How Much Down Payment Do You Need to Buy a House
The down payment is the first large financial decision in a home purchase, and it shapes nearly everything that follows: your loan balance, your monthly payment, whether you pay mortgage insurance, and how quickly you reach the break-even point on buying versus renting.
Most buyers do not need 20% down. But every dollar you put down affects what the deal costs and how long it takes to pay off. This guide explains the options, the trade-offs, and how to decide what makes sense for your situation.
3% to 20% options
Most buyers qualify for programs starting at 3% down. VA and USDA loans go as low as 0% for eligible borrowers.
Lower down means higher payment
A 3% down payment on a $400,000 home can cost $747 more per month than 20% down when PMI is included.
PMI affects cost
Putting less than 20% down on a conventional loan triggers PMI, adding $35 to $200+ per month until you reach 20% equity.
Down payment changes break-even
A larger down payment lowers monthly cost, which shortens the break-even point where owning beats renting.
How Much Down Payment Do You Actually Need?
Many buyers do not need 20% down, but lower down payments increase monthly cost and total interest paid over the life of the loan. The right amount depends on purchase price, rate, and how long you plan to stay.
The sections below walk through each option with specific numbers so you can see exactly what each down payment level costs month to month and over time.
Minimum Down Payment Options by Loan Type
Your minimum down payment depends on which loan program you use. The four major categories each have different rules, and eligibility for the lower-down-payment programs comes with specific income, credit, property, or service requirements.
Conventional Loan
Minimum Down
3%
Min. Credit Score
620
PMI required below 20% down. PMI cancels when loan reaches 80% LTV. Best rates at 740+ score.
FHA Loan
Minimum Down
3.5% (580+ score) / 10% (500-579 score)
Min. Credit Score
500
Mortgage insurance premium (MIP) required. With less than 10% down, MIP lasts for the life of the loan.
VA Loan
Minimum Down
0%
Min. Credit Score
580-620 (lender overlay)
Available to eligible veterans, active-duty service members, and surviving spouses. Funding fee applies in most cases.
USDA Loan
Minimum Down
0%
Min. Credit Score
640 (streamlined)
Only for homes in USDA-eligible rural and suburban areas. Income limits apply. Annual guarantee fee required.
Down payment assistance programs
Most states offer down payment assistance programs through their housing finance agencies, including grants, forgivable second mortgages, and deferred-payment loans. Eligibility typically requires first-time buyer status, income limits, and a minimum credit score. Check your state's housing finance agency directly for current program availability and limits in your area.
PMI Explained: What It Costs and When It Ends
Private mortgage insurance (PMI) is not a penalty for putting less down. It is a risk management product that lenders require when the borrower has less than 20% equity at closing. PMI protects the lender, not you, if you default. You pay the premium but receive none of the coverage benefit.
PMI cost is expressed as a percentage of the loan amount per year and is divided into monthly installments. The rate varies based on your credit score, loan-to-value ratio, and the specific PMI provider. Typical ranges run 0.5% to 1.5% annually.
Estimated Monthly PMI Cost by Loan Amount
| Loan Amount | 0.5% Annual PMI | 1.0% Annual PMI | 1.5% Annual PMI |
|---|---|---|---|
| $250,000 | $104/mo | $208/mo | $313/mo |
| $350,000 | $146/mo | $292/mo | $438/mo |
| $450,000 | $188/mo | $375/mo | $563/mo |
| $550,000 | $229/mo | $458/mo | $688/mo |
When PMI ends on a conventional loan
You can request PMI cancellation when your loan balance reaches 80% of the original purchase price. Submit the request in writing to your servicer. You may need to demonstrate the value has not declined and that you have a good payment history. PMI drops off automatically when the balance reaches 78% of the original purchase price, without any action required.
FHA loans work differently. If your down payment was less than 10%, FHA mortgage insurance premium (MIP) stays for the entire loan term. If you put 10% or more down on an FHA loan, MIP cancels after 11 years. Many buyers refinance from an FHA to a conventional loan once they reach 20% equity to eliminate MIP.
Down Payment vs. Monthly Cost
Every dollar you put toward the down payment reduces your loan balance, which reduces two ongoing costs: your monthly principal and interest payment, and the PMI premium you pay until you reach 20% equity. The combined effect on monthly cash flow is significant.
