Why the down payment matters
A larger down payment lowers the mortgage, reduces total interest, and may eliminate PMI. A smaller down payment can make buying easier sooner, but the monthly payment and total interest cost can rise substantially.
- 20% down often avoids PMI on conventional loans.
- Lower loan balances can provide more flexibility in emergencies.
- Upfront cash must also include closing costs and reserves.
Worked example
For a $425,000 home with 20% down, a 6.5% rate over 30 years, and $8,000 in closing costs:
| Item | Amount |
|---|
| Down payment (20%) | $85,000 |
| Loan amount | $340,000 |
| Closing costs | $8,000 |
| Total upfront cash | $93,000 |
Down payment vs. financed amount
How the home price splits between your cash down payment and the mortgage. Updates as you change the inputs.
How it works
Your down payment is the upfront cash you pay toward the home price. A larger down payment reduces the loan amount, monthly payment, and sometimes private mortgage insurance.
Down payment = Home price × Down payment %
The remaining balance becomes your loan amount, which is then used to estimate monthly payments.
Frequently asked questions
What down payment is typical?
Many buyers aim for 20%, but options vary by loan type, lender, and credit profile.
Why does a bigger down payment help?
It reduces borrowing, lowers monthly costs, and often removes the need for PMI on conventional loans.
Do closing costs count toward the down payment?
Not usually. Closing costs are separate from the cash you put down, though both should be budgeted at purchase time.
Can a smaller down payment still work?
Yes, but it usually means a larger loan, more monthly payment, and possible extra insurance costs.
Should I save for more than the minimum down payment?
Often yes if it keeps your monthly payment comfortable while preserving emergency savings.