A down payment between $80,000 and $120,000 is typical for a $400,000 house, but the "right" amount depends on your finances and what you can actually afford to pay back

The most common down payments are 20 percent ($80,000) and 10 percent ($40,000). A 20 percent down payment means you borrow $320,000 and own $80,000 of the house outright from day one. A 10 percent down payment means you borrow $360,000 and own $40,000 outright. Both are real options — the difference is in your monthly payment and what you pay over time.

The reason 20 percent comes up so often is that it avoids mortgage insurance, a monthly fee the lender charges when you put down less than 20 percent. That fee protects the lender if you stop paying, but it costs you. On a $400,000 house with 10 percent down, mortgage insurance might add $200 to $400 per month to your payment. Over 30 years, that is real money.

But 20 percent is not a requirement. You can put down 5 percent ($20,000), 3 percent ($12,000), or even less with some loan types. The trade-off is a higher monthly payment and mortgage insurance costs. The question is whether you have the cash, and whether the monthly payment fits your actual budget.

Key Takeaways

  • A 20 percent down payment ($80,000) avoids mortgage insurance and is the most common choice, but 10 percent ($40,000) or even 5 percent ($20,000) are also used.
  • Putting down less than 20 percent adds mortgage insurance to your monthly payment, typically $200 to $400 per month depending on your loan type and credit score.
  • Your monthly payment on a $400,000 house ranges from roughly $1,900 (with 20 percent down) to $2,400 (with 5 percent down), before taxes, insurance, and homeowners association fees.
  • The right down payment is the one you can afford without draining your savings or taking on other debt.
  • Lenders usually want to see that you have savings left after the down payment, so putting every dollar into the house can actually hurt your chances of being approved.

How down payment size changes your monthly payment

The larger your down payment, the less you borrow, and the smaller your monthly payment. On a $400,000 house at current interest rates (which vary by lender and your credit score), here is roughly what you would owe each month for the loan itself, not counting taxes, insurance, or fees:

With 20 percent down ($80,000), you borrow $320,000. Your monthly payment is roughly $1,900 to $2,000. With 10 percent down ($40,000), you borrow $360,000. Your monthly payment is roughly $2,150 to $2,250, plus $250 to $350 for mortgage insurance. With 5 percent down ($20,000), you borrow $380,000. Your monthly payment is roughly $2,280 to $2,380, plus $300 to $400 for mortgage insurance.

These numbers assume a 30-year loan and a fixed interest rate. Interest rates change daily and vary by lender, so the actual number you are quoted will be different. The point is to see the pattern: smaller down payment means higher monthly payment, and mortgage insurance adds a real cost on top.

When 20 percent down makes the most sense

If you have $80,000 or more saved and your monthly budget can handle a $1,900 to $2,000 payment (plus taxes and insurance), 20 percent down is the cleanest choice. You avoid mortgage insurance, you own a larger piece of the house from the start, and lenders like it because it shows you have serious money in the game.

Lenders also look at your debt-to-income ratio, which is the percentage of your monthly income that goes to debt payments. Most lenders want this to be 43 percent or lower. If your income is $6,000 per month and you already have a $1,500 car payment and $300 in student loans, you have $1,800 in debt. Adding a $2,000 mortgage payment puts you at $3,800 out of $6,000, or 63 percent — too high. A smaller down payment would make the mortgage payment smaller, but it also adds mortgage insurance, which might not help enough.

The point: 20 percent down is not always possible, and it is not always the answer. But if you can do it without emptying your savings, it usually saves you money over time.

When a smaller down payment makes sense

If you have $40,000 to $60,000 saved but not $80,000, a 10 percent down payment ($40,000) is a reasonable middle ground. You keep some emergency savings, your monthly payment is only a few hundred dollars higher than with 20 percent down, and mortgage insurance is a cost you can see and plan for.

A 5 percent down payment ($20,000) makes sense if you have a stable income, good credit, and you want to keep more cash on hand for emergencies or other needs. The mortgage insurance costs more, and your monthly payment is higher, but you are not betting everything on the house.

