Down Payment Calculator

Putting 20% down avoids PMI and gives you immediate equity, but it is not always the optimal strategy. In a market where home prices are appreciating 5–8% per year, waiting an additional 18 months to hit 20% means paying 7–14% more for the same house — a cost that dwarfs several years of PMI premiums. The opportunity cost cuts the other direction too: cash tied up in a down payment earns the mortgage rate guaranteed but forgoes potential investment returns in equities or other assets. The right answer depends on your local market appreciation rate, your investment return expectations, your risk tolerance, and how long you plan to stay in the home. A buyer who plans to sell in three years has a different calculus than one who will stay for twenty. Use the PMI break-even analysis in the Scenario Analysis tab to compare total out-of-pocket costs at 5%, 10%, and 20% down over your expected holding period before committing to a savings target.

Several low-down-payment loan programs make homeownership accessible before you reach the 20% threshold. FHA loans require only 3.5% down for borrowers with credit scores of 580 or above, and just 10% for scores between 500 and 579, though they come with mandatory mortgage insurance premiums that can last the life of the loan if you put less than 10% down. VA loans allow eligible veterans, active-duty service members, and surviving spouses to purchase with 0% down and no monthly mortgage insurance — one of the most valuable benefits in personal finance. USDA loans similarly offer 0% down for properties in eligible rural and suburban areas, with income limits based on area median income. Conventional programs from Fannie Mae (HomeReady) and Freddie Mac (Home Possible) allow as little as 3% down with PMI that cancels automatically at 80% LTV and is typically cheaper than FHA MIP. State housing finance agencies in nearly every state layer additional grants and forgivable second loans on top of these federal programs, often targeting first-time buyers and moderate-income households.

Every dollar you put toward a down payment earns a guaranteed return equal to your mortgage rate — because that dollar eliminates interest you would otherwise pay. At a 6.75% rate, that is a guaranteed 6.75% after-tax return on a risk-free basis, which compares favorably to most fixed-income investments. However, it compares less favorably to historical equity returns of 7–10% per year, which are not guaranteed and involve significant short-term volatility. The opportunity cost calculation also depends on your tax situation: if you itemize and deduct mortgage interest, the after-tax cost of your mortgage rate is lower, narrowing the gap. Additionally, cash deployed into a down payment is illiquid — you cannot easily access home equity in an emergency without refinancing or selling. Maintaining a separate emergency fund of 3–6 months of expenses before making a larger down payment is therefore standard financial planning advice. Use the Scenario Analysis tab to compare five-year total costs at different down payment levels and decide whether the guaranteed savings outweigh the foregone investment flexibility for your situation.

More than 2,000 down payment assistance programs operate across the United States, administered by state housing finance agencies, municipalities, non-profits, and employers. Program structures vary widely: some offer outright grants that never require repayment, others provide forgivable second loans that are fully forgiven after five to ten years of occupancy, and others use deferred loans repayable only at sale or refinance. Many programs target first-time buyers — typically defined as anyone who has not owned a home in the past three years — earning between 80% and 120% of the area median income. Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs pair well with DPA funds, allowing combined loan-to-value ratios above 95% with reduced PMI premiums compared to standard conventional loans. Employer-assisted housing is another underutilized resource: some large employers, hospitals, and school districts offer forgivable grants of $5,000–$20,000 to employees purchasing near the workplace. Search your state’s HFA website, the HUD-approved housing counselor directory, and Down Payment Resource (an aggregator of 2,000+ programs) to identify every program you qualify for before finalizing your savings target.

Home prices have appreciated at roughly 3–4% per year on a long-term national average, though local markets vary dramatically. On a $400,000 home, 4% annual appreciation adds $16,000 to the price each year — meaning a buyer waiting 24 months to accumulate a larger down payment faces a home that now costs $832,000 instead of $400,000 in a high-appreciation market, though this example illustrates the compounding effect rather than typical price levels. More concretely, a buyer saving $2,000 per month toward a $80,000 down payment (20% of $400,000) needs 40 months. If the home appreciates 5% per year during that window, the required 20% down payment on the new price is nearly $90,000 — the target keeps moving. Buying at 5% down and paying PMI for two to three years until you reach 80% LTV through a combination of payments and appreciation often results in more total equity built compared to waiting. The PMI Break-Even analysis in the Scenario Analysis tab models this comparison accurately using your specific home price, appreciation assumption, and monthly savings rate so you can make the decision with real numbers rather than rules of thumb.