Down Payment Calculator

Down Payment Calculator Guide: Compare Cash Down, LTV, Mortgage Size, and Liquidity

A down payment is the portion of a home purchase price that you pay upfront rather than finance through the mortgage. If you buy a $500,000 home and contribute $50,000 toward the price, your down payment is 10% and the starting mortgage amount is approximately $450,000 before any separately financed charges or adjustments.

The arithmetic is straightforward. The decision is not. A larger down payment reduces the mortgage balance, lowers loan-to-value, and generally reduces principal-and-interest cost for the same loan rate and term. Depending on the mortgage program, it can also change mortgage-insurance requirements or loan pricing. But every additional dollar committed to the house is a dollar that is no longer sitting in a checking, savings, or investment account available for closing expenses, moving, repairs, emergencies, or other priorities.

This is why “How much should I put down?” is a better question than “What is the maximum amount I can put down?” CFPB recommends first identifying the cash available for the purchase and then setting aside money for other savings goals, moving costs, renovations, and an emergency cushion before deciding how much remains available at closing. In its current homebuying guidance, CFPB suggests keeping a financial cushion and uses roughly three to six months of expenses as a planning rule of thumb rather than committing all available cash to the purchase.

The down payment also determines the starting loan-to-value ratio, or LTV. If a buyer finances $400,000 of a $500,000 home, the starting LTV is 80%. If the buyer finances $475,000, the LTV is 95%. LTV is important because lenders and mortgage programs can use it when determining eligibility, mortgage-insurance treatment, pricing, and risk.

Twenty percent down receives disproportionate attention because conventional mortgages above 80% LTV can involve private mortgage insurance. But 20% is not a universal minimum down payment required to buy a home. Mortgage programs differ, and some permit substantially smaller borrower contributions. The relevant question is not simply whether a smaller down payment is allowed, but what the complete financing package looks like after mortgage insurance, interest rate, closing cash, reserves, and monthly payment are considered.

Down-payment money also does not always have to come entirely from the buyer’s existing bank account. Depending on the loan program and transaction, acceptable gifts, grants, down-payment assistance, and other documented sources can contribute toward the purchase. Fannie Mae, for example, permits qualifying personal gift funds for certain principal-residence and second-home transactions subject to its source, documentation, property-type, and borrower-contribution rules.

The strongest down-payment decision therefore coordinates four things at once: how much equity you want to establish at closing, how much mortgage debt you are comfortable carrying, how much cash the complete transaction requires, and how much liquidity should remain after you receive the keys.

How to Calculate a Home Down Payment Without Using Every Dollar of Available Cash

Enter the expected purchase price: Use the price you realistically expect to pay rather than automatically using the listing price or the maximum price a lender may approve.
Choose a down-payment amount or percentage: Test more than one scenario. Common comparisons include a smaller contribution that preserves liquidity, a middle scenario, and a larger contribution that reduces borrowing more aggressively.
Review the resulting mortgage amount: Subtract the down payment from the purchase price to see how much must be financed before considering any program-specific financed fees or adjustments.
Review loan-to-value: LTV shows the financed portion of the property value. A 10% down payment corresponds to approximately 90% starting LTV when purchase price and property value are the same.
Estimate mortgage insurance when applicable: A higher-LTV mortgage can involve mortgage-insurance costs depending on the loan type. Do not assume one universal PMI rate or cancellation rule.
Keep closing costs separate: The down payment is not the same as cash to close. Lender fees, third-party costs, prepaid expenses, escrow funding, points, credits, deposits already paid, and other adjustments can change the amount due at settlement.
Set aside emergency reserves before maximizing the down payment: Decide how much liquid cash you want to retain after closing. CFPB recommends considering other savings goals, moving costs, renovations, and an emergency cushion before deciding how much cash is available for the purchase.
Identify the source of each dollar: If part of the down payment comes from a gift, grant, assistance program, asset sale, or other non-payroll source, discuss documentation requirements with the lender before relying on the money.
Compare the monthly payment: Run the resulting mortgage balance through the Mortgage Calculator to see whether the lower debt from a larger down payment produces enough monthly savings to justify the additional cash committed.

Formula and variables

The calculator translates between purchase price, cash down, mortgage amount, down-payment percentage, and loan-to-value. Down payment and LTV move in opposite directions when property value is held constant: increasing the down payment reduces the amount financed and therefore lowers LTV.

