Purchase and financing
Down payment amount, explained
A down payment is the part of the home price you pay at the start instead of borrowing. You borrow the rest with your home loan. For example, if a home costs $100 and you pay $20 at the start, your down payment is 20% and your starting loan is $80. The part of the home you already own is called equity.
Published and maintained by Kevin Song for Your Home Cost. Last reviewed: . How guides are reviewed.
5 cited sources
Why it changes your estimate
A larger down payment creates a smaller loan, which usually lowers the principal-and-interest payment and total interest. It can also affect the interest rate, lender approval, and mortgage-insurance or guarantee-fee rules. A smaller down payment keeps more cash available but normally increases the amount borrowed.
What to enter
Enter only the dollars that will be credited directly toward the purchase price. Do not include closing costs, moving costs, or savings kept for emergencies and repairs. Gifts, grants, or down-payment assistance may be allowed, but the lender must confirm that the source, documentation, and program are acceptable.
Good to know
The Federal Housing Finance Agency (FHFA) benchmark is built from its National Mortgage Database, a nationally representative 5% sample of closed-end first-lien U.S. mortgages. For home-purchase loans, the app subtracts FHFA's average combined loan-to-value ratio (combined LTV) from 100%. Combined LTV compares the first mortgage plus any other mortgage secured by the home with the property's value, so its complement is a broad share of value not mortgage-financed—not a directly measured average cash down payment. Appraisal rules, second liens, and the difference between an average and a median all matter. The National Association of Realtors (NAR) 2025 survey covered transactions from July 2024 through June 2025 and reported median down payments of 19% overall, 10% for first-time buyers, and 23% for repeat buyers. Those national medians describe the buyers in that period; they are not minimums, recommendations, or a prediction for one loan. Twenty percent is not universally required: some programs allow much less, while a conventional loan below 20% down often adds private mortgage insurance (PMI). Even a zero-down-payment loan can require cash for closing, moving, inspections, and reserves.
Choose the amount with a complete cash plan
Start with cash that will be available and acceptable to the lender, then reserve money for closing costs, inspections, moving, immediate work, and a post-closing cushion. Compare at least two down-payment amounts on otherwise identical lender quotes. The useful question is not only how much the monthly payment falls, but how much cash is left, whether the rate or mortgage-insurance price changes, and how long it would take monthly savings to replace the extra cash contributed.
Document where every dollar will come from. A lender may need statements and explanations for savings, gifts, grants, asset sales, or assistance programs, and a program may impose timing or occupancy conditions. Do not count an earnest-money deposit twice: track it as money already paid that is expected to receive a credit in the final cash-to-close calculation, subject to the contract and closing documents.
- Build the down payment only after reserving known closing and move-in cash needs.
- Compare lender quotes at multiple down-payment levels instead of assuming 20% is best.
- Verify documentation, timing, and program rules for gifts, grants, or assistance funds.
Worked example
On a $400,000 home, a $40,000 down payment is 10%. The starting loan would be about $360,000 before any financed costs.
Sources and citations
These references support the definitions, planning guidance, and program rules above. A citation does not mean its publisher endorses this guide.
- Consumer Financial Protection Bureau: Determine your down payment
- Consumer Financial Protection Bureau: Down-payment funding
- Federal Housing Finance Agency: Combined loan-to-value dashboard
- Federal Housing Finance Agency: Combined loan-to-value data feed
- National Association of Realtors: 2025 buyer survey
Original planning exercise
Compare monthly savings with cash left after purchase
Assume $100,000 available cash, a $400,000 purchase, $12,000 closing allowance, $500 inspection, and $4,000 moving and setup costs. Compare $40,000 and $80,000 down at an illustrative 6.5% over 30 years.
Illustrative assumptions, not quotes or forecasts. Calculations by Your Home Cost; mortgage payment examples use the calculator's shared fixed-rate formula.
| Option or step | Calculation | Planning result |
|---|---|---|
| $40,000 down | $100,000 − $40,000 − $12,000 − $500 − $4,000 | $43,500 cash left; $2,275.44/month principal and interest |
| $80,000 down | $100,000 − $80,000 − $12,000 − $500 − $4,000 | $3,500 cash left; $2,022.62/month principal and interest |
What the comparison tells you
The additional $40,000 cuts principal and interest by $252.82 a month under the unchanged-rate assumption. This calculation does not include PMI differences, different lender pricing, interest on retained savings or the value of having cash available for a repair.
Evidence to collect
Request both down-payment scenarios from the same lender, including PMI, rate, points, credits and required reserves. Check that all assumed cash is available by the dates it will be needed.
Apply it in the calculator
Export each scenario with the same taxes and other operating costs, then record the cash left outside the calculator. Upfront cash spent and the lender's required reserve balance are different figures.
Original planning exercise added . Source-review dates above are maintained separately.