A down payment is the share of a home's price you pay upfront; the rest is your mortgage. How much you need depends on the loan type and your goals — and there's a real difference between the minimum you can put down and the amount that saves you money long term.
How much do different down payments look like?
Here's a comparison using a $300,000 home at current rates to show how each down payment percentage affects your loan, monthly payment, and PMI:
| Down Payment % | Down Payment Amount | Loan Amount | Monthly Payment* | PMI/Month† |
|---|---|---|---|---|
| 3% | $9,000 | $291,000 | ~$1,925 | ~$204 |
| 5% | $15,000 | $285,000 | ~$1,885 | ~$199 |
| 10% | $30,000 | $270,000 | ~$1,786 | ~$189 |
| 15% | $45,000 | $255,000 | ~$1,687 | ~$134 |
| 20% | $60,000 | $240,000 | ~$1,588 | $0 |
*Monthly principal and interest at 6.5% for 30 years. †PMI estimated at 0.5%–1% of loan annually.
The difference between 5% and 20% down is $45,000 upfront — but the 20% option saves you about $300/month in PMI alone, plus a lower monthly mortgage payment. Over 10 years, that adds up to more than $36,000 in PMI costs avoided.
What is PMI and why does it matter?
Private mortgage insurance (PMI) is a monthly fee added to your mortgage when you put down less than 20%. It protects the lender — not you — in case you default on the loan. PMI doesn't reduce your payment or build equity; it's purely an extra cost of borrowing with a small down payment.
PMI typically costs 0.5% to 1.5% of the loan amount per year. On a $270,000 loan (5% down on a $300,000 home), that's roughly $112 to $338 per month — or $1,350 to $4,050 per year. The exact rate depends on your credit score, loan type, and down payment size.
The good news: PMI isn't forever. You can request removal once you reach 20% equity (through payments, home appreciation, or both). It automatically drops off when your balance hits 78% of the original value. Some lenders require a new appraisal to confirm the home's value has held.
An alternative is an 80/10/10 piggyback loan: put 10% down, take a first mortgage for 80%, and a second mortgage (often a HELOC) for the remaining 10%. This avoids PMI entirely but means managing two loans, and the second mortgage usually has a higher rate.
Why 20% is the classic target
Putting down 20% typically lets you avoid PMI — an extra monthly cost that protects the lender, not you. It also means borrowing less, which lowers both your interest rate options and your monthly payment. On a $300,000 home, 20% is $60,000; 5% is $15,000. The smaller down payment is far easier to reach, but means a bigger loan and usually PMI until you build enough equity.
Beyond PMI, a larger down payment also gives you:
- Lower interest rates — lenders often offer better rates for lower loan-to-value ratios.
- More equity from day one — if home values dip, you're less likely to go underwater.
- Lower monthly payments — freeing up cash for other goals like retirement or an emergency fund.
- A stronger offer — sellers may prefer buyers with larger down payments because the deal is less likely to fall through due to financing issues.
Don't forget closing costs
Beyond the down payment, budget roughly 2%–5% of the price for closing costs. On a $300,000 home, that's $6,000 to $15,000. Closing costs include:
- Loan origination fee — the lender's fee for processing your mortgage (0.5%–1% of the loan).
- Appraisal fee — typically $300–$600, required by the lender to confirm the home's value.
- Title insurance — protects against disputes over property ownership ($1,000–$3,000 typically).
- Attorney fees — required in some states, typically $500–$1,500.
- Prepaid items — property taxes (2–6 months upfront), homeowner's insurance (first year), and prepaid interest.
- Recording fees — small government charges to record the deed ($50–$250).
You can sometimes negotiate for the seller to cover part of the closing costs, especially in a buyer's market. Your lender will provide a Loan Estimate within three days of application that itemizes all costs. It's wise to keep your emergency fund intact too, rather than draining it for the purchase.
First-time home buyer programs
Several programs make homeownership more accessible with lower down payments:
- FHA loans — require just 3.5% down with a credit score of 580+. Backed by the Federal Housing Administration, these are popular with first-time buyers. The trade-off: mandatory mortgage insurance for the life of the loan (unless you put 10%+ down, then it drops after 11 years).
