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Housing & Mortgages

Down payment

A down payment is the part of a home’s purchase price you pay upfront, with the rest borrowed through a mortgage. It is often described as a percentage of the price, such as 5% or 20%.

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How it works

The size of your down payment affects the type of loan you can get, your interest rate and your loan costs. In most cases you need at least 3% of the price. CFPB guidance notes that you can often save money by putting down at least 10%, and save the most at 20% or more. On a conventional loan, putting down less than 20% may mean paying private mortgage insurance.

Lenders typically look at the down payment in increments of 5% when setting the rate and loan costs, so putting down almost the next increment usually saves nothing extra. Borrowing less also means lower monthly principal and interest and less total interest. The tradeoff is cash: money put into a home is hard to get back out, and closing costs, moving costs and an emergency cushion also have to come from savings.

CFPB homebuying guidance says closing costs typically run 2% to 5% of the purchase price, on top of the down payment. One way to size a down payment is to start from total savings, subtract other goals, moving costs, an emergency cushion and estimated closing costs, and treat what remains as the most you can put down. Special programs exist for some buyers, including veterans and service members, rural residents and some first-time buyers.

Try it with your own numbersSavings Goal CalculatorFree savings goal calculator. See how much to set aside each month, every two weeks or each week to reach a goal on time, with or without interest.

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Sources and further reading

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.

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