Down payment = Purchase price − Loan amount; Down payment % = Down payment ÷ Purchase price × 100; LTV = Loan amount ÷ Property value × 100

PP — Purchase price: The agreed or modeled price of the home before subtracting the buyer’s down payment.
DP — Down payment: Cash or other eligible funds applied directly toward the purchase price rather than financed through the mortgage.
DP% — Down-payment percentage: The down payment expressed as a percentage of the purchase price.
L — Starting loan amount: The portion of the purchase price financed through the mortgage before any separately financed charges or adjustments.
LTV — Loan-to-value ratio: The mortgage amount divided by the property value used for the LTV calculation.
CC — Closing costs: Transaction and loan-related amounts that generally must be considered separately from the down payment when estimating total cash required.
R — Post-closing reserves: Liquid or qualifying financial resources retained after the transaction rather than committed to the down payment and closing.

Scenario 1: 10% Down Versus 20% Down on a $500,000 Home

A buyer has enough savings to consider either a 10% or 20% down payment on a $500,000 home. The mortgage rate and term are assumed to be identical for the principal-and-interest comparison, while mortgage insurance is considered separately.

Home price: $500,000
10% down payment: $50,000
Loan with 10% down: $450,000
Starting LTV with 10% down: 90%
20% down payment: $100,000
Loan with 20% down: $400,000
Starting LTV with 20% down: 80%
Additional cash required for 20% down: $50,000

At 10% down, the buyer contributes $50,000 and finances approximately $450,000.
The starting LTV is $450,000 ÷ $500,000 = 90%.
At 20% down, the buyer contributes $100,000 and finances approximately $400,000.
The starting LTV becomes $400,000 ÷ $500,000 = 80%.
The larger down payment reduces the starting mortgage balance by $50,000.
That lower mortgage generally reduces principal-and-interest cost at the same rate and term and can materially change conventional mortgage-insurance treatment.
However, the buyer also has $50,000 less liquid cash after contributing the larger down payment.

Result: The 20% scenario begins with $50,000 less mortgage debt and a 10-percentage-point lower LTV, but it also requires $50,000 more upfront cash than the 10% scenario.

The correct comparison is not simply “20% is better because the loan is smaller.” The buyer should compare mortgage payment, mortgage insurance, cash to close, remaining emergency reserves, other debt, expected repairs, and alternative uses for the additional $50,000.

Understanding your results

Down payment in dollars

This is the portion of the purchase price you plan to contribute rather than finance. It creates immediate ownership equity before considering changes in property value or transaction costs.

It should not be confused with total cash to close, which can be higher because closing costs and prepaid expenses are separate.

Down-payment percentage

The percentage makes it easier to compare down-payment strategies across different home prices. A $50,000 contribution is 10% on a $500,000 home but 20% on a $250,000 home.

Percentage thresholds can affect loan structure, but no single percentage should be treated as universally optimal.

Starting mortgage amount

The mortgage amount is the part of the purchase price that remains after the down payment, before any loan-specific financed amounts.

Use that balance in the Mortgage Calculator to compare the full monthly housing payment: Mortgage Calculator

Loan-to-value ratio

LTV expresses how much of the property value is financed. A lower starting LTV generally means the buyer contributes more equity upfront.

LTV can affect mortgage insurance, pricing, underwriting, and program eligibility, so it is more than a descriptive percentage.

Cash retained after closing

A down-payment strategy should leave enough cash to complete the transaction and maintain an appropriate post-closing financial cushion.

The mathematically largest down payment may be financially fragile if it leaves the household unable to absorb a repair, insurance deductible, moving expense, temporary income loss, or other unexpected cost.

Assumptions

The purchase price is known or reasonably estimated.
The starting mortgage amount is calculated as purchase price minus the modeled down payment unless other financed amounts are explicitly included.
The property value used for the simplified LTV calculation equals the purchase price unless a different value is entered.
The calculator does not automatically determine the minimum down payment required by a specific mortgage program.
Mortgage-insurance costs are not assumed unless explicitly modeled.
Gift, grant, and assistance funds are treated as usable only when they satisfy the applicable lender and program requirements.
Closing costs remain separate from the down payment unless explicitly financed or credited.
Post-closing reserves are not automatically committed to the transaction.
The model does not assume future home appreciation or depreciation.
The result is a planning estimate rather than a lender determination of eligible funds or loan qualification.

