💰Down Payment Calculator
Calculate how much you need for a down payment, closing costs, and when you can afford to buy your home.
Why Use This Calculator?
PMI Avoidance with 20% Down
$400k home: 10% down ($40k) = PMI $225/month ($2,700/year). 20% down ($80k) = No PMI = save $2,700 annually. Over 7 years before PMI drops: $18,900 saved. Extra $40k down pays for itself in 14.8 years through PMI elimination. Calculator shows break-even on higher down payment.
Lower Interest Rate Qualification
$400k home, 15% down = 6.8% rate. 20% down = 6.5% rate (better LTV = lower risk = better rate). 0.3% difference on $320k loan = $64/month savings ($23k over 30 years). Larger down payment = better rate = double savings (lower payment + less interest).
Monthly Payment Reduction
$400k home: 10% down ($40k) = $360k loan @ 6.8% = $2,350/month. 20% down ($80k) = $320k @ 6.5% = $2,023/month. Extra $40k down reduces payment $327/month. $327 × 360 months = $117,720 saved over loan life. Calculator projects lifetime savings.
Instant Equity Position
$400k home with 5% down = $20k equity (5%). 20% down = $80k equity (20%). Market drops 10% = $360k value. 5% down = $20k - $40k loss = underwater $20k. 20% down = $80k - $40k loss = still $40k equity. Higher down payment = foreclosure protection buffer.
Stronger Offer in Competitive Market
20% down offer shows financial strength = seller confidence. Competing with 3% down FHA offer = your 20% down likely wins (less appraisal risk, faster closing). In bidding war, high down payment differentiates. Calculator shows required down payment for competitive positioning.
Debt-to-Income Improvement
$400k home, $8k monthly income: $360k loan (10% down) = $2,350/month = 29.4% housing ratio. $320k loan (20% down) = $2,023/month = 25.3% ratio. Lower DTI = easier approval + room for other debts. Extra down payment improves qualification metrics significantly.
Step-by-Step Guide
Determine Target Home Purchase Price
Identify desired home price: $400,000. This is starting point for down payment calculation. Use home search sites (Zillow, Redfin) for realistic pricing in target area. Include buffer for closing costs and competition. Home price drives all down payment math.
Example:
Example: $400,000 target home price in desired neighborhood
Calculate Minimum Required Down Payment
Loan minimums: Conventional 3-5%, FHA 3.5%, VA/USDA 0%. $400k home conventional = $12k-20k minimum (3-5%). But minimums require PMI and higher rates. Minimum gets you in door but costs more monthly. Calculator shows minimum vs recommended amounts.
Example:
Example: $400k × 3% = $12,000 minimum conventional down payment
Calculate 20% Down Payment Amount
$400k × 20% = $80,000 down payment. This is magic number to avoid PMI. 20% down = No PMI ($200-300/month savings), better interest rate (0.25-0.5% lower), stronger offer position. $80k seems huge but saves $100k+ over loan life. Target 20% whenever possible.
Example:
Example: $400,000 × 20% = $80,000 (PMI avoidance threshold)
Factor in Closing Costs Separately
$400k home needs $80k down PLUS closing costs. Closing costs 2-5% of price = $8k-20k additional. Total cash needed: $80k down + $12k closing (3% average) = $92k total. Don't confuse down payment with total cash to close. Budget both separately.
Example:
Example: $80k down + $12k closing = $92k total cash needed
Compare PMI Cost for Lower Down Payments
$400k home, 10% down ($40k) = $360k loan with PMI. PMI rate 0.75% annually = $2,700/year ($225/month). PMI continues until 78% LTV (paid down to $320k) = ~7 years. Total PMI paid: $18,900. Extra $40k to reach 20% eliminates this completely.
Example:
Example: $225/month PMI × 84 months = $18,900 total PMI cost
Calculate Interest Rate Impact
LTV affects rate: 95% LTV (5% down) = 7% rate, 90% LTV (10% down) = 6.8%, 80% LTV (20% down) = 6.5%. $360k at 6.8% = $2,350/month. $320k at 6.5% = $2,023. Lower LTV = better rate = lower payment. Rate difference worth extra down payment.
