 20% down eliminates private mortgage insurance (PMI) and lowers monthly payments, but smaller down payments allow buyers to enter the market sooner and keep emergency cash reserves.

Is 20% down required to buy a home?

No. The 20% down payment requirement is a persistent myth. Conforming conventional loans permit down payments as low as 3% (Conventional 97), FHA loans require 3.5%, and VA/USDA loans allow 0% down. Putting down 20% simply removes the requirement for Private Mortgage Insurance (PMI) on conventional loans.

How does a down payment affect my monthly mortgage payment?

A larger down payment reduces the total loan balance financed, which directly lowers the monthly principal and interest (P&I) payment. Additionally, reaching a 20% down payment eliminates the monthly cost of Private Mortgage Insurance (PMI), further reducing your total monthly housing obligation.

How does a down payment affect PMI?

On conventional loans, lenders typically require Private Mortgage Insurance (PMI) whenever the down payment is less than 20% (Loan-to-Value greater than 80%). The monthly PMI cost is added to your payment until your loan balance reaches 80% LTV by request or 78% LTV automatically under the Homeowners Protection Act of 1998.

How much cash do I need at closing besides the down payment?

In addition to the down payment, buyers must pay upfront closing costs and prepaids typically totaling 2% to 5% of the purchase price. These include lender origination fees, appraisal, credit reports, title insurance, recording fees, and initial escrow reserves for property taxes and homeowners insurance.

Can I buy a house with 0% down?

Yes, qualified buyers can purchase with 0% down through government-backed loan programs: VA loans for eligible military service members and veterans, or USDA loans for qualifying properties located in designated rural areas.

What is the difference between a 3%, 5%, 10% and 20% down payment?

Lower down payments (3% to 5%) preserve liquid cash and enable earlier homebuying but require higher monthly P&I payments and monthly PMI. A 10% down payment reduces monthly interest and PMI costs, while a 20% down payment eliminates PMI entirely, maximizes equity from day one, and minimizes total lifetime interest expense.

Should I put more money down or invest the extra cash?

Putting extra cash into a down payment yields a guaranteed return equal to your mortgage interest rate plus PMI savings. Alternatively, investing that extra capital in a diversified index fund has historically yielded 7% to 10% long-term nominal returns, though returns are variable and not guaranteed. Your decision depends on risk tolerance, liquidity needs, and interest rate environment.

How is PMI calculated and when can it be removed?

PMI typically costs 0.3% to 1.5% of your initial loan balance per year, billed monthly. Under federal law (Homeowners Protection Act of 1998), you can request PMI cancellation when your loan balance reaches 80% of original purchase price, and the servicer must automatically cancel PMI when the balance drops to 78% LTV based on the original amortization schedule.

What is loan-to-value ratio (LTV)?

Loan-to-Value (LTV) ratio is the proportion of the property's purchase price or appraised value that is financed by the mortgage loan. For example, a $400,000 mortgage on a $500,000 home represents an 80% LTV, which corresponds to a 20% down payment ($100,000).

Can I use gift funds or other assistance for a down payment?

Yes. Most mortgage programs permit gift funds from immediate family members accompanied by an executed gift letter verifying no repayment is expected. Eligible first-time buyers may also utilize local Down Payment Assistance (DPA) grants, forgivable second loans, or penalty-free retirement withdrawals subject to IRS guidelines.

How long will it take me to save for a down payment?

The timeline depends on your target home price, down payment percentage, monthly savings contribution, and interest rate on savings. For example, saving $2,500 monthly with $25,000 starting cash in a 4.5% high-yield savings account reaches a $115,000 down payment and closing cash goal in approximately 33 months (2.8 years).

Down Payment Calculator — Mortgage Down Payment & PMI Payoff Suite

Free Down Payment Calculator. Dual mode calculation (by home price or max cash available), 0% to 30% tier comparisons, PMI cancellation date milestone, opportunity cost index fund simulator, and upfront cash-to-close.

Currency:

Down Payment Calculator

Purchase & Loan Input Parameters

Home Purchase Price

Down Payment (%)

Down Payment ($)

Interest Rate %

Loan Term (Yrs)

Property Tax ($/yr)

Home Insurance ($/yr)

PMI Rate % (<20% Down)

HOA Dues ($/mo)

Closing Costs %

Monthly Payment & Cash Needed

$3,178/mo

Down Payment$100,000 (20%)

Loan Financed$400,000

Total Cash Required at Closing: $115,000

PMI Removal Milestone (78% LTV): No PMI Required ($0)

P&I: 79.5%

Tax: 15.7%

Ins: 4.7%

Underwriting & Amortization Formulas:

Down Payment = Home Price ($500,000) × 20% = $100,000

Loan Principal = Home Price - Down Payment = $400,000

Monthly P&I Payment = Loan Amount × [r(1+r)^n / ((1+r)^n - 1)] = $2,528/mo

Monthly PMI (0% No-PMI) = $0/mo

Mortgage Amortization & Equity Schedule

Period	Beginning Balance	Payment (PITI)	Principal	Interest	PMI	Ending Balance
Year 1	$400,000	$38,139	$4,471	$25,868	$0	$395,529
Year 2	$395,529	$38,139	$4,770	$25,569	$0	$390,759
Year 3	$390,759	$38,139	$5,090	$25,249	$0	$385,669
Year 4	$385,669	$38,139	$5,431	$24,909	$0	$380,238
Year 5	$380,238	$38,139	$5,794	$24,545	$0	$374,444
Year 6	$374,444	$38,139	$6,182	$24,157	$0	$368,261
Year 7	$368,261	$38,139	$6,596	$23,743	$0	$361,665
Year 8	$361,665	$38,139	$7,038	$23,301	$0	$354,627
Year 9	$354,627	$38,139	$7,510	$22,830	$0	$347,117
Year 10	$347,117	$38,139	$8,013	$22,327	$0	$339,105
Year 11	$339,105	$38,139	$8,549	$21,790	$0	$330,555
Year 12	$330,555	$38,139	$9,122	$21,218	$0	$321,434
Year 13	$321,434	$38,139	$9,733	$20,607	$0	$311,701
Year 14	$311,701	$38,139	$10,384	$19,955	$0	$301,316
Year 15	$301,316	$38,139	$11,080	$19,259	$0	$290,237
Year 16	$290,237	$38,139	$11,822	$18,517	$0	$278,415
Year 17	$278,415	$38,139	$12,614	$17,726	$0	$265,801
Year 18	$265,801	$38,139	$13,458	$16,881	$0	$252,342
Year 19	$252,342	$38,139	$14,360	$15,979	$0	$237,983
Year 20	$237,983	$38,139	$15,322	$15,018	$0	$222,661
Year 21	$222,661	$38,139	$16,348	$13,992	$0	$206,314
Year 22	$206,314	$38,139	$17,442	$12,897	$0	$188,871
Year 23	$188,871	$38,139	$18,611	$11,729	$0	$170,260
Year 24	$170,260	$38,139	$19,857	$10,482	$0	$150,403
Year 25	$150,403	$38,139	$21,187	$9,152	$0	$129,217
Year 26	$129,217	$38,139	$22,606	$7,734	$0	$106,611
Year 27	$106,611	$38,139	$24,120	$6,220	$0	$82,491
Year 28	$82,491	$38,139	$25,735	$4,604	$0	$56,756
Year 29	$56,756	$38,139	$27,459	$2,881	$0	$29,298
Year 30	$29,298	$38,139	$29,298	$1,042	$0	$0

Down Payment Comparison

Down Tier	Down Amount ($)	Loan Amount ($)	Monthly Payment ($/mo)	Monthly PMI ($/mo)	Lifetime Interest ($)	Cash to Close ($)
0%	$0	$500,000	$4,019/mo	$208/mo	$637,722	$15,000
3.5%	$17,500	$482,500	$3,901/mo	$201/mo	$615,402	$32,500
5%	$25,000	$475,000	$3,850/mo	$198/mo	$605,836	$40,000
10%	$50,000	$450,000	$3,682/mo	$188/mo	$573,950	$65,000
20% (Standard No-PMI)	$100,000	$400,000	$3,178/mo	$0	$510,178	$115,000
30%	$150,000	$350,000	$2,862/mo	$0	$446,406	$165,000

Opportunity Cost Analysis

Base Down %

Larger Down %

Index Fund Return % (CAGR)

Horizon (Years)

Opportunity Cost Advantage

Extra Down Cash: $75,000

Mortgage Interest Saved$56,886

Index Fund Future Value$174,949

Investing Extra Cash is Better (Historical index returns outpace mortgage rate savings)

Upfront Cash to Close

Origination Fee %

Appraisal & Credit ($)

Title & Escrow Fees ($)

Prepaid Escrow (Mos)

Total Cash Required at Closing

$109,050

Down Payment$100,000

Total Closing Fees$9,050

Loan Program Comparison

Program	Min Down %	Down Amount ($)	Upfront Fee ($)	Monthly Ins ($/mo)	Total Monthly PITI ($/mo)	PMI Cancellation Rules
Conventional 97	3%	$15,000	$0 (0%)	$222/mo	$3,938/mo	Cancels automatically at 78% LTV
FHA Loan	3.5%	$17,500	$8,444 (1.75%)	$221/mo	$3,974/mo	Life of loan (unless >10% down)
VA Loan (Veteran)	0%	$0	$10,750 (2.15%)	$0/mo	$3,878/mo	$0 Monthly PMI Benefit!
USDA Rural Development	0%	$0	$5,000 (1%)	$146/mo	$3,988/mo	0.35% Annual Fee for life of loan
Jumbo Mortgage	20%	$100,000	$0 (0%)	$0/mo	$3,178/mo	No PMI required (20% Down)