Limitations

Minimum down-payment requirements vary by mortgage program, property type, occupancy, borrower profile, lender overlays, and transaction structure.
A calculator cannot determine whether a specific borrower qualifies for a low-down-payment conventional mortgage, FHA loan, VA loan, USDA loan, state housing program, local assistance program, or other financing option.
Mortgage-insurance requirements and pricing can differ materially across conventional, FHA, and other loan structures.
LTV used for underwriting can depend on the applicable property value and transaction rules rather than simply using purchase price in every case.
Gift funds must satisfy documentation, donor, transfer, and program requirements. The fact that money was given to the borrower does not automatically make it an acceptable mortgage source.
Down-payment assistance programs vary by location and can involve income limits, homebuyer education, repayment conditions, second liens, occupancy requirements, purchase-price limits, or other terms.
Seller or other interested-party contributions are not the same as down-payment funds. Fannie Mae, for example, does not permit interested-party contributions to satisfy the borrower’s down payment, minimum borrower contribution, or reserve requirement.
The calculator does not verify whether reserves satisfy the mortgage program’s definition of eligible reserve assets.
Using retirement accounts for a home purchase can have tax, penalty, investment, and retirement-planning consequences not captured here.
The calculator does not determine whether a larger down payment produces a better investment outcome than retaining or investing the cash elsewhere.

Common mistakes

Assuming every buyer must put 20% down.
Assuming the minimum allowed down payment is automatically the best down payment.
Using every dollar of savings for the down payment and leaving nothing for closing costs.
Treating down payment and cash to close as interchangeable terms.
Ignoring mortgage insurance when comparing smaller down payments.
Ignoring the loss of liquidity when comparing larger down payments.
Using the seller’s home value or an online estimate without checking which value the lender will use for LTV.
Assuming a gift requires no documentation because the money does not need to be repaid.
Borrowing money informally for the down payment and failing to disclose the resulting debt obligation.
Assuming seller concessions can always be used as the buyer’s required down payment.
Using a down-payment assistance program without reviewing whether it creates a second lien or future repayment requirement.
Forgetting moving costs, immediate repairs, furnishings, and utility deposits when deciding how much cash can be committed.
Assuming a larger down payment always produces a proportionally lower monthly payment.
Ignoring higher-interest debt while directing all available cash toward the mortgage down payment.

Practical use cases

Scenario 2: 5% down preserves cash for repairs

A buyer purchasing a $400,000 older home has $65,000 in liquid savings. A 15% down payment would use $60,000 before closing costs, leaving almost no cushion. A 5% down payment uses $20,000 and leaves substantially more cash available for the transaction and post-closing repairs.

The smaller down payment increases the mortgage balance and may increase mortgage-insurance expense, but it may produce a much stronger liquidity position. The tradeoff should be measured rather than assuming the larger down payment is automatically safer.

Scenario 3: Extra cash can eliminate a high-LTV layer

Suppose a buyer is only a few thousand dollars away from a materially different LTV bracket under the lender’s pricing or mortgage-insurance structure.

Adding a relatively small amount to the down payment can sometimes produce a larger financial effect than spreading that same cash across a more arbitrary down-payment percentage. Obtain actual loan pricing before deciding where the next dollar of down payment has the greatest impact.

Scenario 4: A gift covers part of the down payment

A buyer has $25,000 available and receives a $30,000 qualifying gift from an acceptable donor. Depending on the mortgage program and transaction, documented gift funds may be used toward the down payment or other eligible transaction needs.

The important issue is documentation. Current Fannie Mae guidance requires gift documentation such as a gift letter stating the amount and that repayment is not expected, together with evidence supporting transfer or availability of the funds.

Scenario 5: A down-payment assistance grant changes cash required

A qualifying first-time buyer receives assistance that can be applied toward eligible down-payment or closing-cost needs. This may allow the buyer to preserve more personal savings or reach the required transaction funds sooner.

Assistance is not automatically free cash. Programs can impose eligibility, occupancy, income, repayment, lien, or recapture requirements. Review the actual program documents before incorporating assistance into the purchase plan.

Scenario 6: More down versus paying off an auto loan

A buyer has $25,000 beyond the minimum cash needed for the transaction. One option is to increase the home down payment by $25,000. Another is to eliminate an auto loan requiring $650 per month.

The larger home down payment reduces the mortgage amount and LTV. Paying off the auto loan can reduce required monthly debt and may materially improve DTI. Compare both effects with the DTI Ratio Calculator

Planning and decision guide

A down payment creates equity, but equity is not cash

When you contribute $80,000 toward a home purchase, that money does not simply disappear. It becomes part of your ownership equity in the property, subject to transaction costs and future changes in market value.