Example:
Example: 20% down earns 0.3% lower rate = $64/month savings
Determine Opportunity Cost of Cash
$80k down vs $40k down. Extra $40k in down payment vs invested at 8% return. $40k × 8% = $3,200 annual return. But PMI + higher interest costs $2,700 + $768 = $3,468/year. Putting in home saves $268/year vs investing. Plus forced savings through equity. Down payment wins.
Example:
Example: $40k down payment saves $3,468/yr vs $3,200 investment return
Calculate Break-Even Timeline
Extra $40k down (20% vs 10%) saves $327/month payment. Break-even: $40,000 ÷ $327 = 122 months (10 years). If staying 10+ years, extra down payment profitable. Selling in 5 years, extra $40k down only saves $19,620 (not recovered). Match down payment to ownership timeline.
Example:
Example: 10-year break-even on extra $40k down payment
Assess Emergency Fund Impact
$80k down leaves $10k emergency fund vs $40k down leaves $50k fund. Emergency fund critical - don't deplete to zero for down payment. Need 6 months expenses ($30k typical) minimum. If $80k down drains emergency fund, put 10% down, keep cash buffer, accept PMI temporarily. Safety first.
Example:
Example: Keep $30k emergency fund, put remaining $50k down (12.5%)
Model Down Payment Assistance Programs
First-time buyer programs offer 3-5% down payment assistance. $400k home, $12k assistance (3%) + your $8k (2%) = $20k total (5% down). Reduces cash needed from $80k to $8k. Programs have income limits ($100k-150k typical) and property requirements. Check state/local housing authority.
Example:
Example: $12k grant + $8k yours = $20k down (5%), save $60k cash
Expert Tips & Strategies
Target 20% Down to Eliminate PMI and Get Best Rate
$400k home = $80k down seems impossible but saves $100k+ over loan life. PMI $225/month for 7 years = $18,900. Plus 0.3% better rate = $23k savings. Total: $41,900 saved by putting 20% vs 10%. Extra $40k investment pays 105% return over loan life. Worth aggressive saving.
Don't Drain Emergency Fund for Higher Down Payment
Have $90k saved. $80k down leaves $10k emergency fund (too small). Better: $50k down (12.5%), keep $40k emergency fund, accept $150/month PMI temporarily. Job loss with zero fund = foreclosure. Small emergency fund = risky. Never sacrifice safety for slightly lower payment.
Negotiate Seller to Pay Closing Costs
Have $80k for 20% down but need $12k more for closing. Offer $412k with seller paying $12k closing = net $400k to seller, you pay $80k down only. Seller nets same, you preserve 20% down. In buyer's market, sellers often agree. Creative negotiation preserves down payment percentage.
Use Gift Funds from Family for Down Payment
Parents gift $20k toward down payment. With your $60k = $80k total (20% on $400k). Lenders allow gifts with proper documentation (gift letter, proof of transfer). No repayment expected. Gift funds count same as yours for LTV calculation. Family assistance enables 20% down earlier.
Consider Lower Price Home to Reach 20% Down
Have $60k saved. $400k home needs $80k (20%) = short $20k. Alternative: $300k home needs $60k (20%) = you qualify! Lower payment ($1,517 vs $2,528) + no PMI + better rate. Pride says buy bigger, math says buy affordable. Right-size home with 20% down beats stretch purchase with PMI.
Time Purchase for Down Payment Windfalls
Need $80k, have $60k. Expecting $25k bonus in 3 months. Wait 3 months, have $85k, put 20% down + $5k extra. Vs buying now with 15% down = 5 years of PMI ($13,500). Patience saves thousands. Time home purchase around bonuses, inheritance, RSU vesting, tax refunds.
Put Less Down If Rate is Very Low
Rate 3% (rare) = opportunity cost favors investing over down payment. Extra $40k at 3% mortgage cost vs 8% investment return = keep $40k, invest, accept PMI. But rate 7% = invest PMI savings in extra down payment. Rule: If mortgage rate > investment return - 2%, maximize down payment.
Avoid Taking 401k Loan for Down Payment
$30k 401k loan for down payment = lose $2,400 annual growth (8%), pay $1,500 interest to yourself, risk job loss = immediate repayment. True cost: $3,900/year. PMI only costs $2,700/year. 401k loan more expensive than PMI + risks retirement. Never raid retirement for home down payment.
