Down Payment Calculator

The amount you need for a down payment depends primarily on the type of mortgage you choose. There is no single "right" amount, and the requirements vary significantly across loan programs. Here is a breakdown of the minimum down payment by loan type:

Conventional loans (3-5% minimum): Backed by Fannie Mae and Freddie Mac, conventional loans offer the widest range of down payment options. First-time homebuyers can put down as little as 3% through programs like Fannie Mae's HomeReady and Freddie Mac's Home Possible, while repeat buyers typically need at least 5%. If you put down less than 20%, you will pay private mortgage insurance (PMI), which usually costs between 0.5% and 1.5% of the loan amount per year. PMI can be canceled once your equity reaches 20%.

FHA loans (3.5% minimum): Insured by the Federal Housing Administration, FHA loans are popular with first-time buyers and those with lower credit scores. With a credit score of 580 or higher, you can put down just 3.5%. Scores between 500 and 579 require 10% down. FHA loans charge an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount plus an annual premium of 0.55% for the life of the loan (if you put down less than 10%).

VA loans (0% down): Available exclusively to eligible veterans, active-duty service members, and surviving spouses, VA loans require no down payment at all. There is no monthly mortgage insurance, though a one-time VA funding fee of 1.25-3.3% applies (which can be rolled into the loan). VA loans often offer the most favorable terms of any mortgage product.

USDA loans (0% down): The USDA Rural Development loan program offers 100% financing for buyers purchasing in eligible rural and suburban areas. Income limits apply (generally 115% of area median income), and the home must be in a USDA-designated eligible area. A 1% upfront guarantee fee and 0.35% annual fee apply, but no traditional mortgage insurance is required.

Jumbo loans (10-20% minimum): For homes that exceed conforming loan limits ($766,550 in most areas for 2024, higher in high-cost regions), jumbo loans typically require 10-20% down. Because these loans cannot be sold to Fannie Mae or Freddie Mac, lenders take on more risk and require larger down payments, higher credit scores (often 700+), and more cash reserves.

While many buyers focus on the minimum required down payment, there are compelling financial reasons to put down more if you can afford to do so. A larger down payment affects virtually every aspect of your mortgage and homeownership experience:

Lower monthly payments: The most immediate benefit of a larger down payment is a smaller loan balance, which directly reduces your monthly principal and interest payment. For example, on a $400,000 home at 7% interest over 30 years, increasing your down payment from 5% ($20,000) to 20% ($80,000) reduces your monthly P&I payment from about $2,528 to $2,129, saving you roughly $399 every month.

Eliminate PMI at 20%: Private mortgage insurance is required on conventional loans when the down payment is below 20%. PMI can cost $100 to $400 or more per month depending on your loan size, credit score, and loan-to-value ratio. Putting 20% down eliminates this cost entirely, which can save you tens of thousands of dollars over the life of the loan.

Better interest rates: Lenders view borrowers with larger down payments as lower risk. Many lenders offer slightly better interest rates to borrowers who put down 20% or more compared to those making minimum down payments. Even a 0.125-0.25% rate reduction can save thousands over a 30-year mortgage.

More home equity from day one: Your down payment becomes instant equity in your home. Starting with 20% equity means you have a meaningful financial cushion against market fluctuations. If home values decline 5-10%, you are far less likely to end up "underwater" (owing more than the home is worth) compared to a buyer who put down just 3-5%.

Stronger purchase offer: In competitive housing markets, sellers prefer buyers with larger down payments because they are seen as more financially stable and more likely to close successfully. A 20% down offer may beat a 3% down offer even at the same price, because the seller has more confidence the deal will go through.

Less total interest paid: By borrowing less, you pay less interest over the full term of the loan. On a $400,000 home at 7%, the difference between 5% and 20% down is approximately $143,000 in total interest over 30 years. That is a significant long-term savings that compounds over time.

Assembling your down payment does not have to come exclusively from personal savings. Lenders accept funds from a variety of legitimate sources, and understanding your options can help you buy a home sooner:

Personal savings: The most straightforward source is money you have saved in bank accounts, money market accounts, or certificates of deposit. Lenders will want to see at least two months of bank statements showing that the funds are "seasoned" (meaning they have been in your account for a while, not deposited recently from an unknown source). Setting up automatic transfers to a dedicated house fund is one of the most effective savings strategies.

Gifts from family: Most loan programs allow family members to gift part or all of the down payment. Conventional loans typically limit gift donors to family members, while FHA loans also accept gifts from employers, unions, and close friends. You will need a signed gift letter and documentation of the fund transfer. The gift must be genuinely non-repayable; any arrangement to repay the gift constitutes fraud.

Down payment assistance (DPA) programs: Over 2,000 DPA programs exist across the United States, offered by state and local housing agencies, nonprofits, and some employers. These programs provide grants, forgivable loans, or low-interest second mortgages that can cover part or all of your down payment and closing costs. Many first-time buyer programs also offer below-market interest rates on the primary mortgage.

Retirement account withdrawals: First-time buyers can withdraw up to $10,000 from a traditional IRA without the 10% early withdrawal penalty (income tax still applies). Roth IRA contributions can be withdrawn at any time tax-free and penalty-free. You can also borrow from your 401(k), though this reduces your retirement savings growth and must be repaid, typically within five years (or sooner if you leave your employer).

Sale of assets: Proceeds from selling stocks, bonds, a car, or other assets can be used toward your down payment. You will need to document the sale and may owe capital gains taxes on appreciated investments. Lenders will want a paper trail connecting the sale to the deposit in your bank account.

Employer assistance programs: Some employers offer homebuying benefits, including down payment matching programs, forgivable loans, or housing stipends. These are more common in industries competing for talent in high-cost housing markets like tech, healthcare, and finance.

One of the most persistent myths in home buying is that you need 20% down to purchase a home. While a 20% down payment has clear advantages, the reality is that most buyers put down significantly less, and doing so can be a perfectly sound financial decision.

According to the National Association of Realtors, the median down payment for first-time homebuyers is approximately 6-8%, while repeat buyers put down a median of 13-17% (often using equity from a previous home sale). Among all buyers, only about a third put down 20% or more.

The 20% standard became deeply ingrained during the pre-2008 era and was reinforced after the financial crisis as lenders tightened requirements. However, today's mortgage market offers numerous low-down-payment programs specifically designed to make homeownership accessible. Fannie Mae's HomeReady and Freddie Mac's Home Possible programs, for example, allow just 3% down with reduced mortgage insurance for income-qualified borrowers.

The cost of waiting to save 20% can be substantial. If home prices are appreciating at 3-5% per year in your area, the down payment target is a moving target that keeps getting larger. Meanwhile, you continue paying rent that builds no equity. In many markets, the combined cost of a slightly higher monthly payment plus PMI is less than the price appreciation you would miss while saving for a larger down payment.

That said, the decision to buy with less than 20% down should be made carefully. You should be comfortable with the higher monthly payment, have stable employment and income, maintain an emergency fund, and understand that PMI is an additional cost that does not build equity. Run the numbers using this calculator and our mortgage calculator to see the full picture before deciding.