On a $400,000 purchase, moving from 3% down to 20% down reduces the loan balance by $68,000. At a 7% rate over 30 years, that smaller loan balance saves roughly $452 per month in principal and interest alone. Add the elimination of PMI (which may have been $175 per month at 3% down) and the total monthly savings reach approximately $627 per month.
The question is whether the $68,000 in additional cash deployed at closing is worth $627 per month in payment savings. That is an implicit return on the incremental capital, and it needs to be compared to what that $68,000 could earn if invested in a diversified portfolio instead.
How Down Payment Affects the Break-Even Timeline
The rent vs buy break-even point is the year at which total ownership costs, including the opportunity cost of your down payment, fall below what you would have spent renting. A larger down payment lowers the monthly ownership cost, which pulls that break-even date earlier. But it also raises the opportunity cost, because you are committing more capital to an illiquid asset instead of keeping it invested.
In practical terms, the effect of down payment size on break-even varies based on local rent levels and appreciation rates. In a high-appreciation market where property values rise 4% to 5% per year, a smaller down payment still builds equity quickly through price appreciation, which can offset the higher PMI cost. In a flat or slow-appreciation market, the PMI cost without rapid equity growth shifts the math toward a larger down payment.
The Rent vs Buy Calculator accounts for down payment size, PMI, opportunity cost, appreciation, and rent growth in a single model. Running your own numbers with different down payment scenarios is the most accurate way to see how this trade-off plays out in your specific market.
Down Payment Example: $400,000 Purchase Price
The table below shows the effect of different down payment amounts on a $400,000 home purchase using a 30-year fixed mortgage. PMI estimates assume a 720 credit score. Rates are illustrative and reflect that higher LTV loans typically carry a slight rate premium.
| Down % | Cash Down | Rate | P&I / mo | PMI / mo | Total P&I+PMI | vs. 20% down |
|---|---|---|---|---|---|---|
| 3% | $12,000 | 7.25% | $2,647 | $175 | $2,822 | +$747/mo |
| 5% | $20,000 | 7.125% | $2,561 | $145 | $2,706 | +$631/mo |
| 10% | $40,000 | 7.00% | $2,395 | $90 | $2,485 | +$410/mo |
| 15% | $60,000 | 6.875% | $2,233 | $35 | $2,268 | +$193/mo |
| 20% | $80,000 | 6.75% | $2,075 | None | $2,075 | baseline |
Purchase price: $400,000. Term: 30 years fixed. 720 credit score assumed. PMI estimates based on typical rates for the given LTV. Rates are illustrative and reflect average national spreads by LTV tier as of 2026. Table excludes property taxes, homeowners insurance, and HOA fees. Actual totals will be higher.
3% vs 20% down
$747/mo more
The combined P&I and PMI difference between the minimum and maximum conventional down payment on a $400,000 home.
PMI at 3% down
~$175/mo
Disappears once the loan balance reaches 80% of the original purchase price, typically in 7 to 10 years with normal payments.
10% vs 20% down
$410/mo more
The cost of splitting the difference. Still meaningful but substantially lower than the minimum down scenario.
How to Model Down Payment in the Calculator
The table above shows the monthly payment impact of different down payments, but it does not show how those scenarios compare to renting, nor does it account for the opportunity cost of the cash you commit at closing. That is where the Rent vs Buy Calculator comes in.
When you enter a down payment amount in the calculator, it adjusts three things simultaneously: the loan balance (which drives monthly P&I), the PMI cost (which drops to zero at 20% equity), and the opportunity cost calculation (which models what that down payment capital would have returned if invested instead). The output is a break-even timeline that accounts for all three.
The most useful way to use the calculator for down payment decisions is to run two scenarios side by side: one with your actual available down payment (say, 10%) and one with 20%. The difference in the break-even timeline tells you whether the additional savings time to accumulate 20% down is worth the delay in entering the market.
Model Your Down Payment Scenarios
Enter your down payment amount to see the break-even timeline that accounts for PMI, opportunity cost, and local market conditions.
Run the Rent vs Buy CalculatorFrequently Asked Questions
Do I really need 20% down to buy a house?