But the equity is less liquid than cash in a bank account. Accessing it later can require selling the home or obtaining additional financing.

The 20% down rule is widely misunderstood

Twenty percent is an important benchmark in conventional mortgage discussions because an 80% LTV can affect private mortgage-insurance treatment. It is not a universal requirement for purchasing a home.

Mortgage products can permit lower down payments. The economic question is what the lower-down-payment loan costs in rate, mortgage insurance, fees, payment, and liquidity—not whether the buyer has violated a nonexistent universal 20% rule.

Scenario 7: Waiting for 20% may not always improve the outcome

A household has 10% saved today but would need several additional years to accumulate 20%. Waiting could reduce future mortgage debt, but rent, home prices, mortgage rates, savings returns, and personal circumstances may also change during that period.

The point is not that buying sooner is better. It is that “wait until 20%” is itself a financial scenario that should be compared with buying earlier at a higher LTV.

Loan-to-value translates the down payment into lending risk

If purchase price and property value are equal, a 5% down payment generally corresponds to 95% starting LTV, 10% down to 90% LTV, and 20% down to 80% LTV.

Lenders use LTV because it expresses how much of the property’s value is financed rather than owned outright by the borrower at closing.

Scenario 8: 95% LTV versus 80% LTV

On a $600,000 property, 5% down means contributing $30,000 and financing roughly $570,000. Twenty percent down means contributing $120,000 and financing $480,000.

The second buyer begins with $90,000 less mortgage debt and substantially more equity, but also gives up $90,000 more liquidity. That is a balance-sheet tradeoff, not just a mortgage-payment calculation.

Mortgage insurance is one reason LTV matters

Mortgage insurance can protect the lender against specified losses when a borrower makes a relatively small down payment. Its structure depends on the loan program.

For conventional mortgages, private mortgage insurance is commonly associated with higher-LTV financing. FHA and other programs have different insurance or guarantee structures and should not be treated as though they use identical PMI rules.

Do not estimate PMI with one permanent percentage

Actual conventional PMI pricing can depend on credit profile, LTV, loan structure, coverage requirements, insurer pricing, and other factors.

Use a planning estimate early, but replace it with the lender’s actual mortgage-insurance quote when comparing loan options.

A smaller down payment can increase the complete mortgage payment in more than one way

Borrowing more increases principal and interest. Higher LTV can also trigger mortgage insurance or different loan pricing depending on the mortgage.

This is why the correct comparison is not simply $50,000 more debt versus $50,000 less debt. Compare the complete payment using the Mortgage Calculator

Scenario 9: $50,000 more down saves less per month than expected

A buyer may assume that putting an additional $50,000 down will reduce the monthly housing payment by hundreds and hundreds of dollars beyond what the amortization math supports.

The actual principal-and-interest reduction depends on the mortgage rate and term. Run the exact difference before committing the cash, then add any change in mortgage insurance separately.

The down payment is not the same as total cash to close

A buyer putting $60,000 down does not necessarily need only $60,000 at settlement. Loan costs, title and settlement charges, prepaid interest, insurance premiums, initial escrow deposits, and other transaction amounts can increase cash required.

The next calculator in this silo—Closing Costs—should be used to build the full cash-to-close picture.

Scenario 10: The buyer has the down payment but not enough cash to close

A buyer wants to put $80,000 down and has exactly $85,000 in liquid savings. If closing costs, prepaid expenses, and initial escrow funding require another $15,000, the planned down payment is not operationally possible without another eligible source of funds.

The problem is not mortgage affordability. It is transaction liquidity.

CFPB recommends preserving a financial cushion

Current CFPB homebuying guidance tells buyers to subtract money needed for other savings goals, moving costs, renovations, and an emergency cushion before deciding how much cash is available for closing.

The agency uses roughly three to six months of expenses as a planning rule of thumb for the emergency cushion. That is guidance, not a universal mortgage reserve requirement.

Personal reserves and lender-required reserves are different concepts

Personal reserves are the liquidity you decide to keep because it makes your household safer. Underwriting reserves are assets a lender or mortgage program requires or recognizes under specific rules.

Those numbers can overlap, but they should not be assumed to be identical.

Fannie Mae reserve requirements depend on the transaction

Current Fannie Mae guidance states that minimum reserve requirements can vary by transaction, occupancy, amortization type, number of units, and number of other financed properties.

