Down Payment Calculator
Trying to figure out how much cash you need upfront? Enter the home price and your down payment percentage or dollar amount to see your loan size and PMI status.
The 20% Down Payment Myth
Ask anyone about home buying and they'll tell you that you need 20% down. This myth persists despite data showing most buyers put down far less. The median down payment for first-time buyers hovers around 6%, and repeat buyers average 13%.
Where did 20% come from? It's the threshold where lenders stop requiring private mortgage insurance. Drop below that and you pay an extra monthly fee until your equity climbs back above 20%. But avoiding PMI isn't always worth delaying homeownership for years while you save.
Consider a $300,000 home. At 20% down you need $60,000 cash. At 10% down you need $30,000. If home prices rise 4% annually while you save that extra $30,000, the house now costs $312,000—and you're chasing a moving target. Sometimes accepting PMI for a few years beats sitting on the sidelines.
Down Payment Sources Beyond Savings
Most people assume down payments come from checking accounts, but buyers tap multiple sources. Gifted funds from family are common—parents or grandparents can legally gift money for a down payment, though lenders require a signed letter confirming it's a gift, not a loan.
Retirement accounts offer another route. First-time buyers can withdraw up to $10,000 from an IRA without the usual 10% early withdrawal penalty (though you still owe income tax). Some 401(k) plans allow loans against your balance, which you repay to yourself with interest.
Down payment assistance programs exist in most states, offering grants or low-interest loans to qualified buyers. These programs target specific groups—teachers, healthcare workers, first responders—or income brackets. The money might be forgivable after you live in the home for a set period, effectively making it free.
How Down Payment Size Affects Your Mortgage
A larger down payment shrinks your loan amount, which reduces your monthly payment and total interest paid over the life of the loan. On a $350,000 home at 6.5% for 30 years, putting down 10% ($35,000) means borrowing $315,000 with a monthly payment of $1,991. Put down 20% ($70,000) and you borrow $280,000 with a payment of $1,770—a difference of $221 per month and $79,560 over 30 years.
But that math ignores opportunity cost. If you invest the extra $35,000 in an index fund averaging 8% annual returns instead of using it for a bigger down payment, you'd have roughly $350,000 after 30 years. Meanwhile, you paid an extra $79,560 in interest but kept that $35,000 working for you. The net difference depends on your actual investment returns and discipline.
There's also the liquidity factor. Money locked in home equity is illiquid—you can't spend it without selling the house or taking out a loan. Keeping a smaller down payment and maintaining a larger emergency fund gives you flexibility for job changes, medical bills, or other surprises. Financial security isn't just about minimizing interest; it's about having options.
Frequently Asked Questions
What is a typical down payment percentage?
Conventional wisdom says 20%, which avoids private mortgage insurance. In reality, the median first-time buyer puts down 7%, and FHA loans allow as little as 3.5%.
Can I buy a house with less than 20% down?
Absolutely. FHA loans accept 3.5% down, and some conventional loans go as low as 3%. You'll pay PMI until you hit 20% equity, but low down payment programs exist for a reason.
What is PMI and how much does it cost?
Private mortgage insurance protects the lender if you default. It typically costs 0.5% to 1.5% of the loan amount annually, added to your monthly payment until you reach 20% equity.
Should I drain savings to reach 20% down?
Not if it leaves you with no emergency fund. Keeping liquidity for repairs, job loss, or medical expenses often beats avoiding PMI. Run the numbers on both scenarios before deciding.
Does a bigger down payment lower my interest rate?
Sometimes. Lenders may offer slightly better rates at 20% or 25% down because lower loan-to-value ratios reduce their risk. The difference is usually 0.125% to 0.25%.