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
| Down payment | Potential advantage | Tradeoff to check |
|---|---|---|
| About 3% | May preserve cash and help some eligible conventional buyers purchase sooner. | Higher loan-to-value ratio, a larger payment and likely mortgage-insurance considerations. |
| 3.5% | Used in some FHA loans for qualified borrowers. | FHA eligibility, mortgage-insurance premiums and current program rules must be verified. |
| 10% | Meaningfully lowers the loan while retaining more cash than 20% down. | Conventional PMI may still apply; compare its actual quote. |
| 20% | Usually avoids conventional PMI at closing and lowers the amount financed. | Can absorb a large share of savings; it is not required for every loan. |
| 0% | Possible under certain VA or USDA loan scenarios for eligible borrowers and properties. | Eligibility, location, fees and loan-specific costs still apply; zero down is not zero cash to close. |
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
| 10% down | 20% down | |
|---|---|---|
| Down payment | $45,000 | $90,000 |
| Base loan | $405,000 | $360,000 |
| Estimated P&I | About $2,560/mo | About $2,275/mo |
| Illustrative PMI at 0.50% of original loan annually | About $169/mo | $0 in this simplified example |
| Taxes + insurance | $600/mo | $600/mo |
| Estimated total before HOA | About $3,329/mo | About $2,875/mo |
The extra $45,000 down lowers this simplified monthly estimate by about $454. The decision still depends on the real PMI quote, rate, closing costs, emergency fund, investment alternatives and how long the loan is expected to remain in place.
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:
- Down payment: the equity contributed toward the purchase price.
- Closing costs: lender charges, appraisal, title services, government recording or transfer charges and other transaction costs.
- Prepaids and initial escrow: items such as prepaid interest, homeowners insurance and initial tax/insurance deposits.
- 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.
Financial disclaimer: Educational information only. Program rules, pricing and eligibility can change. Verify current requirements with official agencies, approved lenders and qualified advisers.