This is why a calculator should not state that every mortgage universally requires two, three, or six months of reserves.

Scenario 11: Technically qualified but financially thin

A buyer can meet the lender’s minimum cash requirement and still leave closing with only $1,500 in liquid savings.

A furnace failure, moving expense, insurance deductible, or temporary income disruption immediately after closing could then force the household onto credit cards or other debt. Minimum transaction cash and prudent post-closing liquidity are not the same thing.

Gift funds can expand the buyer’s available cash

CFPB notes that some mortgage loans allow buyers to use gift money from family or other permitted sources toward a down payment, subject to lender and loan-program requirements.

The lender must know where the funds came from, and documentation can be required to establish that the funds are truly a gift rather than undisclosed borrowed money.

Fannie Mae permits personal gifts under specific rules

Current Fannie Mae guidance allows gift funds from acceptable donors for qualifying principal-residence and second-home transactions. Depending on property type and LTV, gift funds may cover some or all eligible transaction needs, subject to minimum borrower-contribution rules.

Its guidance also requires documentation of the gift and states that repayment must not be expected.

Scenario 12: A $40,000 gift is not simply a bank deposit

A parent transfers $40,000 to a buyer shortly before closing. From the buyer’s perspective, the money appears available. From the lender’s perspective, the source and nature of the funds can still require documentation.

The buyer should communicate the gift to the lender before transfer so that the donor, gift letter, and transfer evidence satisfy the applicable loan requirements.

Large unexplained deposits can create underwriting problems

Mortgage lenders can need to document large deposits when those funds are required for the purchase transaction. Fannie Mae guidance specifically addresses documentation of large deposits used for down payment, closing costs, or reserves.

Avoid moving large undocumented amounts between accounts immediately before closing without discussing the transaction with the lender.

Assistance programs can reduce the buyer’s cash burden

Federal, state, local, nonprofit, lender, or housing-agency programs can offer grants, forgivable assistance, deferred-payment loans, second mortgages, or other forms of help.

The word “assistance” does not tell you the economic terms. Determine whether the funds are a grant, debt, deferred obligation, forgivable loan, shared-equity arrangement, or another structure.

Fannie Mae recognizes eligible grants as a source in qualifying transactions

Current Fannie Mae guidance permits funds from qualifying grant sources to be used for certain down-payment, closing-cost, or reserve needs on eligible principal-residence transactions subject to program rules.

This does not mean every program advertised as down-payment assistance qualifies for every mortgage.

Seller credits are not the buyer’s down payment

A seller may agree to contribute toward certain buyer costs where permitted. That can reduce the buyer’s cash burden, but the contribution should not be confused with the buyer’s required down payment.

Fannie Mae specifically prohibits interested-party contributions from being used to satisfy the borrower’s down payment, minimum borrower contribution, or reserve requirement.

Scenario 13: $10,000 seller credit does not create $10,000 of buyer equity

Suppose the seller contributes $10,000 toward eligible closing expenses. That can reduce the buyer’s cash needed for those costs.

It does not mean the seller has supplied $10,000 of the buyer’s required property equity. Down payment and financing concessions have different functions.

Gift funds and seller concessions should never be treated as interchangeable

A qualifying personal gift comes from an acceptable donor and can potentially be used toward eligible borrower needs under the mortgage rules. Seller concessions come from a party with a financial interest in the sale and are subject to a different framework.

Source matters because the lender is underwriting both the borrower and the transaction.

A larger down payment can lower DTI indirectly

A larger down payment reduces the mortgage amount. At the same rate and term, that generally reduces principal and interest and can reduce the proposed housing payment.

A lower housing payment can improve mortgage DTI. Measure the effect directly with the DTI Ratio Calculator

But paying another debt can sometimes move DTI more

Suppose $20,000 added to the home down payment reduces the mortgage payment by a relatively modest amount, while the same $20,000 completely eliminates a $600 monthly auto obligation.

For a borrower constrained by back-end DTI, eliminating the required auto payment can produce a larger ratio change. This does not make it universally better; it shows why cash allocation should be modeled across the entire balance sheet.

Down payment affects affordability even before mortgage insurance

With a fixed home price, increasing the down payment lowers the mortgage principal and therefore the required principal-and-interest payment.

If you are still deciding how much home to buy rather than how much to put down on a specific home, use the Home Affordability Calculator

Scenario 14: Preserve the home price or reduce the mortgage?

