Down Payment

How a Down Payment Shapes Your Loan

A down payment is the portion of a home’s price paid upfront in cash, with the rest financed through a mortgage loan. Enter your home price and either the down payment percent or the dollar amount — whichever you already know — and this calculator returns the other figure, plus the resulting loan amount.

This calculator also flags whether private mortgage insurance (PMI) is likely required: for conventional loans, a down payment below 20% typically requires it, since lenders use PMI to offset the greater risk of financing a larger share of the home’s value.

Key Factors to Consider

• Where your down payment funds come from matters to a lender, not just the amount. Most lenders require “seasoned” funds — money that’s been in your account for a set period (often 60 days) — and documentation for large deposits. A big, sudden deposit shortly before applying, even from a legitimate source, can trigger extra underwriting scrutiny if it isn’t properly documented.
• Gift funds are commonly allowed, but have specific rules. A gift from family toward a down payment typically requires a signed gift letter confirming it doesn’t need to be repaid, and some loan programs limit what percentage of the down payment can come from a gift — worth checking the specific requirements for your loan type before counting on gift money.
• Down payment assistance programs exist and can lower the cash barrier to buying. State, local, and some employer-based programs offer grants or low-interest loans specifically to help with a down payment — worth researching before assuming a larger down payment (or a smaller purchase) is the only path if a big down payment feels out of reach.
• PMI cost itself isn’t a single fixed rate. It varies by credit score, loan type, and how far below 20% the down payment is — someone at 15% down typically pays a lower PMI rate than someone at 5% down, since the lender’s risk is somewhat lower with more equity already in place.

The Formula

$$\vC{\text{Down Payment Amount}} = \vA{\text{Home Price}} \times (\vB{\text{Down Payment Percent}} \div 100)$$ $$\vB{\text{Down Payment Percent}} = \frac{\vC{\text{Down Payment Amount}}}{\vA{\text{Home Price}}} \times 100$$ $$\text{Loan Amount} = \vA{\text{Home Price}} - \vC{\text{Down Payment Amount}}$$

Worked Example

A $350,000 home with 20% down:

1. Down payment amount: $350,000 × 20% = $70,000.
2. Loan amount needed: $350,000 − $70,000 = $280,000.
3. At exactly 20% down, PMI is typically not required on a conventional loan.

If you instead knew you had $40,000 saved toward that same $350,000 home: that works out to about 11.4% down, leaving a $310,000 loan — and PMI would likely be required at that level.

Common Mistakes

• Assuming 20% down is a requirement, not a threshold. Many loan programs allow well below 20% down — the 20% figure specifically marks the point where PMI typically drops away on a conventional loan, not a minimum needed to qualify for a mortgage at all.
• Draining savings entirely to reach a round-number down payment. Putting every available dollar toward the down payment can leave nothing for closing costs, moving expenses, or an emergency fund right after taking on a new, larger monthly obligation.
• Not budgeting for closing costs on top of the down payment. Closing costs (typically a few percent of the home price) are a separate cash requirement due at the same time as the down payment — a buyer who plans exactly enough for the down payment alone can come up short at closing.
• Confusing the down payment percentage with the interest rate. These are two entirely unrelated numbers — the down payment percent affects the loan amount and whether PMI applies; the interest rate affects the cost of borrowing that loan amount over time.

Useful to Know

• The 20%-down PMI threshold is specific to conventional loans — FHA loans have their own mortgage insurance rules (often required regardless of down payment size, with different removal conditions), and VA loans typically have no monthly mortgage insurance at all.
• A down payment on a home is different from earnest money, a separate, smaller deposit made when an offer is accepted to show good faith — earnest money is typically applied toward the down payment or closing costs at closing, not paid on top of them.
• Down payment requirements can vary for a second home or an investment property, which often carry higher minimum down payment percentages than a primary residence, since lenders view them as higher-risk loans.
• Even after PMI is no longer legally required at 20% equity, some lenders require a borrower to formally request its removal rather than dropping it automatically — check your specific loan servicer’s process rather than assuming it disappears the moment the math crosses 20%.