Down Payment Calculator

The down payment is one of the most significant upfront costs of buying a home, directly affecting your monthly payment, interest rate, and total loan cost. While the traditional 20 percent down payment remains ideal in many ways, today's buyers have numerous options requiring far less money down. Understanding minimum requirements across different loan programs, the pros and cons of various down payment levels, and strategies for accumulating savings helps you make an informed choice that balances accessibility with long-term financial health.

Down Payment Assistance Programs

Many state and local governments, non-profits, and employers offer down payment assistance to help buyers overcome the savings hurdle. Programs vary widely but commonly provide grants or forgivable loans ranging from 3,000 to 15,000 dollars or more for qualifying buyers. Most target first-time buyers, specific income levels, certain professions, or designated neighborhoods.

Typical requirements include income limits (often 80 to 120 percent of area median income), homebuyer education course completion, and owner occupancy for a specified period. Some programs offer grants that require no repayment, while others provide zero or low-interest loans forgiven after you live in the home for a required period—often 5 to 10 years. If you sell or refinance before the forgiveness period ends, you must repay the assistance.

Research programs through your state housing finance agency, local housing authorities, HUD-approved housing counseling agencies, and employer benefits. Some professions including teachers, police officers, firefighters, and healthcare workers have dedicated programs. Combining assistance programs with low-down-payment FHA or conventional loans can make homeownership possible with minimal personal savings, though carefully evaluate all program terms including interest rates and recapture provisions.

Conventional Loan Down Payment Requirements

Conventional loans are mortgages not backed by government agencies, typically conforming to standards set by Fannie Mae and Freddie Mac. These loans require minimum down payments as low as 3 percent for qualified first-time buyers, though 5 to 20 percent is more common. A 300,000 dollar home with 3 percent down requires only 9,000 dollars, making homeownership accessible with less savings.

However, down payments below 20 percent on conventional loans require private mortgage insurance (PMI), which protects the lender if you default. PMI costs approximately 0.5 to 1.5 percent of the original loan amount annually, paid monthly. On a 285,000 dollar loan (300,000 home with 5 percent down), PMI might add 120 to 350 dollars to your monthly payment depending on your credit score and down payment size.

The relationship between down payment size and PMI cost is direct—larger down payments mean lower PMI rates. Putting 5 percent down might cost 1.2 percent annually in PMI, while 10 percent down might drop the rate to 0.7 percent, and 15 percent down to 0.4 percent. This tiered structure incentivizes larger down payments even if you can't reach the 20 percent threshold where PMI disappears entirely.

Saving for Your Down Payment

Accumulating a down payment requires disciplined savings over time. Calculate your target amount and timeline, then divide to determine monthly savings needs. If you need 40,000 dollars in four years, that's approximately 835 dollars monthly after accounting for modest interest earnings on your accumulating balance. Automate transfers to a dedicated savings account to enforce consistency.

High-yield savings accounts earning 4 to 5 percent APY help your down payment fund grow faster than traditional savings accounts at 0.5 percent or less. On a 20,000 dollar average balance over three years, the difference between 0.5 and 4 percent is approximately 2,100 dollars—meaningful additional down payment funds from choosing the right account.

Reduce expenses and increase income to accelerate saving. Common strategies include cutting discretionary spending, taking side gigs, selling unused possessions, and directing windfalls like bonuses and tax refunds entirely to down payment savings. Some buyers temporarily move in with family or choose less expensive rentals to maximize the gap between income and expenses, funneling the difference into house savings.

First-time homebuyer accounts available in some states allow you to save with state income tax deductions on contributions and tax-free growth if funds are used for qualifying first-home purchases. These accounts function similarly to retirement accounts but for home buying, providing tax advantages that accelerate down payment accumulation for eligible savers.

FHA Loan Down Payment Structure

Federal Housing Administration loans require just 3.5 percent down, making them attractive for buyers with limited savings. On a 250,000 dollar home, that's only 8,750 dollars compared to 50,000 dollars for 20 percent down. FHA loans also accept lower credit scores than conventional loans, often approving borrowers with scores as low as 580 or even 500 with 10 percent down.

The trade-off is that FHA loans require both upfront and annual mortgage insurance premiums. The upfront premium is 1.75 percent of the loan amount, typically financed into the loan rather than paid in cash. On a 240,625 dollar loan (250,000 home with 3.5 percent down), that's an additional 4,211 dollars added to your balance, increasing it to 244,836 dollars.

Annual MIP (mortgage insurance premium) is 0.55 to 1.05 percent of the loan balance depending on the loan term and down payment amount. Unlike conventional PMI which cancels at 78 percent loan-to-value, FHA MIP remains for the life of the loan if you put down less than 10 percent, or for 11 years if you put down 10 percent or more. On a 30-year loan with 5 percent down, you'll pay MIP for all 30 years unless you refinance to a conventional loan.

