What Is a Down Payment?
A down payment is the upfront cash payment made when buying a home. It’s expressed as a percentage of the home’s purchase price.
Common Down Payment Percentages
Here’s what a down payment looks like at different price points:
| Home Price | 3% Down | 5% Down | 10% Down | 20% Down |
|---|---|---|---|---|
| $200,000 | $6,000 | $10,000 | $20,000 | $40,000 |
| $300,000 | $9,000 | $15,000 | $30,000 | $60,000 |
| $400,000 | $12,000 | $20,000 | $40,000 | $80,000 |
How Your Down Payment Affects Your Mortgage
The amount you put down impacts loan approval, monthly payments, and loan costs:
- 📉 Smaller Down Payment – Higher loan amount, higher monthly payments.
- 💰 Larger Down Payment – Smaller loan, lower monthly payments, and potential savings on interest.
- 🔒 20% Down – Avoids private mortgage insurance (PMI).
Low Down Payment Loan Options
Not all homebuyers need 20% down! Here are common low down payment mortgage programs:
| Loan Type | Minimum Down Payment | Best For |
|---|---|---|
| Conventional Loan | 3-5% | Buyers with good credit |
| FHA Loan | 3.5% | First-time buyers with lower credit |
| VA Loan | 0% | Eligible military members |
| USDA Loan | 0% | Rural homebuyers |
Pros & Cons of Different Down Payment Sizes
| Down Payment | Pros | Cons |
|---|---|---|
| 3-5% Down | ✔ Buy a home sooner ✔ More cash left for savings | ❌ Higher monthly payments ❌ Requires PMI |
| 10-15% Down | ✔ Lower loan amount ✔ Smaller PMI payments | ❌ Still requires PMI ❌ Larger upfront cost |
| 20%+ Down | ✔ No PMI required ✔ Lowest possible monthly payment | ❌ Higher upfront cost ❌ Less cash for emergencies |
How to Save for a Down Payment
Need to build your down payment fund? Try these savings strategies:
- 📅 Set Up Automatic Savings – Transfer a set amount monthly.
- 💰 Cut Unnecessary Expenses – Reduce dining out and subscriptions.
- 🛠 Pick Up a Side Hustle – Freelance, Uber, or gig work can add extra cash.
- 🎁 Use Gift Funds – Some loan programs allow family gifts for down payments.
“A larger down payment lowers your loan balance and saves you money in the long run.”
— Sarah Thompson, Mortgage Expert
Frequently Asked Questions
Is it better to put 20% down on a house?
Yes, if you can afford it! A 20% down payment helps you avoid PMI and lowers monthly payments.
Can I buy a home with 3% down?
Yes! Many lenders offer 3-5% down payment loans for qualified buyers.
How can I avoid PMI without 20% down?
Some lenders offer lender-paid PMI (LPMI) or VA and USDA loans with no PMI.