How Much to Put Down on a House: 3%, 10%, or 20%?

Bottom line: The 20% down payment rule is outdated for most buyers. 3–10% down is common and financially defensible, especially when it means buying sooner, preserving cash reserves, and not depleting savings. The tradeoff is PMI (0.5–1.5%/year), which cancels once you reach 20% equity. Wait to save 20% only if you can do it within 12–18 months without sacrificing retirement savings or emergency fund.

Quick answer

Put down what leaves your finances intact, not what folklore demands. Conventional loans start at 3% down and FHA at 3.5%, with PMI of roughly 0.5 to 1.5% per year until you reach 20% equity. On a $400,000 home, the jump from 5% to 20% down ties up an extra $60,000 to avoid about $142 a month in cancellable PMI, which is usually a poor trade against keeping reserves and buying sooner. Ten percent down is the common sweet spot. Whatever you choose, budget separately for closing costs of 2 to 5% and keep a 3-to-6-month emergency fund after closing. With 30-year rates near 6.72% APR, run the payment at each down payment level before deciding.

The conventional wisdom says "put 20% down to avoid PMI." That advice made more sense when homes were cheaper and saving 20% took 2–3 years. Today, 20% on a median U.S. home ($420,000) is $84,000, a figure that takes many buyers a decade or more to accumulate while paying rent.

Down Payment Options and Their Costs

The difference between 5% and 20% down is $60,000 in cash deployed, and about $142/month in PMI that cancels after 5–8 years. Over 7 years, that PMI costs approximately $11,900. The $60,000 not deployed, invested at 7% average annual return over the same 7 years, grows to approximately $96,000.

Putting 20% down costs you more in opportunity cost than it saves in PMI, for most buyers.

The Case for a Larger Down Payment

Lower monthly payment. Every extra dollar down reduces principal and therefore the monthly payment. 20% vs 5% down on a $400,000 home reduces the monthly P&I by approximately $240/month.

Better rate. Lenders offer marginally better rates to borrowers with higher down payments (lower LTV = lower risk). The improvement is typically 0.125–0.25% between 5% and 20% down.

Immediate equity cushion. A 20% down payment means a 20% value decline would leave you exactly at break-even, not underwater. This matters if you need to sell shortly after buying.

Simpler qualification. Higher down payments reduce DTI and compensate for credit imperfections.

The Case for a Smaller Down Payment

Preserve cash. Depleting savings to 20% down leaves no buffer for moving costs, immediate repairs, new furniture, or a financial emergency. Most financial advisors recommend maintaining 3–6 months of expenses in liquid savings after closing, which is impossible if you pour everything into the down payment.

Buy sooner. Every year of saving is a year of rent paid (building no equity) while home prices potentially rise. If the market appreciates 4%/year, a $400,000 home becomes $416,000 the following year, and that $16,000 in appreciation you would have captured exceeds a year of PMI payments.

Invest the difference. $60,000 not deployed as down payment, invested in diversified index funds, has historically returned more over time than the interest saved on the smaller mortgage.

What You Need Beyond the Down Payment

Budget for closing costs (2–5% of the loan amount, typically $8,000–20,000) separately from your down payment. Closing costs cannot be added to the down payment; they require additional cash at closing unless you negotiate a seller credit or choose a no-closing-cost loan.

A sensible pre-purchase cash position:

• Down payment (3–20%)
• Closing costs (2–5%)
• Emergency fund: 3–6 months of expenses
• Moving costs and immediate repairs: $2,000–10,000 buffer

If hitting all four requires saving for 4+ more years, consider a lower down payment that allows you to buy sooner while preserving reserves.

Pick Your Down Payment

Compare monthly payments at each down payment level with the PMI calculator and the home affordability calculator, and check current mortgage rates. To see how the purchase fits your whole financial picture, run Money Map.

Quick answers

What is the minimum down payment on a house? 3% on qualifying conventional loans, 3.5% on FHA with a 580+ score, and 0% on VA and USDA loans for eligible buyers.

How much is PMI on a $400,000 house with 10% down? Roughly $80 to $150 a month depending on credit score, and it cancels once you reach 20% equity.

Is it better to put 20% down or invest the difference? Historically, investing the difference has outperformed the PMI saved for most buyers, but the guaranteed-savings argument favors 20% if the cash is already sitting idle and reserves are intact.

Can the down payment come from a gift? Yes. Both conventional and FHA loans allow gift funds with a documented gift letter.

Sources

• CFPB homeownership resources for down payment and PMI guidance.
• HUD state and local program directory for down payment assistance programs.
• SwitchWize mortgage rate tracking, reviewed against lender and market data on the date below.

Rates referenced on this page were verified on July 9, 2026. Down payment requirements, PMI rates, and assistance programs vary by lender, loan type, and location. This article is educational information, not individualized financial advice.