Savings Goal Planner

Target Cash Goal ($)

Current Savings ($)

Monthly Contribution ($/mo)

High-Yield Interest Rate %

Savings Timeline Goal Result

Goal Reached in 33 Months (2.8 Yrs)

Projected Completion Date: Jun 2029 (Earn $8,434 Interest)

RELATED CALCULATORS:

1. What is a Down Payment & How Does it Work?

A down payment is the initial upfront cash contribution paid by a homebuyer toward the total purchase price of real estate. The remaining balance is financed through a primary mortgage loan secured by the property. The down payment establishes your initial home equity position and directly dictates your Loan-to-Value (LTV) ratio.

Core Mortgage Down Payment Formulas

1. Down Payment Amount ($):

Down Payment = Purchase Price (P) × (Down % ÷ 100)

2. Loan Principal Financed ($):

Loan Amount = Purchase Price − Down Payment

3. Total Cash Required at Closing ($):

Cash to Close = Down Payment + Upfront Closing Costs (2% − 5%)

2. How Much Down Payment Do You Really Need?

The required down payment varies based on loan program guidelines, borrower credit score, occupancy type, and property classification:

0% Down Payment

Available via government-backed VA loans (eligible military veterans) and USDA Rural Development loans (qualifying rural properties).

3% – 3.5% Down Payment

Conventional 97 programs require 3% down for qualifying first-time buyers with 620+ credit scores. FHA loans require 3.5% down for scores 580+.

20% Down Payment

The standard threshold to eliminate Private Mortgage Insurance (PMI) on conventional financing and minimize lifetime interest expense.

3. The 20% Down Payment Myth vs. Reality

While putting 20% down eliminates PMI, waiting years to accumulate 20% involves trade-offs regarding market entry timing and capital liquidity.

Pros of 20% Down

Instant $0 Private Mortgage Insurance (PMI) saving $100–$300/mo
Lower monthly principal & interest (P&I) payment
Lower lifetime interest expense over the loan term
Stronger offer competitiveness in seller markets

Cons & Opportunity Costs of 20% Down

Depletes liquid cash reserves and emergency safety nets
Delaying purchase while saving can expose buyers to market price shifts
Opportunity cost of allocating capital away from other diversified investment assets

4. Mortgage Programs & Minimum Down Payment Requirements

Loan Program	Min Down %	Min Credit Score	Mortgage Insurance Rules	Upfront Fee
Conventional 97	3.0%	620	Cancels at 78%–80% LTV	$0
FHA Loan	3.5%	580	Life of Loan (if <10% down)	1.75% UFMIP
VA Loan (Veteran)	0.0%	580+ (Lender)	$0 Monthly PMI Benefit!	1.4%–2.15% Funding Fee
USDA Rural	0.0%	640	0.35% Annual Guarantee Fee	1.0% Guarantee Fee

5. Private Mortgage Insurance (PMI) & How to Remove It (80% vs. 78% LTV)

Federal protections under the Homeowners Protection Act of 1998 dictate when Private Mortgage Insurance (PMI) on conventional loans must be cancelled:

80% LTV Borrower Cancellation Request

When your principal balance drops to 80% of the original purchase price or appraised value, you have the right to submit a written cancellation request to your loan servicer.

78% LTV Automatic Lender Termination

Lenders are legally required to automatically terminate PMI once your loan balance reaches 78% of original value based on the scheduled amortization table.

6. Down Payment Assistance (DPA) Programs

Numerous state, county, and municipal Down Payment Assistance (DPA) programs exist across the U.S. to help qualified buyers cover upfront cash needs:

DPA Grants: Outright gift funds that never require repayment.
Forgivable 2nd Loans: Zero-interest secondary liens forgiven after residing in the property for a specified period (typically 3 to 5 years).
Deferred Payment Loans: Second liens with 0% interest repaid when the home is sold, refinanced, or the first mortgage is satisfied.

7. Frequently Asked Questions (FAQ)

Explore essential answers to common questions about mortgage down payments, loan programs, and PMI requirements.

