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. For a step-by-step process through the entire buying journey, see our First-Time Home Buyer Playbook.
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. For a focused look at zero-down options, see our guide to buying with zero down.
The short answer: Most buyers can buy a home with 3% to 3.5% down using conventional or FHA loans. VA and USDA loans allow 0% down for eligible borrowers. The trade-off is that a smaller down payment means a higher monthly payment, PMI costs, and more total interest over the life of the loan. You do not need 20% down to buy, but 20% is the threshold where PMI disappears and rates typically improve.
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.
Key Takeaway
You do not need 20% down to buy a home. Most conventional loans allow 3% down. FHA allows 3.5%. The trade-off is PMI, a higher monthly payment, and more total interest. The best down payment is the one that leaves you enough cash reserves for closing costs, emergencies, and immediate repairs.
PMI Explained: What It Costs and When It Ends
In simple terms: PMI is a monthly fee you pay when your down payment is under 20%. It costs roughly $35 to $200+ per month depending on your loan size and credit score. On a conventional loan, PMI drops off once you reach 20% equity. On an FHA loan with less than 10% down, the insurance stays for the life of the loan.
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.
How to Save for a Down Payment: A Realistic Timeline
One of the most common questions about down payments is how long it actually takes to save one. The answer depends on your monthly savings rate and target down payment percentage. The table below shows realistic timelines for a $400,000 home purchase.
Down Payment Savings Timeline: $400,000 Home
| Monthly Savings | Time to 3% ($12k) | Time to 10% ($40k) | Time to 20% ($80k) |
|---|---|---|---|
| $500/mo | 2 years | 6.7 years | 13.3 years |
| $1,000/mo | 1 year | 3.3 years | 6.7 years |
| $1,500/mo | 8 months | 2.2 years | 4.4 years |
| $2,000/mo | 6 months | 1.7 years | 3.3 years |
This table assumes you are starting from zero and saving the full down payment amount in cash. In practice, many buyers combine personal savings with gift funds from family or down payment assistance programs to accelerate the timeline. For a complete list of what to prepare before you start the buying process, see our First-Time Home Buyer Checklist.
Remember that closing costs add another 2% to 5% to the cash you need at closing. Budget for those separately. Our Closing Costs Explained guide breaks down what those fees cover.
See how your savings rate affects your timeline
Model Your Down Payment TimelineDown Payment vs. Monthly Cost
In simple terms: Every dollar you put down reduces your loan balance, which lowers your monthly payment and may eliminate PMI. The trade-off is that cash used for a down payment is no longer available for emergencies, investments, or other goals — including college savings vs down payment — how to choose. The key question is whether the monthly savings from a larger down payment outweigh the opportunity cost of tying up that cash.
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.
Down Payment Size by Purchase Price Tier
Not everyone is buying a $400,000 home. The table below shows recommended down payment strategies at different price points, so you can see how the numbers scale for your target purchase price.
Down Payment by Price Tier
| Home Price | 3% Down | 10% Down | 20% Down | Est. Monthly at 20% (6.75%) |
|---|---|---|---|---|
| $250,000 | $7,500 | $25,000 | $50,000 | $1,297 |
| $400,000 | $12,000 | $40,000 | $80,000 | $2,075 |
| $600,000 | $18,000 | $60,000 | $120,000 | $3,113 |
| $1,000,000 | N/A (jumbo) | $100,000 | $200,000 | $5,188 |
At the $1 million price point, jumbo loan rules typically apply, which require higher down payments and stricter credit qualifications. Most jumbo loans start at 10% down and often require 20% for the best rates.
The monthly payment at 20% down scales roughly linearly with price: a $600,000 home costs about 1.5 times the monthly payment of a $400,000 home at the same down payment percentage and rate. Use the Home Affordability Calculator to see how price affects your specific monthly payment.
Enter your target price to see your exact down payment cost
Run the NumbersHow Down Payment Affects the Break-Even Timeline
In simple terms: A larger down payment lowers your monthly payment, which shortens the break-even point where buying becomes cheaper than renting. But it also means more of your capital is tied up in the home instead of earning returns elsewhere. The net effect depends on your local market, mortgage rate, and how long you plan to stay. For a full walkthrough of how these factors interact, see our Rent vs Buy Break-Even Analysis.
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.
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.
Total Interest Cost Over 30 Years by Down Payment
The monthly payment is only part of the story. The total interest you pay over the full loan term varies dramatically with down payment size, because the loan balance and rate are both lower at higher down payment levels. The table below shows the lifetime interest cost for each scenario.
Total Interest Cost: $400,000 Home, 30-Year Fixed
| Down % | Loan Amount | Rate | Monthly P&I | Total Interest (30yr) | Interest Saved vs 3% |
|---|---|---|---|---|---|
| 3% | $388,000 | 7.25% | $2,647 | $565,000 | — |
| 10% | $360,000 | 7.00% | $2,395 | $502,000 | $63,000 |
| 20% | $320,000 | 6.75% | $2,075 | $427,000 | $138,000 |
The difference between 3% down and 20% down is $138,000 in total interest over the life of the loan. That is money that goes to the lender rather than building your wealth. The lower rate at 20% down (due to better LTV pricing) combines with the smaller loan balance to produce this large gap.
To see how these interest costs affect your full financial picture, including the opportunity cost of using cash for a down payment instead of investing it, use the Rent vs Buy Calculator, which models the full trade-off between monthly savings and long-term investment returns. You can also use our Home Affordability Calculator to see how different down payment amounts affect the price range you can afford.
