On a $400,000 home, each 5 percentage points of down payment equals $20,000. The right amount is the one that leaves enough cash for closing, moving and the first repair after the keys are handed over.

How much should you put down on a house?

Start with the purchase price and calculate several dollar amounts, then compare the complete result. A down-payment percentage by itself does not show the monthly payment, mortgage insurance, interest cost or cash remaining after closing.

On a $400,000 home, 5% is $20,000, 10% is $40,000 and 20% is $80,000. The base loan amount would be $380,000, $360,000 or $320,000 before any financed program-specific amounts.

Common down-payment percentages compared

Program rules change, and available options differ by lender. Confirm current requirements with official program material and multiple lenders instead of treating these examples as approval criteria.

How down payment changes loan-to-value ratio

Loan-to-value ratio, or LTV, compares the loan amount with the property value used for underwriting.

If the purchase price and accepted property value are both $400,000, a $40,000 down payment produces a $360,000 base loan and a 90% LTV. If the appraisal comes in below the contract price, the transaction may require renegotiation, additional cash or a different structure because lenders generally do not treat the higher contract price as extra collateral value.

A lower LTV can affect pricing, mortgage-insurance requirements and risk assessment, but credit, debt-to-income ratio, occupancy, property type, loan purpose and other factors also matter.

Worked example: 10% versus 20% down

Run your own comparison in our mortgage payment calculator. Example PMI is not a program quote and does not model FHA, VA or USDA charges.

Down payment is only one part of cash to close

A safe plan separates at least four cash buckets:

1. Down payment: the equity contributed toward the purchase price.
2. Closing costs: lender charges, appraisal, title services, government recording or transfer charges and other transaction costs.
3. Prepaids and initial escrow: items such as prepaid interest, homeowners insurance and initial tax/insurance deposits.
4. After-closing reserves: money for moving, repairs, furnishings, maintenance and emergencies.

Read our closing-cost guide before deciding how much cash is available for the down payment. The CFPB recommends keeping an emergency cushion after closing. Spending every available dollar removes that cushion.

Where can down-payment money come from?

Acceptable sources depend on the loan program and lender documentation rules. They may include verified checking or savings funds, eligible gift funds, proceeds from selling assets, grants or down-payment assistance, and proceeds from another property sale. Large or unusual deposits may require documentation.

Gift funds

A lender may require a gift letter and evidence showing the transfer and donor’s source. A gift cannot secretly be an undisclosed loan. Relationship and contribution rules vary by program.

Down-payment assistance

Assistance can take the form of grants, forgivable loans, deferred-payment loans or repayable second mortgages. Eligibility may depend on income, location, first-time buyer definitions, education or occupancy. Ask how the assistance affects repayment, refinance, sale and total closing costs.

Questions to ask before choosing a percentage

• What are the interest rate, APR, points and lender credits at each down-payment level?
• What is the exact monthly and upfront mortgage-insurance cost?
• How much cash will remain after the final Closing Disclosure amount is paid?
• Will property taxes be reassessed after the purchase?
• What repairs or association assessments are likely soon?
• Would a slightly lower price create a healthier payment than a larger down payment?
• Are there price breaks at specific LTV thresholds?

Frequently asked questions

Do first-time buyers need 20% down?

No. Qualified borrowers may have lower-down-payment options. “First-time buyer” definitions and program rules vary, so check eligibility before acting.

Does a bigger down payment always get a lower rate?

Not always. LTV can influence pricing, but the result also depends on credit, loan type, occupancy, property and market conditions. Compare written Loan Estimates for the same scenario.

Can closing costs be included in the down payment?

No. The down payment and closing costs are distinct uses of cash, even though both affect cash to close. Seller or lender credits may offset eligible costs under applicable limits but generally do not replace the borrower’s required investment.

What happens if the appraisal is low?

A low appraisal can increase the resulting LTV. Options may include disputing supported errors, renegotiating the price, adding cash, changing the loan structure or ending the purchase if the contract permits.

Is zero down the same as no money needed?

No. Even a zero-down loan can involve closing costs, prepaids, inspections, deposits, moving expenses and reserves.

Keep building your plan

Worked examples were recalculated on September 9, 2026. The three source links below were checked the same day.

A household earning $10,000 a month before tax reaches $3,600 of total debt at 36%. If existing debts take $900, the arithmetic leaves $2,700 for housing. A $1,200 child-care bill is absent from that ratio, so the household may choose $2,400.

