Your first home starts with a plan
A practical guide to the numbers, the process, and your next big step.
Read the guideMinimum down payment: do you really need 20%?
A down payment is the part of a home’s purchase price you pay upfront rather than finance with the mortgage. Twenty percent is a common benchmark, but it is not a universal requirement. The minimum depends on the loan program, your eligibility, the property, and the lender. The best amount also leaves you enough cash for closing costs and life after the move.
How low can a down payment be?
Some conventional mortgage programs allow eligible borrowers to put down as little as 3%. FHA loans can allow 3.5% for qualifying borrowers. Certain VA and USDA loans offer no-down-payment options for borrowers and properties that meet their requirements. These are program options, not an assurance that every applicant or home qualifies. Compare the CFPB’s down payment guidance with the terms your lender offers, and review our FHA loan calculator for an estimate that includes your quoted mortgage insurance premiums.
Why does 20% matter?
On a conventional mortgage, a down payment of at least 20% generally avoids private mortgage insurance (PMI). It also reduces the initial loan balance. With the same price, rate, and term, borrowing less means a lower principal-and-interest payment and less total interest. A larger contribution also gives you more equity at the start, although it does not prevent the home’s value from falling.
The PMI benefit is specific to conventional financing. FHA mortgage insurance has separate rules, so putting 20% down does not automatically remove it. VA and USDA loans have their own fee structures. Review the CFPB explanation of down payments and loan terms before applying the 20% benchmark to a particular loan.
Compare the cash required at different percentages
On a $400,000 home, 3% is $12,000, 3.5% is $14,000, 10% is $40,000, and 20% is $80,000. Those figures cover the down payment alone. If you separately budget an illustrative $12,000 for closing costs, the 20% scenario requires $92,000 before accounting for other cash needs. The $12,000 is an example, not a quote or a required fee percentage.
Use this calculator to compare savings goals and the time needed to reach them. Its target percentage is your input, not a lender’s minimum. The model holds the home price and monthly savings constant and assumes no investment return. It does not verify assistance eligibility or automatically include emergency reserves, moving expenses, or prepaid escrow adjustments.
Balance a bigger down payment with keeping cash available
Saving more can reduce borrowing costs, but waiting may also mean more time paying rent and exposure to changing home prices and rates. Putting every available dollar into the purchase can leave too little for repairs or a loss of income. Compare several down payment amounts using the mortgage calculator, including any mortgage insurance, then check the full payment against your household budget. Ask lenders for written offers so you can weigh the cash required today against the cost over time.