No. The 20% figure is the threshold at which you avoid private mortgage insurance (PMI) on a conventional loan, not a requirement to qualify. Conventional loans allow as little as 3% down. FHA loans require 3.5% with a 580+ credit score. VA and USDA loans allow 0% down for qualifying borrowers. The trade-off for a smaller down payment is a larger loan balance, a higher monthly payment, and PMI costs until you reach 20% equity. Whether putting less down makes sense depends on your timeline, rate, and what you would do with the remaining cash.
What is PMI and how long do I have to pay it?
Private mortgage insurance (PMI) is a monthly premium required on conventional loans when your down payment is less than 20%. It protects the lender, not you, against default risk. PMI typically costs 0.5% to 1.5% of the loan amount per year. On a $380,000 loan, that is roughly $158 to $475 per month. Once your loan balance drops below 80% of the original purchase price, you can request cancellation. PMI drops off automatically when the balance reaches 78%. FHA loans carry a different product called MIP (mortgage insurance premium), which in many cases stays for the life of the loan if the down payment was below 10%.
Should I put more down or keep the cash?
This is a cash-versus-rate trade-off. A larger down payment reduces your monthly payment, eliminates or reduces PMI, and gives you a lower loan balance on which interest accrues. But it also depletes liquid savings, which you need for closing costs, post-move repairs, and emergency reserves. Most financial advisors suggest keeping three to six months of living expenses in reserve after closing. If a larger down payment would leave you with less than that, the incremental payment savings may not justify the liquidity risk. Use the Rent vs Buy Calculator to model both scenarios with your specific numbers.
How does down payment affect my break-even timeline?
A larger down payment lowers your monthly ownership cost, which shortens the break-even timeline (the point where owning becomes cheaper than renting). However, it also increases the opportunity cost, since that capital could have been invested elsewhere. The break-even calculation must account for both the reduced monthly cost of a larger down payment and the alternative returns that capital could have earned. Our Rent vs Buy Calculator includes both factors in its model.
Are there programs that help first-time buyers with the down payment?
Yes. Most states have down payment assistance programs through their housing finance agencies. These typically offer grants, forgivable second mortgages, or deferred-payment loans to first-time buyers who meet income and purchase price limits. Federal programs like FHA, VA, and USDA loans also reduce the barrier with low or zero down payment requirements. HUD-approved housing counselors can help you identify programs available in your specific area. Search your state housing finance agency directly for current offerings.
Does a larger down payment lower my mortgage interest rate?
It can, depending on the loan type and lender. On conventional loans, loan-to-value (LTV) ratio is one of the factors in rate pricing. A borrower putting 20% or more down generally qualifies for a lower rate than one putting 5% down with the same credit score, because the lower LTV reduces the lender's risk. The rate difference may be 0.125% to 0.375% depending on the lender and market conditions. This is separate from the PMI savings, so a larger down payment can improve both the rate and eliminate insurance costs simultaneously.
Related Guides
Credit Score to Buy a House
Minimum scores by loan type and how credit score affects your mortgage rate.
Closing Costs Explained
The additional 2% to 5% in fees you need to budget beyond the down payment.
First-Time Home Buyer Checklist
Step-by-step checklist from financial prep through closing day.
Home Affordability Calculator
Enter your income and debts to find your maximum purchase price.
Methodology
Loan program minimum down payment requirements reflect guidelines published by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the USDA Rural Development program as of 2026. PMI cost ranges are based on industry data from MGIC, Radian, and Genworth. Example calculations use a $400,000 purchase price, a 720 credit score, and illustrative rates based on national average spreads by LTV tier sourced from Freddie Mac's Primary Mortgage Market Survey.
All figures in the example table are illustrative. Actual rates, PMI costs, and monthly payments will differ based on lender, borrower credit profile, loan type, property type, and current market conditions. The opportunity cost framework referenced in the break-even discussion reflects the methodology used in the Rent vs Buy Calculator.
Editorial Note: This article is for general informational purposes only. It is not financial, legal, tax, or investment advice. Mortgage programs, rates, and PMI requirements change frequently. Consult with a licensed mortgage professional before making any major financial decisions.
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