8. Educational Key Takeaways

20% Is Not Mandatory: Conventional 97 (3%), FHA (3.5%), and VA/USDA (0%) offer viable paths to homeownership.
PMI Removal Milestone: Conventional loan PMI is cancellable at 80% LTV by request and cancels automatically at 78% LTV.
Upfront Cash to Close: Remember to reserve 2% to 5% of purchase price for closing costs on top of the down payment.
Liquidity vs Down Payment: Avoid depleting all emergency cash reserves just to reach a higher down payment tier.

Period

Beginning Balance

Payment (PITI)

Principal

Interest

PMI

Ending Balance

Year 1

$400,000

$38,139

$4,471

$25,868

$395,529

Year 2

$395,529

$38,139

$4,770

$25,569

$390,759

Year 3

$390,759

$38,139

$5,090

$25,249

$385,669

Year 4

$385,669

$38,139

$5,431

$24,909

$380,238

Year 5

$380,238

$38,139

$5,794

$24,545

$374,444

Year 6

$374,444

$38,139

$6,182

$24,157

$368,261

Year 7

$368,261

$38,139

$6,596

$23,743

$361,665

Year 8

$361,665

$38,139

$7,038

$23,301

$354,627

Year 9

$354,627

$38,139

$7,510

$22,830

$347,117

Year 10

$347,117

$38,139

$8,013

$22,327

$339,105

Year 11

$339,105

$38,139

$8,549

$21,790

$330,555

Year 12

$330,555

$38,139

$9,122

$21,218

$321,434

Year 13

$321,434

$38,139

$9,733

$20,607

$311,701

Year 14

$311,701

$38,139

$10,384

$19,955

$301,316

Year 15

$301,316

$38,139

$11,080

$19,259

$290,237

Year 16

$290,237

$38,139

$11,822

$18,517

$278,415

Year 17

$278,415

$38,139

$12,614

$17,726

$265,801

Year 18

$265,801

$38,139

$13,458

$16,881

$252,342

Year 19

$252,342

$38,139

$14,360

$15,979

$237,983

Year 20

$237,983

$38,139

$15,322

$15,018

$222,661

Year 21

$222,661

$38,139

$16,348

$13,992

$206,314

Year 22

$206,314

$38,139

$17,442

$12,897

$188,871

Year 23

$188,871

$38,139

$18,611

$11,729

$170,260

Year 24

$170,260

$38,139

$19,857

$10,482

$150,403

Year 25

$150,403

$38,139

$21,187

$9,152

$129,217

Year 26

$129,217

$38,139

$22,606

$7,734

$106,611

Year 27

$106,611

$38,139

$24,120

$6,220

$82,491

Year 28

$82,491

$38,139

$25,735

$4,604

$56,756

Year 29

$56,756

$38,139

$27,459

$2,881

$29,298

Year 30

$29,298

$38,139

$29,298

$1,042

Down Tier

Down Amount ($)

Loan Amount ($)

Monthly Payment ($/mo)

Monthly PMI ($/mo)

Lifetime Interest ($)

Cash to Close ($)

$500,000

$4,019/mo

$208/mo

$637,722

$15,000

3.5%

$17,500

$482,500

$3,901/mo

$201/mo

$615,402

$32,500

$25,000

$475,000

$3,850/mo

$198/mo

$605,836

$40,000

10%

$50,000

$450,000

$3,682/mo

$188/mo

$573,950

$65,000

20% (Standard No-PMI)

$100,000

$400,000

$3,178/mo

$510,178

$115,000

30%

$150,000

$350,000

$2,862/mo

$446,406

$165,000

Program

Min Down %

Down Amount ($)

Upfront Fee ($)

Monthly Ins ($/mo)

Total Monthly PITI ($/mo)

PMI Cancellation Rules

Conventional 97

$15,000

$0 (0%)

$222/mo

$3,938/mo

Cancels automatically at 78% LTV

FHA Loan

3.5%

$17,500

$8,444 (1.75%)

$221/mo

$3,974/mo

Life of loan (unless >10% down)

VA Loan (Veteran)

$10,750 (2.15%)

$0/mo

$3,878/mo

$0 Monthly PMI Benefit!

USDA Rural Development

$5,000 (1%)

$146/mo

$3,988/mo

0.35% Annual Fee for life of loan

Jumbo Mortgage

20%

$100,000

$0 (0%)

$0/mo

$3,178/mo

No PMI required (20% Down)

Loan Program

Min Down %

Min Credit Score

Mortgage Insurance Rules

Upfront Fee

Conventional 97

3.0%

620

Cancels at 78%–80% LTV

FHA Loan

3.5%

580

Life of Loan (if <10% down)

1.75% UFMIP

VA Loan (Veteran)

0.0%

580+ (Lender)

$0 Monthly PMI Benefit!

1.4%–2.15% Funding Fee

USDA Rural

0.0%

640

0.35% Annual Guarantee Fee

1.0% Guarantee Fee