Stage 1 Am I ready?
How much to put down
The question: How much should I put down?
For: Buyers deciding between a smaller and a larger down payment
The short version
The down payment is the part of the price you pay yourself. Whatever you do not put down, you borrow. A larger down payment means a smaller loan, a lower payment and less interest over time. It also means more cash at closing and less left in savings.
The least you can put down depends on the loan type:
- Conventional: 3% with HomeReady, Home Possible or a first-time buyer; 5% otherwise.
- FHA: 3.5% with a score of 580 or higher; 10% with a score from 500 to 579.
- VA and USDA: 0% down for those who qualify.
Mortgage insurance is where the down payment matters most. A conventional loan with 20% down has none; below that, it carries mortgage insurance until enough is paid down. FHA keeps its annual premium for the life of the loan with less than 10% down, and for 11 years with 10% or more.
The least down is not always best, and neither is the most. Money you keep can cover repairs, moving and an emergency. We compare the options in your Mortgage Plan so you see the trade in dollars.
Worked example
A $300,000 home, conventional loan
Example- 30-year fixed
- Example rate 6.75%
- Taxes $1,500 a year
- Insurance $1,400 a year
| Down payment | Loan | Monthly payment | Mortgage insurance | Cash to close |
|---|---|---|---|---|
| 3% ($9,000) | $291,000 | $2,226 | $97 a month | $15,406 |
| 5% ($15,000) | $285,000 | $2,185 | $95 a month | $21,389 |
| 10% ($30,000) | $270,000 | $2,083 | $90 a month | $36,344 |
| 20% ($60,000) | $240,000 | $1,798 | None | $66,255 |
Going from 3% to 20% down takes $50,849 more at closing and lowers the payment by $428 a month. Cash to close includes about $3,662 in fees and the prepaid taxes, insurance and interest.
Example amounts on the $300,000 home. Rates change daily. Your Mortgage Plan shows your own numbers.
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Go deeper
Why some buyers keep cash instead
Cash in the bank can cover a furnace, a roof leak or a lost paycheck. Cash in the home cannot be spent without selling or borrowing against it. Some loans also ask for reserves, savings left after closing. When the difference in payment is small, keeping more cash can be the better choice.
Where the money can come from
Savings, gifts from family and down payment assistance are the usual sources. Assistance is usually a second loan with a lien on the home, and only sometimes a grant. We compare your options with and without it before you apply. See finding the money for a home and down payment assistance.
Your next step
Lesson 7 of 9 in Am I ready?Finding the money for a homeMoney for a home can come from everyday extras, a savings account that earns interest, gifts and assistance. VA and USDA loans need no down payment.Read the lessonOr go another way: What mortgage insurance costsHow much you need saved