How Much Down Payment You Actually Need

A down payment is the chunk of the price you pay upfront in cash, while the mortgage covers the rest. On a $250,000 home, a 10% down payment is $25,000, and you'd borrow the other $225,000. The bigger your down payment, the less you borrow and the lower your monthly payment.

Somewhere along the way, 'you must put 20% down' became common wisdom. It isn't true. Twenty percent is a helpful target, but it's not a requirement. Many loan programs let you buy with far less, and some allow as little as 3% to 5% down for buyers who qualify.

On that same $250,000 home, 20% down is $50,000, which can take years to save. A 5% down payment is $12,500, which puts a home within reach much sooner for a lot of people.

When you put down less than 20%, lenders usually require private mortgage insurance: an extra monthly charge, often $50 to $200 a month, that protects the lender if you stop paying. It isn't permanent, and once you owe less than 80% of the home's value you can usually have it removed. PMI, Explained covers exactly how that works.

A larger down payment lowers your loan and may skip PMI. But draining your entire savings to reach 20% can backfire. If you have no cushion left and the furnace dies, you're stuck. It's often smarter to put a bit less down and keep an emergency fund than to be 'house rich and cash poor.'

• A bigger down payment means a smaller loan and lower monthly payments.
• Reaching 20% lets you avoid PMI entirely.
• A smaller down payment gets you into a home sooner and keeps more cash on hand.
• Whatever you choose, try to keep a few months of expenses in savings.

There's no single magic number. The right down payment gets you into a home you can comfortably afford while leaving you a safety net. Once you've picked a target, Saving for a Down Payment, Realistically covers where to keep the money and how to build it up.