Start with the home price and the percentage lenders require

Your down payment is the cash you put toward the purchase price on day one. The rest comes from a mortgage loan. To figure out what you need, multiply the home's purchase price by the down payment percentage a lender will accept.

Most conventional loans require 20 percent down, though some accept 10 or 15 percent. Federal Housing Administration (FHA) loans often go as low as 3.5 percent. VA loans and USDA loans may require zero down if you meet their criteria. The percentage you can use depends on the loan type you're pursuing and your credit profile.

Here's the math: if a home costs $300,000 and you're putting 20 percent down, that's $300,000 × 0.20 = $60,000. If you can only put 10 percent down, that's $300,000 × 0.10 = $30,000. The lower your percentage, the less cash you need upfront—but you'll pay more in interest and mortgage insurance over time.

Key Takeaways

  • Your down payment is calculated by multiplying the home price by the percentage your lender requires, which ranges from 0 to 20 percent depending on loan type.
  • A 20 percent down payment avoids mortgage insurance costs, but FHA and VA loans let you put down less if you meet their requirements.
  • Closing costs—typically 2 to 5 percent of the home price—are separate from your down payment and must be budgeted separately.
  • Your actual cash needed includes the down payment plus closing costs, property taxes, homeowners insurance, and any repairs the inspection uncovers.
  • Lenders use debt-to-income ratio to decide whether you can afford the monthly payment, not just whether you have enough for the down payment.

Account for closing costs on top of your down payment

The down payment is not the only money you hand over at closing. You also pay closing costs, which cover the lender's fees, title search, appraisal, homeowners insurance, and property taxes. These typically run 2 to 5 percent of the home price, though the exact amount varies by location and lender.

Using the $300,000 home example: if closing costs are 3 percent, that's $9,000. Your total cash needed would be $60,000 (down payment) plus $9,000 (closing costs) = $69,000. Some sellers will pay part of the buyer's closing costs as part of the negotiation, which reduces what you need to bring.

Ask your lender for a Loan Estimate within three days of submitting your application. This document lists every closing cost by name and amount, so you know the exact figure before you commit. Do not rely on estimates—the Loan Estimate is the binding disclosure.

Check what your lender will actually approve you for

Lenders do not just look at whether you have enough cash. They also check your debt-to-income ratio—the percentage of your monthly income that goes to debt payments. Most lenders want this ratio to be 43 percent or lower, though some FHA lenders go up to 50 percent.

This matters because you might have $60,000 saved but not earn enough to may have access to for a $300,000 mortgage. If your monthly debts (car loans, credit cards, student loans) plus the new mortgage payment exceed 43 percent of your gross monthly income, the lender will deny you or approve you for a smaller loan amount.

Before you calculate your down payment, get pre-approved by a lender. They will tell you the maximum loan amount you may have access to for based on your income, debts, and credit. Then you can work backward: if you're approved for a $240,000 loan and you want to put 20 percent down, the most expensive home you can buy is $300,000 ($240,000 ÷ 0.80).

Decide whether a smaller down payment makes sense for your situation

Putting down 20 percent avoids private mortgage insurance (PMI), which protects the lender if you default. PMI typically costs 0.5 to 1.5 percent of the loan amount per year, added to your monthly payment. On a $240,000 loan, that's $100 to $300 per month.

If you put down 10 percent instead of 20 percent on a $300,000 home, you save $30,000 upfront but borrow an extra $30,000 and pay PMI. Over 10 years, PMI might cost $12,000 to $36,000. However, if you invest that $30,000 and earn more than the PMI costs, or if you plan to sell within five years, a smaller down payment can make financial sense.

There is no single right answer. A smaller down payment lets you buy sooner and keep cash for emergencies or investments. A larger down payment reduces your monthly payment and total interest paid. Run both scenarios with your lender's numbers to see which fits your goals and cash position.

Factor in property taxes, insurance, and inspection repairs

Your down payment and closing costs are not your only cash needs. You also need to budget for the first year's homeowners insurance premium (due at closing), property taxes (often escrowed into your mortgage payment but sometimes due upfront), and repairs the home inspection uncovers.

A home inspection typically costs $300 to $500 and may reveal issues ranging from a loose gutter to a failing roof. Sellers sometimes cover repair costs, but if they do not, you need cash reserves. Plan for at least $5,000 to $10,000 in post-purchase repairs, especially if the home is older than 20 years.

Add these to your total cash needed: down payment + closing costs + first insurance premium + inspection costs + repair buffer. This is your true out-of-pocket number, not just the down payment alone.

Use a down payment calculator to model different scenarios

Once you know your pre-approval amount and the home price you're targeting, a calculator shows you the impact of different down payment percentages. Enter the home price, loan amount, down payment percentage, and interest rate. The calculator will show your monthly payment, total interest paid, and PMI cost (if applicable).

Most lenders provide calculators on their websites at no cost. You can also find independent calculators through Bankrate, NerdWallet, or the Consumer Financial Protection Bureau (CFPB). These tools do not require personal information and let you run as many scenarios as you want.

Compare at least three scenarios: 20 percent down, 10 percent down, and the minimum your lender allows (often 3 to 5 percent). Look at the monthly payment, total interest, and PMI cost for each. This shows you the real trade-off between saving cash now and paying more later.

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 that the giver expects no repayment. The lender will verify the gift funds are in your account before closing.

What if I do not have 20 percent saved?

You can buy with less. FHA loans accept 3.5 percent down, and some conventional loans accept 5 to 10 percent. You will pay PMI, which increases your monthly payment, but you can remove it once you reach 20 percent equity through payments or home appreciation.

Do I need to show proof that I have the down payment saved?

Yes. Lenders require bank statements showing the funds have been in your account for at least two months. If you received a large deposit recently, they may ask where it came from to ensure it is not a loan you forgot to disclose.

What happens if the home appraises for less than the purchase price?

If the appraisal comes in low, you have three options: renegotiate the price down, cover the difference in cash (increasing your down payment), or walk away. Most purchase agreements include an appraisal contingency that lets you back out if the home does not appraise for the agreed price.

Can I borrow money for my down payment?

No. Lenders require the down payment to come from your own funds or a gift. Borrowing for a down payment signals higher risk and will disqualify you. Any new loans you take out before closing will also increase your debt-to-income ratio and may reduce your approval amount.