Down Payment Calculator

What is the Minimum Down Payment on a House?

The minimum down payment is the lowest up-front amount a home buyer must pay before purchasing a home. The minimum down payment is used to secure a mortgage by letting lenders know that you can financially support mortgage payments. The minimum down payment on a house is 20% of the total purchase price for general conventional loans. However, there are many situations where the minimum down payment amount varies due to the type of loan taken and if it is within conforming loan limits set by the Federal Housing Finance Agency. For example, first-time home buyers can have minimum down payments of as low as 3% through conforming loans like Fannie Mae’s HomeReady Program or Freddie Mac’s HomePossible Program.

Do I Need to Pay Mortgage Insurance?

Mortgage insurance is only required on loans if the minimum down payment is less than 20%. This insurance protects your mortgage lender if you fail to make your monthly mortgage payments. Mortgage insurance is meant to protect your lender and if you do not make payments, the lender can still repossess your home. No matter what mortgage you get, if the down payment is less than 20%, someone is paying for insurance. You will have to pay Private Mortgage Insurance (PMI) on conventional loans, FHA Mortgage Insurance Premiums (FHA MIP) on FHA loans, and reduced mortgage insurance on conforming loans. There are very few loan types that won’t charge insurance with a low down payment, but the USDA and VA insure their mortgages. If you get a USDA or VA loan, the insurance is covered by the government-sponsored agency supporting the loan. This means that your mortgage payment doesn’t include an insurance premium. There are very few loan types that won’t charge insurance with a low down payment, but the USDA and VA insure their mortgages. If you get a USDA or VA loan, the insurance is covered by the government-sponsored agency supporting the loan. This means that your mortgage payment doesn’t include an insurance premium. It might be possible to avoid paying for mortgage insurance premiums with a seller carry back loan where a seller provides a second loan that covers a part of closing costs or the down payment for the mortgage.

What is a Conforming Loan?

A conforming loan is a mortgage that falls within the purchase price limits set by the Federal Housing Finance Agency. These loans are insured by government-sponsored agencies like the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). The loans must have a loan to value (LTV) ratio of at least 80% and a debt to income ratio no greater than 43% to be considered conforming loans. If these criteria of loan size, loan to value ratio, and debt to income ratio are not met, then government agencies will not insure the loan, which can result in higher mortgage rates. If the loan is beyond the limit it is classified as a Jumbo loan and will require Private Mortgage Insurance in rare cases where the down payment is less than 20%.

How is the Minimum Down Payment Calculated?

Three factors that determine the minimum down payment you are required to pay:

1. Location – Counties have different maximum mortgage amounts, so you will need a jumbo loan for properties within that county that exceed this limit.
2. Home Price – The home sale price determines whether the loan is a conforming loan within the limit or a jumbo loan.
3. Credit Score – The credit score is also used because certain loans cannot be offered below a certain credit score. Home buyers with low credit scores may have to use bad credit mortgages.

What is a First-Time Home Buyer?

A first-time home buyer is defined by the U.S. Department of Housing and Urban Development (HUD). According to HUD, you are a first-time home buyer if you fall into one of the following categories:

• You have not owned a principal residence in the past three years
• Purchasing a home with your spouse who has not owned a principal residence in the past three years
• Divorced and have only jointly owned a home with your former spouse
• A displaced homemaker who jointly owned a home with your spouse
• Owned a principal residence not affixed to a permanent foundation as defined by HUD
• Owned a home in volation of state, local, or model building codes

Conforming Loan – Minimum Down Payment of 3%

These loans can be insured by the federal government through sponsored agencies such as Fannie Mae and Freddie Mac. There are certain requirements to qualify for these loans:

• Minimum credit score of 620
• Loan-to-Value (LTV) Ratio of at least 20%
• Debt-to-Income (DTI) Ratio less than 43%
• Your income must not exceed 80% of your county's median income
• The property must be a 1-unit principal residence

FHA Loan – Minimum Down Payment of 3.5%

FHA loans are mortgages insured by the Federal Housing Agency (FHA) that are targeted toward low-income earners. To be eligible you must meet the following requirements:

• Within the FHA Loan Limit
• Purchase of Mortgage Insurance Premium
• Debt-to-Income (DTI) Ratio of less than 43%
• Must be the Primary Residence
• Proof of Employment and Income

FHA loan limits have changed for 2022 - The base floor limit for most counties is $420,680 and for high-cost counties, the loan limit is $970,800. You can find the FHA loan limit for your county on the Housing and Urban Development page. These limits are not linked to conforming loan limits and FHA and conventional loans are independent. Find out more about FHA Loans

VA Loan – No Minimum Down Payment Required

VA Loans are insured by the Department of Veterans Affairs. They are meant for veterans, military members, or their family members and to be eligible you must meet the following requirements:

• 90 days of active service during wartime
• 181 days of active service during peacetime
• 6 Years in the National Guard or Reserve
• Spouse of service member who passed in the line of duty

There are no minimum down payment or minimum credit score requirements, but your lender may still consider your credit score when determining your creditworthiness.

Find out more about VA Loans

USDA Loan - No Minimum Down Payment Required

The USDA Rural Development Guaranteed Housing Loan Program is insured by the US Department of Agriculture Mortgage Program. To be eligible for a USDA loan, you must meet the following requirements:

• Rural area - Population should be less than 20,000 individuals
• Income cannot be more than 115% of the median income. For example, if the median income is $50,000, to be eligible your income should be below $57,500 ($50,000 * 115%)
• Debt-to-Income (DTI) Ratio of less than 41%
• Home is used as the primary residence
• Acceptable credit history

Find out more about USDA Loans

Jumbo Loan - Minimum Down Payment of 20%

A jumbo loan is a conventional non-conforming loan. If a loan is beyond the local loan limits for your area, then it is considered a jumbo loan. Eligibility requirements for a jumbo loan:

• Credit score > 700
• Debt-to-income (DTI) ratio < 43%
• Cash reserves to cover 1 years' worth of mortgage payments

Find out more about Jumbo Loans

Down Payment Assistance

Down payment assistance programs help home buyers with down payment and closing costs as it is a substantial portion of the upfront cost of purchasing a house. According to Forbes, 68% of renters are not purchasing a home because a large down payment acts as a barrier to a low-rate mortgage. Down payment assistance programs vary by county, city, and state which makes it difficult to determine which program is best. Down payment assistance programs are generally offered by first-time home buyer programs. There are over 2,500 different programs, so it is recommended to research the area where the home is being purchased to determine which program best fits your needs.

These programs are eligible for most conforming loans such as FHA Home Loans, VA loans, and USDA loans. Conforming loans that are insured by Fannie Mae and Freddie Mac are also eligible for such programs. Many state-wide mortgage programs provide down payment assistance through local housing authorities backed by the FHA. Conventional loans that are Jumbo loans are not eligible for these programs as they are above the limits for such programs.

Types of Down Payment Assistance Programs

There are 3 Different types of Down Payment Assistance Programs:

1. Grants – This is the best type of assistance because these funds do not have to be paid back. You will receive either a flat amount or a percentage of the home price as a one-time grant usually offered to first-time home buyers.
2. 2^nd Mortgage with Interest: This is an interest-based mortgage where the principal loan amount has to be paid back in addition to the original mortgage, resulting in higher monthly expenses. This mortgage is considered separate, but failure to fulfill the monthly payment amounts could result in the foreclosure of your home.
3. Deferred 2^nd Mortgage: The other type of homeowner’s second mortgage is deferred where the payment has to be made if you move, sell, or refinance. You do not need to make interest payments, but the full amount must be returned to the government if the mortgage is terminated.
4. Interest-free loans – These loans have to be paid back but are interest-free. You should expect to make monthly payments like a 2nd mortgage, but monthly payments will be lower and all money used in the payments will repay the principal amount of the loan.

Apart from these 3 types, there are also hybrid options where the second mortgage is forgiven after a certain period such as between 5 to 20 years. Down payment programs also have limits which in most cases is 5% of the home price, it can also be a dollar amount depending on the state. The borrower will still need to put up a certain amount as the down payment assistance program will not cover the full cost. However, down payment assistance programs can be a significant amount and should not be overlooked if you are low on cash.

