How much to put down is one of the biggest decisions a first-time buyer makes — and the right answer depends on your cash, your monthly budget, and how long you plan to stay.
The core trade-off
Every dollar you put down lowers your loan balance and monthly payment but reduces the cash you keep for reserves, repairs, and emergencies. Putting less down does the opposite. First-time buyers should weigh both the monthly number and the cushion they keep after closing.
Side-by-side comparison
| Down payment | Cash needed | Mortgage insurance | Typical use case |
|---|---|---|---|
| 3% | Lowest | Usually required (PMI on conventional) | Buyers prioritizing entry with limited savings |
| 5% | Low | Usually required | Common conventional starting point |
| 10% | Moderate | Often required but lower premium | Balancing payment and reserves |
| 20% | Highest | Typically none on conventional | Buyers with ample savings minimizing payment |
Illustrative only. Actual requirements, premiums, and rates vary by program and lender — verify current figures.
Private mortgage insurance (PMI)
On most conventional loans with less than 20% down, lenders require PMI, which can often be removed later once you reach sufficient equity. FHA loans use a different mortgage insurance structure. Ask your lender how and when insurance can be cancelled under your specific program.
Do not drain your reserves
A common first-time-buyer mistake is putting every dollar into the down payment and closing with no cushion. Homeownership brings repairs and surprises. Many buyers intentionally put less down to keep an emergency fund intact.
How the choice affects offers
In competitive situations, the down payment can affect how a seller views your offer, but a strong pre-approval and clean terms often matter more. Your REALTOR can advise on positioning without overextending your cash.
Putting it together
- Confirm your total available cash and required reserves.
- Get monthly-payment quotes at several down-payment levels.
- Factor in mortgage insurance cost and how long it lasts.
- Choose the level that keeps your payment and your cushion comfortable.
General information only. This page is educational and is not financial, tax, mortgage, or legal advice. Loan terms, assistance-program eligibility, funding, and tax rules change frequently — confirm current eligibility and your personal situation with a licensed lender, tax professional, and your REALTOR®.
Frequently Asked Questions
Is 20% down required to buy a home?
No. Many programs allow far less. Twenty percent is simply the conventional threshold that typically avoids PMI. Confirm program minimums with a lender.
Is it better to put more down or keep cash?
It depends on your reserves, the rate, and your comfort with the monthly payment. Keeping a healthy emergency fund is often wiser than maximizing the down payment.
Can I use gift funds for the down payment?
Often yes, with proper documentation. See the gift-fund guide and confirm donor and sourcing rules with your lender.
Does a bigger down payment get a better rate?
Sometimes lenders price slightly better at higher down payments, but the effect varies. Compare Loan Estimates to see the real difference.
Can I remove PMI later?
On conventional loans, PMI can usually be cancelled once you reach a set equity level. FHA mortgage insurance rules differ. Ask your lender about your program.
How much should I keep in reserves after closing?
Many buyers aim for several months of housing costs plus a repair buffer. Your ideal number depends on income stability and the home's condition.
