Calculate how much you need for a home down payment. Compare 5%, 10%, 15%, and 20% scenarios with PMI costs, monthly payments, and savings timeline.
The 20% rule is a guideline, not a requirement. Many successful homebuyers put down far less.
Conventional: 3-5% minimum. PMI required below 20%. FHA: 3.5% with credit 580+. VA: 0% for veterans. No PMI. USDA: 0% for rural areas. The average first-time buyer puts down 6-7% (NAR, 2024). Only 25% of buyers put 20%+ down. A lower down payment lets you buy sooner but increases monthly costs through PMI and a larger loan balance.
PMI (Private Mortgage Insurance) costs 0.5-1.5% of the loan per year when down payment is below 20%.
On $285K loan (5% down on $300K): PMI at 0.7% = $166/month. Over ~7-10 years to reach 20% equity: $14,000-20,000 total. PMI is removed automatically at 22% equity or by request at 20%. In rising markets, buying now with PMI often beats waiting to save 20% because home price appreciation ($15,000/year at 5%) exceeds PMI costs. Refinancing when your home value increases enough is another way to eliminate PMI early.
Down payment money belongs in safe, accessible accounts, not stocks. You cannot afford volatility on money needed within 1-5 years.
High-yield savings (best): 4-5% APY, FDIC insured, fully liquid. $1,000/mo at 4.5% = $62,900 in 5 years. CDs: Slightly higher rates, locked terms. Use CD ladders for flexibility. Avoid: Stocks, crypto, or any volatile investment. A 30% correction before your purchase date could erase years of savings. Use our Savings Goal Calculator to plan your timeline.
Total cash needed = down payment + closing costs (2-5% of home price) + moving/repairs.
For $300K home with 10% down: $30,000 (down) + $9,000 (closing, ~3%) + $3,000 (move/repairs) = $42,000 total cash needed. Closing costs include: origination fee (0.5-1%), appraisal ($300-600), inspection ($300-500), title insurance ($500-2,000), attorney fees, prorated taxes, and first year insurance. Negotiate seller concessions to reduce your share. Use our Mortgage Calculator for detailed monthly payment breakdown.
If investment returns exceed mortgage rate + PMI, investing the difference builds more wealth. But it carries risk that a larger down payment does not.
Scenario ($300K home, $60K saved): Option A: 20% down, payment $1,517/mo, no PMI. Option B: 10% down, invest $30K, payment $1,706 + $158 PMI = $1,864/mo. After 7 years: $30K invested at 10% = $58,400. Extra costs (higher payment + PMI) = $42,420. Net gain from investing: $15,980. But if markets return only 3%, you lose $18,000. The 20% down payment is the guaranteed win. Investing the difference has higher expected value but real risk. Your risk tolerance determines the right choice.
Most states offer down payment assistance programs for first-time buyers, including grants, forgivable loans, and matched savings programs.
FHA loans (federal): 3.5% minimum down, credit score 580+. Lower rates than conventional for buyers with imperfect credit. MIP (mortgage insurance) required. State Housing Finance Agencies: Nearly every state offers programs with reduced rates, down payment grants (free money that does not need to be repaid), and closing cost assistance. Eligibility typically requires income below 80-120% of area median income and completion of a homebuyer education course. Employer programs: Some employers offer down payment assistance or matched savings as a benefit, particularly hospitals, universities, and large corporations. IRA withdrawal: First-time buyers can withdraw up to $10,000 from a traditional IRA penalty-free (still taxed as income) for a home purchase. Roth IRA contributions (not earnings) can be withdrawn anytime tax and penalty-free. Gift funds: FHA and conventional loans allow 100% of the down payment to come from gift funds from family. Documentation (gift letter) required. This is how many first-time buyers with limited savings manage to purchase. Check your state housing authority website for specific programs available in your area.
US median home prices have risen from $119,600 in 2000 to approximately $420,000 in 2026 (NAR data) — a 251% increase.
Adjusted for inflation, the increase is approximately 100% — still significant, and outpacing wage growth over the same period. This is why down payments feel harder to save than a generation ago: 20% of $420,000 is $84,000, while 20% of $119,600 was $23,920. In real (inflation-adjusted) terms, the down payment burden has roughly doubled. Markets vary enormously by region: median prices in San Francisco exceed $1.2M while parts of the Midwest remain under $200K. This geographic disparity means that down payment requirements range from $7,000 (3.5% FHA on $200K) to $240,000 (20% on $1.2M). Remote work has expanded location options for many buyers, making affordable markets accessible to those with higher salaries from expensive cities.
Disclaimer: This calculator provides estimates. Actual PMI rates vary by lender, credit score, and LTV ratio. Closing costs vary by location. Consult a mortgage lender for exact quotes. Sources: NAR, Freddie Mac, FHA, VA.
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