Down Payment Assistance requirements

Although there are no hard and fast requirements, most programs follow a similar list of requirements:

1. Income – Low to moderate-income earners are eligible for down payment assistance. Low-income earners are those whose income is less than 50% of the median income in the county, whereas moderate-income is less than 80% of the median income in the county. For example, if the median income in your community is $50,000 you would be considered a low-income earner if you earned less than $25,000 and a moderate-income earner if you earned less than $40,000.
2. Credit Score – Your credit score should be at least 620, but if your credit score is lower than 620, you can check out FHA Home Loans, which only have a minimum credit score requirement of 500.
3. Home Price & Location– The home price should be around the median home price in the area and certain areas are targeted over others such as low-income neighborhoods. USDA home loans are only available for properties in designated rural areas.
4. Primary Residence – The home must be the primary residence of the party receiving down payment assistance and they must stay in the home for a specified number of years depending on the program.
5. First-Time Home Buyer – Although there is no official rule, most programs help individuals who currently don’t own a home to make housing more affordable for everyone.

How to Save for a Down Payment for a House

Saving for a down payment for a home can be a daunting task. While this down payment calculator tells you how much money you need to buy a home, you will still need to find a way to save up that money. It can at first seem difficult to save up enough money for a home’s down payment. When should you start saving? How much often and how much should you save? With some commitment and strategies, you’ll be able to save enough to make your mortgage’s down payment requirements. Here are a few tips on how to save for a down payment.

• Create a plan

  It’s never too early to start saving up for a home down payment. Using a down payment calculator is the first step in planning your savings. Once you know how much you need to save for a house, you need to pay that into a plan. When will you start home buying? If you're still years off from buying a home, say in 10 years or more, then you may have some more breathing room to save for a down payment. It’s still a good idea to start saving as soon as you know that you intend to purchase a home in the future. However, if you're closer to being ready to buy a home, then you'll need to start saving sooner.

• Make a budget and stick to it

  Find out how much money you are spending and see what you can go without. There are plenty of ways to save money without making big sacrifices. Make a list of all of your expenses and see where you can cut back, especially in areas like dining out, entertainment, and luxury items. Build in a certain amount of savings that is set exclusively for your home’s down payment. This means that if you are going over budget for a particular month, that you will need to cut back on frivolous spending before you even consider cutting back on your down payment savings.

  It's also important to have a realistic budget and to make sure that your down payment savings goal is achievable. Frequently missing your savings goals can be discouraging and can cause savers to give up. Evaluate your budget to make sure that it makes sense and is reasonable.

• Automate your savings

  One of the best ways to save money for a down payment on a home is to automate your savings. This puts your savings on auto-pilot by automating regular transfers to your savings account. You won't have to worry about forgetting to transfer the money, and you'll be less likely to spend it impulsively. Depending on your home buying timeline and risk tolerance, you may even consider putting your savings into an investment account instead.

  There are a number of different ways to automate your down payment savings transfers. You can use your bank's online banking features, or you can use a financial budgeting app like Mint or Quicken. We discuss the different automated savings options available to you later on in this page.

• Increase your income

  While it can often be easier said than done, you might have options available to increase your income. This could involve asking for a raise, finding a new job, working overtime, or starting a side hustle. A side job doesn’t necessarily need to be a part-time job. It can be things that you enjoy, like creating handmade crafts and selling them on eBay or Etsy. Maybe you have a spare room that you can rent out to a tenant or host on Airbnb. You might even have a talent that you can freelance, such as on Fiverr. Supplementing your income by making extra money on the side can help you save up for a down payment much faster.

• Pay off existing debt

  Prioritize paying off high-interest debt, such as credit cards, in order to reduce your interest expenses. This frees up more money that you can put towards your savings later. This also makes it easier for you to qualify for a mortgage, since a key number that mortgage lenders look at closely is your debt-to-income ratio (DTI). Having a low DTI ratio allows you to qualify for lower mortgage rates, saving you even more money in the future.

  However, you may still want to consider putting away at least a small amount of money each month towards your savings, even if you currently have a lot of debt. Prioritizing your debt repayments is a good idea, but it’s not a good idea to completely neglect your savings either. Having at least savings as an emergency fund or rainy day fund can help you make it through unexpected changes, such as a loss of income or a large expense. Try to have at least a few months worth of savings for use during emergencies before aggressively paying down debt. A good rule of thumb for how much your emergency fund should be is to have between 3-6 months’ of living expenses covered.