A buyer has $75,000 available and can either use it to support a more expensive purchase or apply the same cash to a less expensive home and carry a smaller mortgage.

Those are different decisions. The Home Affordability Calculator helps determine the purchase-price boundary, while this page determines how the cash contribution changes financing within that purchase.

A large down payment can improve monthly cash flow while weakening emergency liquidity

Once cash becomes home equity, it can be difficult or expensive to access quickly. A household that puts nearly every liquid asset into the property may have a low mortgage payment but little ability to respond to a financial shock.

The strongest household balance sheet often balances lower debt with sufficient liquid reserves rather than maximizing only one side.

Scenario 15: $100,000 down or $75,000 down plus $25,000 reserve

A buyer can put $100,000 down and keep almost no emergency savings, or put $75,000 down and retain $25,000 in a high-liquidity reserve.

The first strategy creates a smaller mortgage. The second creates a larger mortgage but stronger immediate liquidity. Compare the incremental monthly mortgage cost with the value of retaining the $25,000 rather than evaluating the strategies emotionally.

Putting more down produces a known debt reduction, not a guaranteed investment return

Additional down-payment cash lowers the amount borrowed. That creates a known reduction in mortgage principal and associated future borrowing expense under the loan terms.

Comparing that choice with investing the money elsewhere requires considering expected return, risk, taxes, liquidity, and investment horizon—not merely comparing the mortgage rate with a historical market average.

The best down payment can change when the mortgage rate changes

When mortgage rates are relatively high, reducing the loan balance eliminates borrowing at a higher contractual cost. When mortgage rates are lower, retaining cash or using it for another purpose may appear more competitive.

The down-payment decision should therefore be rerun when the actual mortgage quote changes.

Scenario 16: Same down payment, different mortgage rate

A $50,000 reduction in mortgage principal has a different long-term interest effect at 3.5% than at 7.0%.

This is one reason the down-payment calculation should feed directly into the Mortgage Calculator rather than being treated as an isolated percentage exercise.

Do not confuse the down payment with prepaid principal

The down payment reduces the amount that must be borrowed before the mortgage begins. An extra mortgage payment occurs after the loan exists and reduces outstanding principal ahead of the amortization schedule.

Both reduce debt, but they occur at different stages of the homeownership process. After closing, use the Extra Payment Calculator

Scenario 17: Larger down payment versus paying extra after closing

A buyer can put another $20,000 down at closing or keep the money temporarily and make a $20,000 principal payment six months later.

From the mortgage alone, applying the money earlier generally avoids more interest because the starting balance is smaller for those first six months. But retaining the cash temporarily can provide liquidity during the highest-expense period of moving and settling into the home.

A down payment does not reduce property tax

Property tax depends on the property and local tax system, not the size of your mortgage. Putting 40% down instead of 10% does not automatically reduce the assessed value or tax bill.

Estimate taxes separately at Property Tax Calculator

A down payment can change rent-versus-buy economics

Using more cash upfront reduces mortgage debt but increases the amount of capital tied to the property. A rent-versus-buy comparison should therefore account for both lower financing cost and the alternative investment value of the additional down-payment funds.

Model that broader decision at Rent vs. Buy Calculator

Do not choose the down payment before understanding closing costs

A buyer who decides “I will put every available dollar toward 20%” before estimating the rest of the transaction can discover late in the process that there is not enough cash for lender fees, prepaid insurance, escrow deposits, title charges, or other settlement items.

The next step in the homebuying sequence should be the Closing Costs Calculator, which will separate the down payment from total cash to close.

Continue planning

Check the home-price boundary

Test whether the resulting payment fits both underwriting ratios and your budget.

Calculate the resulting mortgage

Compare payment, LTV, PMI assumptions, and lifetime interest.

Itemize cash to close

Replace a percentage estimate with points, escrow, deposits, and actual credits.

Compare renting with buying

Test the down payment as part of a complete ownership and opportunity-cost decision.

Frequently asked questions

What is a down payment?

A down payment is the portion of the home purchase price paid upfront rather than financed through the mortgage. It creates starting equity in the property.

How do I calculate a down payment?

Multiply the purchase price by the desired down-payment percentage. For example, 10% of a $400,000 home is $40,000.

How do I calculate down-payment percentage?

Divide the down-payment amount by the purchase price and multiply by 100. A $60,000 contribution on a $500,000 home equals 12%.

