Down Payment Calculator

The amount of down payment you need depends primarily on the type of mortgage you choose and your financial qualifications. While 20% has long been considered the gold standard, the reality is that most buyers put down considerably less. Understanding your options helps you plan an achievable savings goal and get into your home sooner.

FHA Loans: 3.5% Down

Federal Housing Administration (FHA) loans are the most popular option for first-time buyers and those with lower credit scores. With a credit score of 580 or higher, you can put down as little as 3.5%. On a $400,000 home, that is just $14,000 instead of $80,000 for 20%. The trade-off is that FHA loans require both an upfront mortgage insurance premium (1.75% of the loan, typically financed into the loan) and an annual MIP (0.50-0.55% of the loan, paid monthly) that lasts for the life of the loan if your down payment is under 10%. Despite the insurance cost, FHA loans make homeownership accessible to millions of buyers who could not otherwise afford the upfront cost.

VA Loans: 0% Down

Available to eligible military veterans, active-duty service members, and surviving spouses, VA loans offer the unique benefit of 0% down payment with no PMI requirement. There is a one-time VA funding fee (typically 1.25-3.3% of the loan, which can be financed), but no ongoing mortgage insurance. VA loans also tend to offer competitive interest rates and have no maximum loan amount for borrowers with full entitlement. If you are eligible for a VA loan, it is often the most cost-effective path to homeownership, saving you tens of thousands in both down payment and insurance costs over the life of the loan.

Conventional Loans: 3-20% Down

Conventional loans offer the most flexibility in down payment amounts. While 20% is ideal for avoiding PMI, many conventional programs allow as little as 3% down for first-time buyers (Fannie Mae HomeReady and Freddie Mac Home Possible) or 5% for repeat buyers. Conventional PMI costs 0.3-1.5% of the loan amount annually and can be removed once you reach 20% equity through payments or home appreciation. Unlike FHA mortgage insurance, conventional PMI is cancelable, making these loans attractive for buyers who expect to build equity quickly through home value appreciation or aggressive payments.

20% Down: The PMI-Free Option

Putting 20% down eliminates PMI entirely, reduces your monthly payment, and gives you immediate equity in the home. On a $400,000 home, a 20% down payment ($80,000) means your loan is $320,000 instead of $386,000 with 3.5% down. The smaller loan means lower monthly payments, less total interest over the life of the loan, and no PMI charges. However, saving $80,000 takes most families years. The median household income in the US is approximately $75,000, and saving 20% of a median-priced home ($400,000+) while paying rent and other expenses is a significant challenge. This is why most financial experts agree that waiting until you have 20% is not always the best strategy.

While a low down payment gets you into a home sooner, it comes with real costs that add up over time. Understanding these costs helps you make an informed decision about whether to buy now or save more.

PMI Adds Up Quickly

Private Mortgage Insurance on a conventional loan typically costs 0.5-1.0% of the loan amount per year. On a $380,000 loan (5% down on a $400,000 home), that is $1,900 to $3,800 per year, or $158 to $317 per month. Over the time it takes to reach 20% equity (often 7-10 years), you could pay $13,000 to $32,000 in PMI. FHA mortgage insurance can be even more expensive because it includes both an upfront premium and annual premiums that may last the entire 30-year term. On the same $380,000 loan, FHA MIP would cost about $6,650 upfront plus $174 per month for the life of the loan — potentially totaling over $69,000 in insurance premiums if you never refinance. These costs are real money that goes toward insurance rather than building your equity.

Larger Loan Means More Interest

A smaller down payment means a larger loan, which means more total interest paid over the life of the mortgage. On a $400,000 home at 6.5% for 30 years, the difference between 5% down ($380,000 loan) and 20% down ($320,000 loan) is approximately $127,000 more in total interest for the smaller down payment. Combined with PMI costs, a 5% down payment could cost you over $150,000 more than a 20% down payment over the life of the loan. This does not mean you should always wait — if home prices are rising 5% per year, the house itself costs $20,000 more each year you wait, which can offset the savings.

High-Yield Savings Account (HYSA)

A high-yield savings account is the most popular and practical choice for down payment savings. Online banks currently offer rates of 4-5% APY, which is significantly higher than the 0.01-0.1% offered by traditional brick-and-mortar banks. Your money is FDIC insured up to $250,000, completely liquid (you can withdraw anytime), and the interest earned helps your savings grow faster. On a $50,000 balance earning 4.5%, you earn approximately $2,250 per year in interest — essentially free money that brings your goal closer. HYSAs are the best option for timelines of 1-3 years.

Certificates of Deposit (CDs)

CDs offer slightly higher rates than savings accounts in exchange for locking your money for a fixed period (typically 6 months to 5 years). If you know you won't need your down payment for a specific period, a CD ladder (spreading money across CDs with different maturity dates) can maximize your returns while maintaining some flexibility. The downside is early withdrawal penalties, typically 3-6 months of interest. CDs work well when you have a 2-4 year timeline and want to earn a predictable return without any risk to principal.

Money Market Accounts

Money market accounts combine features of savings and checking accounts. They typically offer rates comparable to HYSAs, with the added convenience of check-writing and debit card access. This can be useful if you need to write a check for earnest money or closing costs directly from your savings. Money market accounts are FDIC insured and offer the same safety as savings accounts, making them a solid alternative for down payment savings.

Numerous federal, state, and local programs exist to help first-time buyers with down payments and closing costs. Many buyers qualify for assistance they do not know about. Here are the most common programs to explore.

State Housing Finance Agencies (HFAs)in every state offer down payment assistance programs, typically as grants (free money) or forgivable second mortgages that are forgiven after you live in the home for a certain period (often 5-10 years). These programs are often income-limited but available to a wide range of buyers. Check your state's HFA website for current programs and eligibility requirements. Many of these programs can be combined with FHA or conventional loans for maximum benefit.

Employer-assisted housing programs are offered by some large employers, particularly in high-cost areas. These may include forgivable loans, matching savings programs, or direct grants to help employees purchase homes near their workplace. Ask your HR department whether your company offers any housing assistance benefits.

Note on "first-time buyer" definition:For most federal programs, a "first-time buyer" is anyone who has not owned a primary residence in the past 3 years. This means you could qualify even if you owned a home years ago. Displaced homemakers and single parents who previously co-owned a home with a spouse may also qualify.