How much down payment do you need?
The classic target is 20% of the home price, because it lets you avoid private mortgage insurance (PMI) in many markets and secures better loan terms. But it's not mandatory — many first-time buyers put down far less (often 5–10%), accepting PMI and a larger loan in exchange for buying sooner. This calculator works for any percentage so you can compare scenarios.
Don't forget closing costs
The down payment isn't the only cash you need at the table. Closing costs — lender fees, title, appraisal, taxes, and more — typically add 2–5% of the price (this tool estimates 3%). On a $350,000 home that's around $10,500 on top of the down payment. Budgeting only for the down payment is a common way buyers get caught short right before closing.
20% vs less: the real trade-off
- 20% down: no PMI, smaller loan, lower monthly payment, more equity from day one — but it takes longer to save and ties up more cash.
- Less than 20%: buy sooner and keep cash liquid, but pay PMI (often 0.5–1.5% of the loan yearly) and carry a bigger balance.
A balanced approach many advisors favor: arrive with a solid down payment and a preserved emergency fund, rather than draining every dollar into equity you can't easily access. Home equity doesn't fix a broken furnace — cash does.
Saving the gap
Once you know the monthly figure, automate it into a separate high-yield savings account so it grows a little while you save and stays out of spending reach. Windfalls — bonuses, tax refunds, gifts — are down-payment accelerators precisely because they were never in your monthly budget.