How much is 20% down on a $500,000 house?

Twenty percent of $500,000 is $100,000, leaving approximately $400,000 to finance before any other loan-specific adjustments.

How much is 10% down on a $500,000 house?

Ten percent is $50,000, leaving approximately $450,000 to finance.

How much is 5% down on a $500,000 house?

Five percent is $25,000, leaving approximately $475,000 to finance.

Do I need 20% down to buy a house?

No. Twenty percent is not a universal homebuying requirement. Mortgage programs can permit smaller down payments. The appropriate amount depends on loan eligibility, mortgage insurance, pricing, monthly payment, closing cash, reserves, and personal finances.

Why is 20% down important?

On many conventional mortgage discussions, 20% down corresponds to approximately 80% LTV, which can materially affect private mortgage-insurance treatment. It is a useful benchmark, not a universal requirement.

Can I buy a house with less than 20% down?

Potentially. Low-down-payment conventional and government-supported mortgage options exist, subject to eligibility and program requirements.

Is a bigger down payment always better?

No. A larger down payment reduces mortgage debt and may reduce mortgage-insurance costs, but it also reduces liquidity. The best choice depends on closing costs, reserves, other debt, mortgage pricing, and financial priorities.

Does a larger down payment lower my monthly mortgage payment?

Generally yes. With the same rate and term, borrowing less reduces the scheduled principal-and-interest payment. Mortgage-insurance costs can also change depending on the loan.

What is LTV?

Loan-to-value, or LTV, compares the mortgage amount with the property value used for the calculation. A $400,000 mortgage on a $500,000 property corresponds to 80% LTV.

How does down payment affect LTV?

A larger down payment reduces the amount financed and therefore lowers starting LTV when property value remains unchanged.

What is the LTV with 5% down?

When purchase price and property value are the same, a 5% down payment corresponds to approximately 95% starting LTV.

What is the LTV with 10% down?

When purchase price and property value are the same, 10% down corresponds to approximately 90% starting LTV.

What is the LTV with 20% down?

When purchase price and property value are the same, 20% down corresponds to approximately 80% starting LTV.

Does a lower LTV help with a mortgage?

It can. LTV can affect mortgage insurance, eligibility, pricing, and underwriting depending on the mortgage product and borrower profile.

What is PMI?

Private mortgage insurance is insurance used with certain conventional mortgages to protect the lender against specified losses if the borrower defaults. It is different from homeowners insurance.

Will I have PMI with 10% down?

A conventional mortgage at roughly 90% LTV commonly involves private mortgage insurance, but the actual requirement and cost depend on the specific loan and lender.

Will I have PMI with 20% down?

An 80% starting LTV commonly changes conventional PMI requirements, but loan programs differ and other mortgage-insurance structures should not be treated as conventional PMI.

How much does PMI cost?

There is no single universal PMI rate. Pricing can depend on LTV, credit profile, loan terms, insurer, coverage requirements, and other factors. Use an actual lender estimate when available.

Is down payment the same as cash to close?

No. Cash to close can include the down payment plus closing costs, prepaid expenses, escrow deposits, and other adjustments, less applicable credits and deposits already paid.

How much cash do I really need to buy a house?

You need more than the down payment in many transactions. Consider closing costs, prepaid insurance, prepaid interest, initial escrow funding, moving expenses, immediate repairs, and post-closing reserves.

Should I use all my savings for the down payment?

Usually that deserves careful scrutiny. CFPB advises buyers to set aside funds for other savings goals, moving, renovations, and an emergency cushion before determining the amount available for closing.

How much emergency savings should I keep after buying?

The appropriate amount depends on household circumstances. CFPB currently uses roughly three to six months of expenses as a planning rule of thumb for an emergency cushion when deciding how much cash can be devoted to a home purchase.

Are mortgage reserves the same as emergency savings?

No. Lender reserve requirements follow mortgage-program definitions, while personal emergency savings reflect the household’s own liquidity needs. They can overlap but are not identical concepts.

Do all mortgages require cash reserves?

No single reserve requirement applies universally. Current Fannie Mae guidance varies reserve requirements according to transaction characteristics, occupancy, property type, underwriting, and other financed properties.

Can gift money be used for a down payment?

Yes for some mortgage transactions when the gift source and documentation meet the applicable loan-program requirements.

Does a mortgage gift have to be repaid?

A true gift used under mortgage gift-fund rules generally requires documentation that repayment is not expected. If repayment is required, the funds may instead represent borrowed money and a debt obligation.

