Down Payment Calculator
The three calculations below offer different ways to help calculate an estimated down payment.
Use the Upfront Cash Availabile
If the amount of upfront cash available and down payment percentages are known, use the calculator below to calculate an estimate for an affordable home price.
Home Price: $217,391
Use the Home Price
If the home price and down payment percentages are known, use the calculator below to calculate an estimate for an amount needed in cash available for upfront costs.
Cash Needed: $46,000
Use the Home Price and Upfront Cash Available
If the home price and amount of upfront cash available are known, use the calculator below to calculate an estimate for a down payment percentage.
Down Payment: 22.0%
Down payments are the upfront portions paid to purchase homes. It is generally expressed as a percentage of the purchase price, such as 3.5% or 20%, and can come out to quite a hefty price. For instance, for a $250,000 home, a down payment of 3.5% is $8,750, while 20% is $50,000. Not a lot of people have this much simply sitting inside their wallets for home down payments; most will end up spending years saving diligently.
Down payments are important to lenders; normally the larger, the better in their eyes. This is because big down payments lower risk. The smaller the total amount they lend out, the less likely they are to lose a lot of money when defaults do happen.
Quick Tip: For conventional loans, paying at least 20% down payment for a home purchase will abolish Private Mortgage Insurance (PMI) payments, which are sizable monthly fees that add up over time. In addition, mortgages with a 20% down payment have higher chances of being approved and are usually accompanied with better APRs.
The Case for a Lower Down Payment
It's true that paying a 20% or more down payment is generally the most financially feasible decision, but as with all things, that's not to say there aren't specialized risks associated with it. There are certain events that can occur, the risk of which can make smaller down payments a better option. Here are some examples.
- Job loss – Layoffs that occurs right after spending a good chunk of savings on down payments would leave little to nothing to live off of while job searching.
- Emergency funding – Similar to job loss, it is likely that after down payments, there is little left in savings to fund emergencies such as medical.
- High investment return – Good investors can achieve a much higher return than the mortgage interest rate, making it less attractive to pay a bigger down payment upfront.
Different Loans, Different Down Payment Requirements
Conventional loans normally required a down payment of 20% or more. Some lenders may go lower, such as 10%, 5%, or 3% in extreme case. If the down payment is lower than 20%, borrowers will be asked to purchase Private Mortgage Insurance (PMI) to protect the mortgage lenders.
To help low-income buyers, the U.S. Federal Housing Administration (FHA) provides insurance to primary residence home buyers so that they can purchase with a down payment as low as 3.5%. Please use our FHA Loan Calculator to determine an appropriate monthly payment or to learn more about FHA loans.
Also, in the U.S., the Department of Veterans Affairs (VA) has the ability to subsidize VA loans, which do not require any down payments upfront! Only two other entities can do this, the USDA and Navy Federal. Please use our VA Mortgage Calculator to determine an appropriate monthly payment or to learn more about VA loans.
It's important to remember that down payments only make up one out of many things that need funding upfront during a home purchase, even though it is generally the largest. Often, home buyers underrate how much actually comes out of their pocket during closing and don't have enough for it. There are many things that need to be paid at the inception of mortgages, such as upfront points of mortgage loans, insurance, lender's title insurance, inspection fee, appraisal fee, survey fee, and many others. A rough estimate for the amount needed to cover closing costs is 3% of the purchase price, which is set as the default. Feel free to change the percentage if more accurate determinates are available for each individual scenario.