The basic formula: price times percentage, minus what you already have
Your down payment is the cash you put toward a home purchase upfront. To calculate it, multiply the home's purchase price by the percentage you plan to put down, then subtract any funds you've already set aside. For example: a $300,000 home with a 20% down payment means $300,000 × 0.20 = $60,000. If you've already saved $40,000, you need $20,000 more.
The percentage you choose depends on what you can afford, what lenders will accept, and what makes sense for your situation. Common percentages are 3%, 5%, 10%, 15%, and 20%, but you can put down any amount between the lender's minimum and the full purchase price.
Down payment calculators exist online, but they all use the same math. A pencil and paper works just as well, and you'll understand exactly where the number comes from.
Key Takeaways
- Down payment equals the home price multiplied by your chosen percentage (3%, 5%, 10%, 20%, etc.), minus any money you've already saved.
- Lenders typically require a minimum down payment ranging from 3% to 20%, depending on the loan type and your credit profile.
- A larger down payment lowers your monthly mortgage payment and may eliminate the need for mortgage insurance, but it ties up cash you might need elsewhere.
- Your total upfront cost includes the down payment plus closing costs, which usually run 2% to 5% of the home price and are separate from your down payment calculation.
How lender minimums affect your calculation
Your lender sets a floor—the smallest percentage they'll accept. Conventional loans (not backed by the government) often require 5% to 20% down. FHA loans, backed by the Federal Housing Administration, allow as little as 3.5% down. VA loans and USDA loans, for borrowers who meet specific criteria, sometimes require 0% down.
If a lender requires 5% minimum and you want to put down 3%, you cannot use that lender. You'll need to either save more money or find a lender with a lower minimum. Check with multiple lenders before you settle on a down payment target, because their minimums vary.
Your credit score, debt-to-income ratio, and savings history also influence what percentage a lender will accept. A lower credit score might push you toward a higher down payment even if the lender's stated minimum is lower.
Calculating what you can actually afford
The math is straightforward, but the decision is not. A 20% down payment sounds ideal—it eliminates mortgage insurance and lowers your monthly payment—but it also means tying up a large amount of cash. If you put $60,000 down on a $300,000 home, that $60,000 is no longer available for emergencies, home repairs, or other needs.
Start by listing what you have saved. Subtract any funds you want to keep in reserve (most financial advisors suggest three to six months of living expenses in an emergency fund). What remains is what you could reasonably put toward a down payment. If that number is less than your lender's minimum, you need to save more before you're ready to buy.
Some buyers put down the minimum their lender requires and invest the rest. Others prioritize paying less interest over time and put down as much as possible. Neither choice is universally right—it depends on your income stability, other debts, and comfort with risk.
Down payment versus closing costs: why they're separate
Your down payment is only part of what you'll pay at closing. Closing costs—appraisal fees, title insurance, loan origination fees, and others—typically run 2% to 5% of the home price. On a $300,000 home, that's $6,000 to $15,000 on top of your down payment.
When you calculate how much cash you need, add both numbers. If you're putting down 10% ($30,000) on a $300,000 home and closing costs are 3% ($9,000), you need $39,000 total, not $30,000. Many buyers overlook this and arrive at closing short on cash.
Some lenders allow you to roll closing costs into your loan, which means you don't pay them upfront but you pay interest on them over time. Ask your lender whether that option is available and what it costs you in the long run.
Using a straightforward worksheet to track your numbers
Write down these four lines and fill in the blanks:
- Home purchase price: $_______
- Down payment percentage you're targeting: _______%
- Down payment amount (price × percentage): $_______
- Money you've already saved: $_______
- Additional amount you need to save: $_______
Then add a second section for closing costs:
- Estimated closing costs (ask your lender for a range): $_______
- Total cash needed at closing (down payment + closing costs): $_______
This worksheet forces you to be specific about what you're aiming for and what gap remains. Update it as your savings grow or as you look at different homes.
What happens if you can't reach your target
If you've saved $25,000 but a 10% down payment on your target home costs $35,000, you have three paths: save longer, look at less expensive homes, or put down a smaller percentage if your lender allows it.
Putting down 5% instead of 10% means a higher monthly payment and mortgage insurance (a monthly fee that protects the lender if you default). On a $350,000 home, mortgage insurance might add $200 to $400 per month. Over time, that's expensive, but it lets you buy sooner. Run the numbers with your lender to see what the actual cost is for your situation.
Some employers, nonprofits, and down payment information programs offer grants or low-interest loans to help with down payments. These are not common, but they exist in some areas. Your local housing authority or a nonprofit housing counselor can tell you whether any are available where you live.
Frequently Asked Questions
Can I use borrowed money for my down payment?
Most lenders require that your down payment come from your own funds—savings, gifts from family, or proceeds from selling another property. Borrowed money (a personal loan, credit card, or loan from a friend you plan to repay) usually disqualifies you because it increases your debt and signals financial strain. Gifts from family are typically allowed if the giver signs a statement saying it's a gift, not a loan.
What if the home appraises for less than the purchase price?
If you agreed to pay $300,000 but the appraisal comes in at $280,000, your lender will only lend based on the lower amount. You'll need to either renegotiate the price with the seller, put down more cash to make up the difference, or walk away. This is why having extra savings beyond your down payment matters.
Does a larger down payment always mean a lower interest rate?
Usually, yes—lenders view larger down payments as lower risk and often offer better rates. But the difference is often small (0.25% to 0.5%), so compare offers from multiple lenders rather than assuming a bigger down payment automatically saves you money. Sometimes the savings on interest don't offset the opportunity cost of tying up that cash.
Can I put down less than 3%?
Some FHA loans go as low as 3.5%, and VA and USDA loans can be 0%. Conventional loans rarely go below 3%, and some lenders won't go below 5%. If you have less saved, you'll need to either save more or look for a loan program designed for lower down payments.
Should I delay buying to save a bigger down payment?
That depends on your local market, interest rates, and personal situation. If home prices and interest rates are rising faster than you can save, waiting may cost you more. If prices are stable or falling, waiting to save more might make sense. A mortgage lender or housing counselor can help you think through the math for your specific situation.