What is a gift letter?

A gift letter documents the gift under the lender’s requirements. Current Fannie Mae guidance requires information including the gift amount, donor information and relationship, and a statement that repayment is not expected.

Who can give me gift funds for a mortgage?

Acceptable donors depend on the mortgage program. Current Fannie Mae conventional guidance defines permitted personal gift donors and documentation requirements for eligible transactions.

Can a seller give me my down payment?

Do not assume so. Seller and other interested-party contributions are governed by different rules. Fannie Mae does not permit interested-party contributions to satisfy a borrower’s down payment or minimum borrower contribution.

Can a seller pay my closing costs?

Seller or other interested-party contributions can be permitted toward certain costs within mortgage-program limits, but that is different from supplying the buyer’s required down payment.

What is down-payment assistance?

Down-payment assistance includes programs designed to help eligible homebuyers meet upfront purchase requirements. Assistance may take the form of grants, forgivable loans, deferred loans, second mortgages, or other structures.

Is down-payment assistance free money?

Not necessarily. Some assistance is grant-based, while other programs create repayment obligations, liens, occupancy conditions, or forgiveness schedules. Review the actual program terms.

Can a grant be used for a down payment?

Potentially. Current Fannie Mae guidance permits qualifying grants from acceptable entities for eligible borrower needs on certain principal-residence transactions, subject to mortgage-program requirements.

Can I borrow my down payment?

Borrowed funds can affect underwriting and may not be acceptable as the required down-payment source under every mortgage program. Any new debt should be disclosed to the lender and can affect DTI.

Can I use a personal loan for my down payment?

Do not assume it is permitted. Mortgage programs have rules governing acceptable sources of funds, and a personal loan creates an additional debt obligation that can affect qualification.

Can I use retirement money for a down payment?

Potentially, depending on the account and applicable rules, but withdrawals or loans can have tax, penalty, liquidity, and retirement consequences. Review current plan, tax, and mortgage requirements before using retirement funds.

Does a down payment affect DTI?

Indirectly. A larger down payment reduces the mortgage amount and generally lowers the required principal-and-interest payment, which can reduce the housing obligation used in DTI. Calculate the effect at DTI Ratio Calculator

Should I pay off debt or increase my down payment?

It depends on the required debt payment, interest rate, mortgage pricing, LTV, cash reserves, and which affordability constraint is binding. Compare both scenarios rather than assuming one strategy is always better.

How does down payment affect home affordability?

A larger down payment reduces the amount that must be financed for a given purchase price. This can lower the monthly mortgage payment and potentially increase the purchase price supported by a fixed housing budget. Model it at Home Affordability Calculator

Does my down payment affect property tax?

No. Property tax depends on the property and local tax rules rather than how much of the purchase price you finance. Estimate tax separately at Property Tax Calculator

Is it better to put more down or make extra mortgage payments later?

A larger down payment reduces the mortgage from the beginning. Extra payments reduce principal after the mortgage already exists. The earlier principal reduction generally avoids more mortgage interest, while retaining cash temporarily provides more liquidity. Model later prepayment at Extra Payment Calculator

Does down payment affect rent vs. buy?

Yes. More down reduces mortgage debt but commits more capital to the property, increasing the opportunity cost of cash that could remain invested elsewhere. Compare the full decision at Rent vs. Buy Calculator

How accurate is a down payment calculator?

The basic dollar, percentage, mortgage-balance, and LTV calculations are straightforward. The real financing outcome depends on the actual property value, loan program, mortgage insurance, fees, source-of-funds rules, assistance terms, and lender underwriting.

Sources and review

Determine your down payment — Consumer Financial Protection Bureau. Accessed 2026-08-31.
Where can I get money for a down payment on a home? — Consumer Financial Protection Bureau. Accessed 2026-08-31.
What is a loan-to-value ratio and how does it relate to my costs? — Consumer Financial Protection Bureau. Accessed 2026-08-31.
Personal Gifts — Fannie Mae. Accessed 2026-08-31.
Minimum Reserve Requirements — Fannie Mae. Accessed 2026-08-31.
Interested Party Contributions — Fannie Mae. Accessed 2026-08-31.
Grants and Lender Contributions — Fannie Mae. Accessed 2026-08-31.
Depository Accounts — Fannie Mae. Accessed 2026-08-31.

Reviewed 2026-08-31 by Dr Akawak Ejigu, DBA.

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