How to Quickly Save for a Down Payment

What if you need to have a down payment saved up in a year or less? If you’re in a time crunch and need to boost your savings now, there are a few things you can do to speed up the process.

• Move in with your parents

  If you’re really in a bind and need to save up for a down payment as quickly as possible, one option is to move in with your parents. This will allow you to significantly reduce your living expenses by saving on rent. The money that you would otherwise be spending on rent can now be used to save towards your down payment. If that’s not an option, you could try to find a roommate to help split the costs.

• Sell some belongings

  If you’re in a hurry to save for a down payment, consider selling some of your belongings. This could be anything from clothes you never wear to furniture you don’t need. Not only will you get some extra cash to put towards your down payment, but you’ll also free up some space in your home. You may even consider selling your car if you have alternative transportation options and you need the money soon. Using public transportation may even save you money every month.

• Gifts from family and friends

  Gifts from family and friends can be an option to help cover the difference if you aren’t able to save up enough money. However, borrowing money to use as your home’s down payment is usually not allowed. This means that your family and friends can’t lend you money for your down payment. Instead, it must be a gift. Your lender will require proof of this, which will be in the form of a mortgage gift letter. Your lender will want to know the source of your down payment so that they can properly access your debt levels and your ability to repay the mortgage.

  However, there can be limits to how much gifted money can be used for a down payment depending on your lender, loan type, and property type. You might not be able to use gifted money for your down payment at all, which is the case for investment properties.

Down Payment Savings Option

Automatic Transfers

Most banks and credit unions allow you to set up automatic transfers from your checking account to your savings account. You will need to have both bank accounts at the same bank. For example, Wells Fargo allows automatic transfers from your Wells Fargo checking account to your Wells Fargo Way2Save Savings account.

Some banks even allow you to transfer funds from accounts with different banks. For example, you might decide to transfer funds automatically from a checking account at one bank to a savings account at another bank. However, fees may apply.

Common frequencies for automated transfers are:

• Monthly
• Weekly

Some banks may even offer daily transfers. You can cancel your automatic transfers at any time, so you aren’t forced to always make these transfers. If regular transfers don’t work out for you, such as if you have irregular income, you can always schedule one-time transfers for a future date. For example, if you expect to receive a sum of money three months from now, you can schedule a one-time transfer to your savings account ahead of time.

Besides making your savings easier, automatic transfers can also save you money. For example, the $5 monthly fee for PNC Bank's Standard Savings account is waived if you have an automatic transfer of at least $25 or more each month into your savings account. Chase Savings' $5 monthly service fee is also waived if you have automatic transfers of at least $25 each month. With Chase, you can set up transfers of just $1 a day.

Save Your Spare Change

Some banks and third-party apps allow you to round-up your purchases to the nearest dollar, with the difference being savings that is automatically transferred to your savings account. For example, Bank of America's Keep the Change Program allows you to automatically save money through your regular purchases with your Bank of America debit card. It then transfers the change to your savings account daily.

Wells Fargo takes a slightly different approach with their Save As You Go transfers. With Wells Fargo, a flat $1 is transferred to your Wells Fargo savings account every time you make a purchase with your debit card or make an online bill payment.

If your bank doesn’t offer a round-up program, you can use third-party apps. The most popular round-up app is Acorns. For $3 per month, or $5 per month with a family plan, you can link your credit cards and debit cards from any financial institution and automatically invest your round-ups. You can choose between a variety of investment portfolios to invest your spare change in, and returns can be higher than the low interest rate that savings accounts traditionally offer. Other alternatives include Digit, Chime, and Qoins. These apps can automatically transfer a portion of your paycheck to your savings account too.

Types of Down Payment Savings

Savings Accounts

The interest that you earn is typically shown as an annual percentage yield (APY). Savings accounts typically offer higher interest rates compared to checking accounts. However, savings accounts usually have limitations, such as the number of transactions you can make per month, which makes them not ideal for your everyday expenses.