Common Mistakes to Avoid
✓ Better approach: $400k home, putting $12k down (3%) to keep $68k cash "for emergencies." But PMI $250/month + higher rate costs $400/month = $4,800/year wasted. $68k earning 4% = $2,720/year. Keeping cash loses $2,080/year. Should put $60k down, keep $20k emergency fund, eliminate PMI. False economy keeping excess cash.
✓ Better approach: Have $85k, putting all $80k down, left with $5k. Then: $2,000 emergency = broke, forced to use credit card at 24% APR. Should put $55k down (13.75%), keep $30k emergency fund. PMI $150/month is insurance against life emergencies. Never leave yourself with under 6 months expenses in savings.
✓ Better approach: Putting $80k down unaware of state first-time buyer program offering $16k assistance (4% of $400k). Could have put $64k down, kept $16k cash, achieved same 20% down. Many miss free money - state, local, employer programs. Always research assistance before using own money. $16k missed = $16k mistake.
✓ Better approach: Saving $80k thinking "I have 20% down for $400k house, ready to buy." Forgetting closing costs $12k = actually $8k short. Offering on home, then shocked at closing costs. Total cash = down payment + closing + reserves. Budget 23-25% of price total, not just 20% for complete preparedness.
✓ Better approach: $400k rental, putting $100k down (25%) to lower payment. But rental income $2,500 covers $2,200 mortgage (20% down) easily. Extra $20k down only saves $150/month (small vs rental income). Better: 20% down, invest extra $20k = $1,600/year return vs $1,800/year mortgage savings. Minimize investment property down payment.
✓ Better approach: $25k bonus, allocating all to down payment. But bonus taxed 22-37% = $8,750 taxes owed April. Now short $8,750 at tax time, forced into payment plan. Should have allocated $16,250 to down payment, $8,750 to taxes. Not planning for bonus tax = cash crisis April 15.
✓ Better approach: Stressed about PMI $225/month on 10% down purchase. But PMI drops at 78% LTV = 7 years with normal payments. Total PMI $18,900 over 7 years vs forcing extra $40k down immediately. If $40k down strains finances, accepting 7 years PMI reasonable. PMI isn't permanent - many treat it like it is.
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Frequently Asked Questions
How much should I save for a down payment?
The ideal down payment is 20% of the home price to avoid PMI (private mortgage insurance). However, many buyers put down less: FHA loans require just 3.5%, and conventional loans can start at 3-5%. While lower down payments help you buy sooner, they result in higher monthly payments and PMI costs. Consider your budget, savings timeline, and monthly payment comfort level when deciding.
What are closing costs and how much are they?
Closing costs are fees paid when finalizing a home purchase, typically 2-5% of the home price. They include loan origination fees, appraisal fees, title insurance, attorney fees, property taxes, homeowner's insurance, and recording fees. For a $350,000 home, expect $7,000-17,500 in closing costs. Some costs are negotiable, and sellers sometimes contribute to closing costs.
Should I pay PMI or wait to save 20% down?
This depends on your market and goals. PMI typically costs 0.5-1% of the loan amount annually ($100-300/month on a $300K loan). If home prices are rising quickly, buying with PMI now may be better than waiting years to save 20%, as appreciation could outpace PMI costs. However, if you can save 20% in 1-2 years, waiting eliminates PMI and reduces your loan amount. Run the numbers for your specific situation.
Can I use gift money for my down payment?
Yes, most loan programs allow gift money from family members for down payments. The donor must provide a gift letter stating the money is a gift, not a loan, and doesn't need to be repaid. FHA allows 100% of the down payment to be gifted, while conventional loans typically require at least 5% to come from your own funds. Keep clear documentation of gift money transfers for your lender.
How long does it take to save for a down payment?
This depends on home prices, your target down payment percentage, and monthly savings. The median first-time buyer takes 5-7 years to save for a down payment. For a $350,000 home with 20% down ($70,000), saving $1,000/month takes 6 years, while $2,000/month takes 3 years. Consider strategies like reducing expenses, increasing income, using tax refunds, or exploring down payment assistance programs to speed up the process.
Financial Disclaimer
This calculator is provided for educational and informational purposes only. The results are estimates based on the information you provide and should not be considered as financial, legal, or tax advice.
Actual results may vary based on your specific circumstances, market conditions, and other factors. Always consult with qualified financial, legal, and tax professionals before making any financial decisions.
We make no guarantees about the accuracy, completeness, or reliability of the calculations. Use this tool at your own risk.