The basic formula: multiply the home price by your down payment percentage

To find your down payment amount, take the purchase price of the home and multiply it by the percentage you plan to put down. If you are buying a house for $300,000 and putting down 20 percent, your down payment is $300,000 × 0.20 = $60,000. The remaining $240,000 is what you will borrow through a mortgage.

The percentage you choose depends on what you can afford now, what interest rate you want to lock in, and whether you want to avoid mortgage insurance. A larger down payment means a smaller loan, lower monthly payments, and less interest paid over the life of the mortgage. A smaller down payment means you keep more cash on hand for emergencies or other goals, but you will pay more in interest and may owe mortgage insurance premiums.

Key Takeaways

  • Down payment amount equals the home's purchase price multiplied by your down payment percentage (for example, $300,000 × 0.20 = $60,000).
  • Most conventional loans require 3 to 20 percent down, while FHA loans allow as little as 3.5 percent and VA loans may require zero percent.
  • Putting down less than 20 percent triggers private mortgage insurance (PMI), which adds to your monthly payment until you reach 20 percent equity.
  • Your down payment is separate from closing costs, which typically run 2 to 5 percent of the purchase price and are due at signing.
  • Use a down payment calculator or spreadsheet to test different percentages and see how each affects your monthly payment and total interest.

Common down payment percentages and what they mean for your loan

The percentage you choose shapes both your monthly payment and the total cost of borrowing. A 3 percent down payment on a $300,000 home is $9,000, leaving you to borrow $291,000. A 10 percent down payment is $30,000, leaving you to borrow $270,000. A 20 percent down payment is $60,000, leaving you to borrow $240,000. The difference in monthly payment can be several hundred dollars.

Loan type also affects what percentages are available to you. Conventional loans typically require 3 to 20 percent down. FHA loans, backed by the Federal Housing Administration, allow 3.5 percent down. VA loans, available to military members and veterans, often allow zero percent down. USDA loans, for rural properties, also allow zero percent down for borrowers who meet income limits. Check with your lender about which loan types you may be able to use.

How mortgage insurance changes your calculation

If you put down less than 20 percent on a conventional loan, you will pay private mortgage insurance (PMI). This is an insurance premium added to your monthly mortgage payment. It protects the lender if you stop paying, but you are the one who pays for it.

PMI typically costs between 0.5 and 1.5 percent of your loan amount per year, divided into monthly payments. On a $270,000 loan (10 percent down on a $300,000 home), PMI might add $112 to $337 per month. You can stop paying PMI once you reach 20 percent equity in the home, either by paying down the principal or by the home's value rising. Ask your lender when you can request PMI removal and what proof of equity they will need.

Separating down payment from closing costs

Your down payment is not the same as closing costs. Closing costs are fees paid to the lender, title company, appraiser, and other parties involved in the sale. They typically run 2 to 5 percent of the purchase price and are due at the time you sign the final paperwork.

On a $300,000 home, closing costs might range from $6,000 to $15,000. You need to budget for both the down payment and closing costs. Some sellers or lenders offer to cover part of the closing costs, which can reduce what you owe at signing. Ask your lender for a Loan Estimate, which shows closing costs in detail, so you know the full amount due on closing day.

Using a calculator to test different scenarios

Rather than doing the math by hand for each percentage, use a down payment calculator or a spreadsheet. Enter the home price, the interest rate your lender quoted, and the loan term (usually 30 years). Then change the down payment percentage and watch how the monthly payment and total interest change.

For example, on a $300,000 home at 7 percent interest over 30 years: a 10 percent down payment ($30,000) with PMI might result in a monthly payment of around $1,900 to $2,000. A 20 percent down payment ($60,000) might result in a monthly payment of around $1,600. The difference is roughly $300 to $400 per month, or $108,000 to $144,000 over 30 years. Seeing these numbers side by side helps you decide whether to save longer for a larger down payment or buy sooner with a smaller one.

What happens if you cannot reach 20 percent down

Many first-time buyers cannot save 20 percent before they want to buy. That is normal. A 10 percent down payment is common, and 3 to 5 percent down is available through many conventional and government-backed programs. You will pay PMI, but you will also build equity from day one and can remove PMI later.

Some buyers use a gift from a family member to boost their down payment. Others use down payment assistance programs offered by nonprofits, state housing agencies, or employers. If you are a first-time buyer, a veteran, or buying in a rural area, you may have access to programs that reduce or eliminate the down payment requirement. Talk to your lender about what programs you may be able to use.

Frequently Asked Questions

Can I use a gift from family for my down payment?

Yes. Most lenders allow down payment gifts from family members. You will need a signed gift letter stating the money is a gift, not a loan, and the giver will not expect repayment. The lender may ask for proof that the gift has been deposited into your account.

What if I want to put down more than 20 percent?

You can put down any amount up to 100 percent. Putting down more than 20 percent reduces your loan amount, monthly payment, and total interest. It also means you have less cash left over for emergencies or other goals, so weigh the trade-off carefully.

Does the down payment percentage affect my interest rate?

Yes, usually. Larger down payments often may have access to for lower interest rates because the lender's risk is lower. The difference may be 0.25 to 0.5 percent, which adds up over 30 years. Ask your lender what rates they offer at different down payment levels.

How do I know if I have saved enough for a down payment?

Calculate the down payment amount using the formula above, then add closing costs (2 to 5 percent of the purchase price). You also want to keep 3 to 6 months of living expenses in savings after you buy, so you can handle emergencies without missing a mortgage payment.