Prior to 2020, the Federal Reserve's Regulation D only allowed a maximum of 6 transactions per monthly statement cycle per savings account. This savings account withdrawal limit was lifted in 2020.

Compared to investing your down payment savings, a savings account from a major bank may have a relatively low interest rate. One benefit for the relatively low return is that your savings are protected. FDIC insurance covers deposits at insured banks. If your bank fails, your deposit of up to $250,000 is covered per bank. Federally insured credit unions will have deposits insured by the NCUA.

Money Market Accounts

Money market accounts have a higher interest rate, but can require a higher balance. Some banks also allow money market accounts to have a linked debit card and checks, which is something that savings accounts don't usually allow. Since money market accounts are also deposits, they are covered by FDIC insurance.

Certificates of Deposit (CDs)

A certificate of deposit locks in your savings for a certain deposit term. This can range from as little as a month to multiple years. The longer you lock in your deposit, the higher the interest rate. CDs also have a tiered interest rate, which means that the larger the amount of your deposit, the higher the interest rate will be. You may be charged penalties for withdrawing from a CD early.

High-Yield Checking Accounts

A high-yield checking account offers a high interest rate if you fulfill certain requirements. This allows you to unlock a high APY, which can be significantly higher than savings accounts, money market accounts, and CDs. However, the high APY is usually only applicable on a low balance amount. This makes it the opposite of how tiered rates on a CD works. With a CD, the larger your deposit, the higher the rate that you’ll earn. With a high-yield checking account, small deposits earn a higher rate, while large deposits earn a lower rate.

One example of a high-yield checking account is T-Mobile's MONEY Checking account. By maintaining a minimum balance of $3,000, having a T-Mobile wireless plan, and making at least 10 purchases with your debit card, you can earn a 4.00% APY on balances up to $3,000. Balances over $3,000 will earn 1.00% APY.

Another example is Presidential Bank's Advantage Checking account. You need to have a minimum balance of $500, have a monthly deposit of at least $500, and at least seven withdrawals per month in order to earn a 2.25% APY on your balance of up to $25,000.

One of the highest yields for a checking account is offered by La Capitol Federal Credit Union, which operates in Louisiana. With their Choice checking account, you can earn a 4.25% APY on balances up to $3,000 if you conduct at least 15 debit card purchases per month or maintain a $1,000 minimum balance in addition to having estatements.

Investment Accounts

Investing can grow your savings, but it comes with risks. Putting your down payment savings into a savings account, money market account, CDs, or high-yield checking account means that your balance is insured and guaranteed. This means that you aren’t at risk of losing the money that you have saved for your home’s down payment. By investing instead, you are taking on additional risk in exchange for the potential to grow your savings even further.

Investing can be as easy as using a robo-advisor to automate your investing or as hands-on as opening your own brokerage account. You might even decide to invest in a REIT. It can be a good idea to work with a financial advisor to figure out the best place for you to put your money when saving for a house. It’s not a good idea to invest in the stock market or volatile investments if you plan on needing to use that money in the next few years to use as your down payment. A sudden market downturn could significantly impact your savings. Having a longer investment horizon can protect you against short-term volatility by allowing more time for your investment to grow.

Example of Saving for a Down Payment: Plan to Buy a House in 5 Years

Let’s say that you plan to buy a $500,000 house in five years. Using the down payment calculator, you find out that you need to have a $100,000 down payment for a conventional loan. You currently have no savings, so you will need to save $100,000 over the next five years.

Your after-tax household income is $60,000 per year. That works out to $5,000 per month. After expenses, such as rent, food, and bills, you have $1,500 left over per month. If you save $1,500 per month for five years, you would have $90,000. That’s close to the $100,000 minimum required down payment in this example, but it’s still not enough. If you had invested your savings, you might have enough money for your down payment. In this case, an annual return of 4.5% would have resulted in $100,000 in five years.

According to the Federal Reserve, the average sale price of a home in the United States has increased from $369,900 in Q4 2016 to $477,900 in Q4 2021. That's a 31% increase in five years, or about 5.5% per year. In terms of how much home prices have gone up, it means that the average price of a home increased by $108,000 in five years. If you need to make a 20% down payment for a home, then you would have needed to have saved an additional $21,600 just to keep up with the growth in home prices.