VA Loan Benefits and Requirements

VA loans, available to eligible veterans, active duty service members, and some surviving spouses, require zero down payment while offering competitive interest rates without mortgage insurance. This powerful benefit allows qualifying buyers to purchase a 300,000 dollar home with no money down and no PMI, dramatically lowering both upfront costs and monthly payments.

The VA funding fee partially offsets the zero-down-payment risk, typically ranging from 1.4 to 3.6 percent of the loan amount depending on your service category, down payment if any, and whether it's your first VA loan. A first-time user with zero down pays 2.3 percent, or 6,900 dollars on a 300,000 dollar loan. This fee can be financed into the loan amount. Veterans with service-connected disabilities are exempt from the funding fee entirely.

Despite requiring no down payment, making a voluntary down payment of 5 or 10 percent on a VA loan reduces the funding fee to 1.65 percent or 1.4 percent respectively. Whether this makes sense depends on your interest rate, alternative uses for the cash, and how long you plan to keep the home. For many VA-eligible buyers, zero down makes sense to preserve cash for emergencies, furnishings, and moving costs.

The 20 Percent Down Payment Advantage

Putting 20 percent down eliminates PMI requirements on conventional loans, saving 100 to 300-plus dollars monthly depending on the loan size and your credit profile. On a 350,000 dollar purchase, that's the difference between a 280,000 dollar loan with PMI adding 200 dollars monthly versus a 280,000 dollar loan at the same rate without PMI. Over seven years before PMI would have cancelled automatically, you save approximately 16,800 dollars.

Twenty percent down also typically qualifies you for better interest rates. Lenders view larger down payments as lower risk, offering rates perhaps 0.125 to 0.375 percentage points better than minimum-down loans. On a 280,000 dollar loan, a 0.25 percent rate advantage saves approximately 36 dollars monthly and 13,000 dollars over 30 years—meaningful savings from the rate improvement alone.

Lower loan-to-value ratios provide a buffer against home value fluctuations. If you put 20 percent down and home values drop 10 percent, you still have 10 percent equity. With only 3 percent down, that same 10 percent decline leaves you underwater, owing more than the home is worth. This equity cushion provides financial flexibility to sell if needed without bringing cash to closing.

Smaller mortgages mean lower monthly payments regardless of PMI. On a 300,000 dollar home, putting 20 percent down (60,000 dollars) versus 5 percent (15,000) reduces your loan from 285,000 to 240,000 dollars. At 6 percent interest, that's a 270 dollar monthly payment difference from principal and interest alone, plus the PMI savings. The challenge is accumulating an extra 45,000 dollars in down payment, which delays homebuying but provides long-term financial benefits.

PMI Avoidance Strategies

One strategy to avoid PMI without 20 percent down is a piggyback loan, also called an 80-10-10 or 80-15-5 structure. You take a first mortgage for 80 percent of the home's value, a second mortgage (home equity loan or HELOC) for 10 to 15 percent, and put down 5 to 10 percent cash. On a 300,000 dollar home, that's a 240,000 first mortgage, a 30,000 second mortgage, and a 30,000 down payment.

This structure avoids PMI because your first mortgage is only 80 percent loan-to-value. However, the second mortgage typically carries a higher interest rate and may have a variable rate, potentially making the combined monthly cost higher than a single loan with PMI. Run the numbers comparing total monthly costs and interest expenses to determine whether piggyback loans save money in your situation.

Lender-paid mortgage insurance (LPMI) is another option where the lender pays PMI in exchange for a higher interest rate. This eliminates the separate PMI payment but increases your rate by approximately 0.25 to 0.50 percentage points. LPMI makes sense if you plan to stay in the home long-term and prefer a lower monthly payment to paying PMI separately, or if the slightly higher rate still gives you a better total cost than traditional PMI.

Optimal Down Payment Strategy

The optimal down payment balances competing priorities: minimizing monthly payments, avoiding PMI, preserving emergency savings, and opportunity cost of capital. If you have exactly 60,000 dollars and are buying a 300,000 dollar home, putting all 60,000 down (20 percent) eliminates PMI and minimizes monthly payments. However, it might leave you with insufficient emergency reserves for unexpected home repairs, job loss, or medical expenses.

A balanced approach might put 30,000 dollars down (10 percent), accept a lower PMI rate than a 5 percent down payment would carry, and maintain 30,000 dollars for emergencies and moving costs. You'll pay PMI temporarily, but you're not house-poor with zero liquidity. As you build equity through appreciation and principal paydown, you can request PMI cancellation once you reach 20 percent equity, often within 3 to 5 years in appreciating markets.

Consider your personal circumstances including job security, other savings and investments, risk tolerance, and timeline. Two-income households might comfortably put more down knowing they have dual income security, while single-income buyers might prioritize larger cash reserves. Young buyers with decades until retirement might accept PMI costs to invest aggressively in retirement accounts earning higher returns than the PMI cost, while buyers nearing retirement might prioritize minimizing all debt and payments.