Run the full amortization with your down payment
Run the Full Comparison3% 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.
Key Takeaway
The difference between 3% down and 20% down on a $400,000 home is $747 per month and $138,000 in total interest over 30 years. But the 20% down scenario requires $68,000 more cash at closing. The right choice depends on whether you have that cash available and what alternative uses it would serve.
FHA vs. Conventional: When Each Makes Sense
FHA and conventional loans are the two most common options for buyers with less than 20% down. They have different down payment requirements, insurance costs, and cancellation rules. The right choice depends on your credit score, how much you can put down, and how long you plan to stay in the home.
FHA vs Conventional: $400,000 Home, Minimum Down
| Factor | FHA (3.5% down) | Conventional (3% down) |
|---|---|---|
| Minimum down | 3.5% | 3% |
| Min credit score | 580 (3.5%) | 620 |
| Monthly insurance | ~$280/mo MIP (1.25% annual) | ~$175/mo PMI (0.5% annual) |
| Insurance cancellation | MIP stays for life (under 10% down) | Cancels at 78% LTV automatically |
| Rate at 680 score | ~6.75% | ~7.25% |
| Total monthly (P&I + insurance) | ~$2,870 | ~$2,997 |
For a buyer with a 680 credit score and limited savings, FHA often provides a lower total monthly payment because the rate is better at lower credit tiers. However, the MIP (mortgage insurance premium) on FHA loans with less than 10% down stays for the full loan term, unlike conventional PMI which drops off automatically. This makes FHA a better short-term play: use it to get in the door, then refinance to a conventional loan once you build enough equity.
Your credit score significantly affects which option makes sense. For a detailed breakdown of how credit scores affect your mortgage options, see our Credit Score to Buy a House guide.
Compare FHA and conventional with your numbers
Compare Loan TypesHow to Choose Your Down Payment Amount
There is no single right answer for every buyer. The best down payment for your situation depends on these factors. Review each one and use the checklist to guide your decision.
Consider a larger down payment when:
- You have a fully funded 3-6 month emergency fund after closing
- You plan to stay in the home 7+ years
- You want the lowest possible monthly payment
- Your credit score is below 740 (lower LTV helps offset rate pricing)
- You are in a slow-appreciation market
- You want to avoid PMI entirely
- You have additional cash available for closing costs and immediate repairs
Consider a smaller down payment when:
- You have strong job security but limited cash savings
- You plan to stay 3-5 years or less
- You are in a fast-appreciating market (4%+ annual)
- You can invest the difference at a higher expected return than the PMI cost
- You need cash reserves for renovations or repairs after closing
- You qualify for a low-down-payment program (VA, USDA, conventional 3%)
- You want to enter the market sooner rather than waiting to save more
The most important factor is your timeline. The longer you plan to stay, the more the long-term interest savings from a larger down payment matter. For shorter stays, preserving liquidity and entering the market earlier with a smaller down payment often wins.
If you are deciding between a smaller down payment now or waiting to save more, read our The Real Cost of Waiting to Buy guide, which analyzes the trade-off between entering the market sooner versus waiting for a larger down payment.
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 CalculatorKey Takeaway
The right down payment balances three things: monthly affordability, total interest cost, and cash reserves. A larger down payment saves money over time but ties up liquidity. A smaller down payment gets you into the market sooner but costs more per month. Run both scenarios in the calculator before making your decision.
Frequently 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. For a full explanation of how break-even works, see our Rent vs Buy Break-Even Analysis.
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. For a deeper look at how rates affect your overall affordability, see our guide on how mortgage rates affect affordability.
How long does it take to save for a down payment on a house?
It depends on your monthly savings rate and target down payment. Saving 3% ($12,000 on a $400,000 home) takes 2 years at $500/month or 6 months at $2,000/month. Saving 20% ($80,000) takes roughly 6.7 years at $1,000/month or 3.3 years at $2,000/month. Your timeline also depends on starting savings, any gift funds, and down payment assistance programs available in your state.
Is it better to put 5% down or wait and put 20% down?
The answer depends on how long it will take you to save the additional 15% and what happens to home prices and rents in the meantime. If saving to 20% takes 5 years, you are paying rent for 5 extra years while home prices may rise. The break-even analysis needs to compare the monthly savings of a 20% down payment (lower payment, no PMI) against the extra years of rent and potential price appreciation you miss while saving. In fast-appreciating markets, buying earlier with a smaller down payment often wins. In flat markets, waiting for 20% can be the better financial path. For a deeper analysis of this trade-off, see our guide on The Real Cost of Waiting to Buy.
Does putting more down help me get a better mortgage rate?
Yes, generally. On conventional loans, lower loan-to-value (LTV) ratios qualify for better rate pricing. The rate spread between a 5% down borrower and a 20% down borrower is typically 0.25% to 0.375% with the same credit score. At 25% or 30% down, the rate improvement is smaller but still present. Combined with the elimination of PMI at 20%, the total monthly savings from a larger down payment includes both the rate improvement and the insurance cost removal.
What down payment do I need for a $500,000 house?
For a $500,000 purchase, conventional loans require 3% ($15,000) minimum. FHA requires 3.5% ($17,500). At this price point, jumbo loan rules may apply in some markets if the loan exceeds conforming limits. Jumbo loans typically require 10% to 20% down and have stricter credit requirements. Down payment dollars scale linearly with price: 10% on a $500,000 home is $50,000, and 20% is $100,000.
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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