You've heard the advice: "Put 20% down on a house."
But on a $400,000 home, that's $80,000. For many first-time buyers, saving that much feels impossible.
Here's the truth: You don't always need 20% down. But the amount you put down significantly affects your monthly payment, total interest, and whether you'll pay PMI.
Let's break down exactly how much you need and what the trade-offs are.
🧮 Calculate Your Down Payment
Use our Down Payment Calculator to see how different down payment amounts affect your monthly payment and total cost.
Down Payment Options by Loan Type
Different loan programs have different minimum requirements:
Conventional loans: As low as 3% (with good credit)
FHA loans: 3.5% minimum (credit score 580+)
VA loans: 0% down (for veterans and military)
USDA loans: 0% down (rural areas, income limits)
Jumbo loans: Typically 10-20% minimum
So technically, you could buy a $400,000 home with as little as $12,000 down (3%). But should you?
What Is PMI and Why Does It Matter?
Private Mortgage Insurance (PMI) is required when you put less than 20% down on a conventional loan. It protects the lender if you default.
PMI typically costs: 0.5% to 1% of your loan amount per year.
On a $380,000 loan (5% down on a $400k home), PMI could be $158-$317 per month.
That's money that doesn't go toward your home equity — it's pure insurance cost.
The good news: PMI can be removed once you reach 20% equity (either through payments or home appreciation).
How Down Payment Affects Your Monthly Payment
Let's compare different down payments on a $400,000 home at 6.5% interest (30-year mortgage):
$400,000 Home Comparison
3% down ($12,000):
Loan: $388,000 | Monthly P&I: $2,452 | Est. PMI: $290
Total monthly: ~$2,742
10% down ($40,000):
Loan: $360,000 | Monthly P&I: $2,275 | Est. PMI: $225
Total monthly: ~$2,500
20% down ($80,000):
Loan: $320,000 | Monthly P&I: $2,023 | PMI: $0
Total monthly: ~$2,023
The difference between 3% and 20% down is about $719/month — that's $8,628 per year!
The True Cost Over 30 Years
Let's look at total interest paid over the life of the loan:
3% down: Total interest = ~$494,000
10% down: Total interest = ~$459,000
20% down: Total interest = ~$408,000
Putting 20% down instead of 3% saves you roughly $86,000 in interest over 30 years.
Arguments FOR a Smaller Down Payment
1. Get into a home sooner
Saving $80,000 could take years. If home prices are rising 5% annually, waiting costs you more than PMI.
2. Keep cash for emergencies
Putting every dollar into a down payment leaves you house-rich but cash-poor. Unexpected repairs or job loss could be devastating.
3. Invest the difference
If your mortgage rate is 6.5% but you can earn 10% in the stock market, you might come out ahead investing instead of maximizing your down payment.
4. PMI is temporary
Once you reach 20% equity, PMI goes away. In a rising market, this could happen in just a few years.
Arguments FOR a Larger Down Payment
1. No PMI
At 20% down, you avoid PMI entirely. That's real money in your pocket every month.
2. Lower monthly payments
More down = smaller loan = smaller payment. This gives you more budget flexibility.
3. Better interest rates
Lenders often offer slightly better rates for larger down payments (lower risk for them).
4. Instant equity
If home prices drop, you have a buffer. With 3% down, a 5% price drop puts you underwater.
5. Easier to sell
More equity means more flexibility if you need to sell quickly.
Don't Forget Closing Costs!
Your down payment isn't the only upfront cost. Budget for closing costs too:
Typical closing costs: 2-5% of home price
On a $400,000 home, that's $8,000-$20,000 in addition to your down payment.
Closing costs include:
• Loan origination fees
• Appraisal fee
• Title insurance
• Attorney fees
• Inspection costs
• Prepaid property taxes and insurance
How Much Should YOU Put Down?
There's no one-size-fits-all answer. Consider:
Put less down (3-10%) if:
• You have a stable income but limited savings
• Home prices in your area are rising fast
• You want to keep cash reserves for emergencies/repairs
• You're confident in your job security
Put more down (15-20%+) if:
• You have the savings without depleting your emergency fund
• You want the lowest possible monthly payment
• You're buying at the top of your budget
• You want to avoid PMI
The "Sweet Spot" Strategy
Many financial experts suggest 10-15% down as a sweet spot:
• Lower PMI than 3-5% down
• More affordable than saving 20%
• Reasonable equity position
• Leaves money for closing costs and reserves
🎯 Calculate Your Best Option
See exactly how different down payment amounts affect your monthly payment, PMI, and total cost.
The Bottom Line
20% down is ideal but not required. The "right" down payment depends on your financial situation, local market, and priorities.
What matters most:
• Don't drain your savings completely
• Keep 3-6 months expenses as an emergency fund
• Factor in closing costs AND moving/furnishing costs
• Run the numbers on different scenarios
Use our Down Payment Calculator and Mortgage Calculator to see exactly what you can afford.