One of the biggest questions home buyers ask: "How much should I put down?" The answer isn't one-size-fits-all. Let's break down your options and their financial impact.
Minimum Down Payment Requirements
| Loan Type | Minimum Down | PMI Required |
|---|---|---|
| Conventional | 3% | Yes, if below 20% |
| FHA | 3.5% | Yes, for 11 years if 10%+ |
| VA | 0% | No |
| USDA | 0% | Yes |
What is PMI?
Private Mortgage Insurance (PMI) protects the lender if you default. It typically costs 0.5% to 1% of your loan amount annually.
On a $300,000 home with 5% down ($15,000):
- Loan amount: $285,000
- PMI at 0.8%: ~$2,280/year or $190/month
- PMI until you reach 20% equity (can be 7-10+ years)
The 20% Rule
Putting down 20% or more:
- Avoids PMI entirely
- Lower monthly payment
- More equity from day one
- Better loan terms (lower rates sometimes)
Example: $400,000 Home
5% Down ($20,000)
Monthly: ~$2,400
PMI: ~$190/month
Total Monthly: ~$2,590
20% Down ($80,000)
Monthly: ~$2,200
PMI: $0
Total Monthly: ~$2,200
When to Put Less Down
- Market is rising fast: Buy now, build equity quickly
- Low-interest environment: Keep cash invested
- Diversity of investments: Stocks may outperform
- Preserving emergency fund: Don't drain savings
When to Put More Down
- High PMI cost: Eliminating it saves money
- Lower credit score: Larger down payment helps
- Stable job/income: More security
- Want lower payments: Stretching affordability
Key Takeaways
- 3-5% is the minimum, but 20% avoids PMI
- PMI costs thousands over the life of a loan
- Don't drain your emergency fund for a larger down payment
- Consider opportunity cost of cash vs investment returns
- Run the numbers on mortgage calculators