Some people also choose a smaller down payment because they expect their income to rise. If you are 28 years old, in a field where salaries increase predictably, and you know you will earn more in five years, a 5 or 10 percent down payment now might make sense. You can refinance later (get a new loan at better terms) once your income is higher and you have paid down the balance.

What lenders actually look for in your down payment

Lenders do not just care about the size of your down payment. They care about where the money came from. If you saved it over time, that is good. If you borrowed it from a family member, that is usually fine as long as it is documented as a gift, not a loan you have to pay back. If you got it from selling something, that is fine too.

What lenders do not like is if you put down every penny you have and have no savings left. They want to see that you can handle an emergency — a job loss, a medical bill, a major repair to the house — without when ready defaulting on the mortgage. Most lenders want you to have at least two to three months of mortgage payments saved after the down payment is done.

This is one reason why a 20 percent down payment can actually hurt you if it leaves you with no cushion. A lender might approve you for a 10 percent down payment instead, because you would have more savings left over.

Down payment information and other ways to get to 20 percent

If you want to reach 20 percent down but do not have the full amount saved, some programs help. Down payment information programs are offered by state housing agencies, nonprofits, and some employers. These programs give you money (usually as a grant, not a loan) to put toward your down payment. The amount and rules vary widely by state and program.

Some programs require you to take a homebuyer education course first. Others have income limits or are only for first-time homebuyers. A few are tied to specific neighborhoods or property types. Your real estate agent or mortgage lender can point you toward programs in your area, or you can search your state's housing finance agency website.

Another option is to negotiate with the seller. In some markets, sellers offer to pay part of your closing costs, which frees up cash you can put toward your down payment instead. This is more common when the market is slower and sellers are motivated.

The real cost of mortgage insurance and when it ends

Private mortgage insurance (PMI) is the fee you pay when you put down less than 20 percent. It protects the lender, not you. The cost depends on your down payment size, your credit score, the loan type, and the lender. On a $400,000 house with 10 percent down, PMI might be $250 to $350 per month. With 5 percent down, it might be $300 to $450 per month.

PMI does not last forever. Once you have paid down the loan to 80 percent of the original home value (or 20 years have passed, whichever comes first), you can request that PMI be removed. If your house appreciates in value, you might reach 80 percent faster. If you make extra payments toward the principal, you also reach it faster.

Some loan types have different rules. FHA loans (backed by the Federal Housing Administration) require mortgage insurance for the life of the loan if you put down less than 10 percent. If you put down 10 percent or more on an FHA loan, the insurance drops off after 11 years. Conventional loans (not backed by the government) usually let you drop PMI once you reach 20 percent equity, regardless of how long it takes.

Frequently Asked Questions

Is 10 percent down enough to get approved for a $400,000 mortgage?

Yes, most lenders will approve 10 percent down if your credit score is decent (usually 620 or higher) and your debt-to-income ratio is under 43 percent. You will pay mortgage insurance, but approval is possible. Some lenders have stricter rules, so it is worth asking multiple lenders.

What if I can only put down 3 or 5 percent?

You can still get a mortgage, but your monthly payment will be higher and mortgage insurance will be more expensive. Some loan types (like FHA loans or VA loans for military members) are designed for smaller down payments. You will need good credit and a stable income to be approved.

Should I wait and save for 20 percent down, or buy now with less?

That depends on your situation. If home prices in your area are rising faster than you can save, buying now with 10 percent down might make sense — you build equity while you live there. If prices are stable or falling, waiting to save more gives you a lower monthly payment and avoids mortgage insurance. There is no single right answer.

Can I use a gift from family for my down payment?

Yes, most lenders allow gift money as long as it is documented as a gift, not a loan you have to pay back. The person giving you the money usually has to sign a letter saying it is a gift and they do not expect repayment. Ask your lender what paperwork they need.

What happens if my house value drops after I buy it?

If you put down 20 percent and the house value drops 10 percent, you still own 10 percent of the house. If you put down 5 percent and the house value drops 10 percent, you are underwater — you owe more than the house is worth. This is rare over long periods, but it is a reason to put down more if you can afford it.