- VA loans — zero down payment for eligible veterans, active-duty military, and qualifying spouses. No PMI. Funding fee applies (1.25%–3.3%) but can be rolled into the loan.
- USDA loans — zero down payment for homes in eligible rural and suburban areas. Income limits apply. Guarantee fee of 1% upfront and 0.35% annually.
- State and local programs — many states offer down payment assistance, grants, or matched savings accounts (e.g., CalHFA in California, THDA in Tennessee). Check your state's housing finance agency.
- Employer programs — some companies offer homebuyer assistance as a benefit, including down payment loans or grants.
First-time buyer programs often have income limits and home price caps. Contact a HUD-approved housing counselor (free service) to find programs you qualify for in your area.
How long will it take to save?
Pick a target home price, choose your down-payment percentage, and work out the dollar amount. Then use our savings goal calculator to see how much to set aside each month to hit it by your target date — keep the money in a high-yield account so interest helps.
Here's a realistic example: for a $300,000 home with 5% down ($15,000) plus 3% closing costs ($9,000), you'd need $24,000 total. At $1,000/month in savings, that's 24 months — or about 22 months if your savings earn 4.5% APY in a high-yield account.
Strategies to save for your down payment faster
- Automate transfers to a dedicated high-yield savings account on payday. Treat it like a bill — saving happens before spending.
- Use windfalls strategically. Tax refunds, bonuses, cash gifts, or money from selling unused items can accelerate your timeline significantly.
- Temporarily reduce retirement contributions (to the employer match only) to free up cash for the down payment. Resume full contributions after you close.
- Consider house hacking. Buy a duplex or multi-family unit, live in one unit, and rent the others. FHA and conventional loans allow this with as little as 3.5% down.
- Look into first-time buyer savings accounts. Some states offer tax-advantaged accounts specifically for down payment savings, with higher interest rates or tax deductions.
To model your savings plan, use the savings goal calculator — enter your target, starting balance, and monthly contribution to see your timeline. The compound interest calculator also helps you understand how interest accelerates your progress over time.
Don't forget your emergency fund
Buying a home comes with unexpected costs — a furnace that quits, a roof leak, a plumbing emergency. Draining your entire savings for the down payment leaves you vulnerable. Aim to keep at least 3 months of expenses in reserve after closing. See our emergency fund guide for how much to save and where to keep it.
Frequently asked questions
- How much should I put down on a house?
- The ideal down payment depends on your finances and goals. A 20% down payment is the classic target because it eliminates private mortgage insurance (PMI), lowers your interest rate, and reduces your monthly payment. However, many loans allow as little as 3%–5% down. On a $300,000 home, 20% is $60,000 while 5% is $15,000 — a much lower barrier to entry, though it means a larger loan and PMI costs.
- What is PMI and how much does it cost?
- Private mortgage insurance (PMI) is a monthly fee added to your mortgage when you put down less than 20%. It protects the lender if you default. PMI typically costs 0.5% to 1.5% of the loan amount per year, or about $112 to $338 per month on a $270,000 loan. Once you reach 20% equity through payments or home appreciation, you can request PMI removal. It automatically drops off at 22% equity.
- What are closing costs and how much are they?
- Closing costs are fees paid at the end of the home purchase process, typically 2%–5% of the home price. On a $300,000 home, that's $6,000 to $15,000. They include appraisal fees, title insurance, attorney fees, loan origination charges, and prepaid items like property taxes and homeowner's insurance. Budget for both the down payment and closing costs together — some buyers negotiate for the seller to cover part of the closing costs.
- Are there programs for first-time home buyers?
- Yes, several programs help first-time buyers. FHA loans require just 3.5% down with a 580+ credit score. VA loans and USDA loans offer zero down payment for eligible buyers. Many states and cities offer down payment assistance programs, grants, or matched savings accounts. Some employers also offer homebuyer assistance. Check with a local housing counselor or lender to find programs available in your area.
This guide is for educational purposes only and is not financial advice.