Build affordability from the monthly bill

1. Start with take-home cash flow. List reliable net income and the expenses that actually leave your account.
2. Choose a comfortable all-in housing limit. Include the full mortgage-related payment, not only principal and interest.
3. Reserve money for ownership costs. Maintenance, utilities, repairs and special assessments may not appear in a lender payment.
4. Protect savings goals. Emergency reserves, retirement contributions, health costs and near-term goals should survive the purchase.
5. Work backward to a price range. Test rates, down payments, taxes and insurance instead of using a single income multiple.

The 28/36 shortcut starts with gross income. On $10,000 a month, 28% is $2,800 for housing and 36% is $3,600 for total debt. The formula does not subtract a $1,200 child-care bill, payroll deductions or a personal savings target. Put those amounts into the household budget before choosing a price.

Debt-to-income ratio: useful, but not the whole answer

Debt-to-income ratio (DTI) compares recurring monthly debt obligations with gross monthly income.

Depending on the calculation and lender, included obligations may cover the proposed housing payment, auto loans, student loans, minimum credit-card payments, support obligations and other debts. Precise treatment varies by program and underwriting method.

You may hear a 28/36 rule: roughly 28% of gross income for housing and 36% for total debt. Treat it only as a planning rule of thumb, not a universal approval standard or a promise of affordability. Some loan decisions allow different ratios based on the whole file; a household can also qualify at a ratio that feels uncomfortable after taxes and non-debt expenses.

What belongs in the monthly housing number?

Our PITI and payment guide explains these components in detail.

Worked example: qualification math versus comfort

Convert a comfortable payment into a home-price range

Once you choose the all-in mortgage-related limit:

1. Subtract monthly property taxes.
2. Subtract homeowners insurance.
3. Subtract HOA dues.
4. Subtract estimated mortgage insurance if applicable.
5. The remainder is the maximum principal-and-interest payment for this planning scenario.
6. Use the rate and term to solve for the matching loan amount, then add the planned down payment.

This relationship is sensitive to rate and local taxes. A lower-tax property may support a different price at the same monthly limit. A larger down payment can reduce the loan but also reduce reserves. Test scenarios in our interactive mortgage calculator before choosing one price.

Worked price-range illustration

A different rate quote, property-tax bill, insurance premium or PMI amount changes the price. That is why online “salary to house price” multiples are weak planning tools.

Stress-test affordability before making an offer

• Income test: Could the payment survive a temporary reduction in variable pay or overtime?
• Tax and insurance test: What happens if both increase at renewal or reassessment?
• Repair test: Can you handle a deductible and a major system failure without revolving debt?
• HOA test: Is there room for a dues increase or special assessment?
• Rate test: If shopping an adjustable-rate loan, can the budget handle contractually possible increases?
• Cash test: After the down payment and closing costs, will adequate liquid reserves remain?
• Life test: Do child care, health, transportation, education and retirement goals still work?

Ways to improve affordability without stretching

• Consider a lower purchase price or a property with lower ongoing costs.
• Pay down expensive recurring debt when doing so does not erase reserves.
• Compare lenders using consistent Loan Estimate scenarios.
• Adjust the down payment only after modeling PMI, closing costs and remaining cash.
• Review multiple areas because property taxes, insurance and HOA dues can differ sharply.
• Avoid treating the longest available term as free affordability; check lifetime interest and your likely holding period in the amortization guide.

Frequently asked questions

How many times my salary can I afford?

No single multiple is reliable. Rates, debts, taxes, insurance, down payment, location and household expenses can make the same salary support very different prices.

Does DTI use gross or net income?

Lender DTI calculations generally use qualifying gross income, while a personal affordability budget should also study take-home cash flow after taxes, benefits and savings contributions.

Should I spend the full preapproval amount?

Not necessarily. Preapproval addresses conditional borrowing capacity, not your entire financial life. Choose the price that supports a resilient monthly plan.

How much should I budget for maintenance?

There is no perfect universal percentage. Consider the home’s age, roof, HVAC, plumbing, appliances, exterior, climate and inspection findings. Build both a monthly reserve and accessible emergency cash.

Can future rental income make a house affordable?

Only use income you can document and reasonably sustain. Lender treatment of rental income follows specific rules, while vacancy, repairs and management reduce the cash actually available.

Next steps

Worked examples were recalculated on September 9, 2026. The two CFPB links below were checked the same day.