Is 20% down required to buy a home?

No. 20% is a threshold that avoids US PMI and unlocks better terms, but many loans allow far less — some as little as 3%. You simply borrow more and pay a higher monthly payment.

Do closing costs count as part of the down payment?

No. Closing costs are separate and paid on top of the down payment. Budget for both: the down payment is the equity you put in, while closing costs cover taxes, legal and lender fees.

Does a bigger down payment lower my interest rate?

Often, yes. A larger down payment means a lower loan-to-value ratio, which lenders read as lower risk and may reward with a slightly better rate, alongside a smaller balance to charge interest on.

Should I put down everything I have saved?

Usually not. Keep a cash buffer for closing costs, moving and repairs, plus an emergency fund. Emptying your savings for a larger down payment can leave you house-rich but cash-poor.

How Much Down Payment Do You Need to Buy a Home?

Published 4/2/2026 · 3 min read · Real-estate calculators

Camille Laurent — Finance writer at Allin

Tax · Personal finance

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In short

Most buyers put down between 5% and 20% of the purchase price. In the US, a 20% down payment lets you skip private mortgage insurance (PMI): on a $400,000 home that is $80,000. Smaller down payments are possible — some loans go as low as 3% — but below 20% you usually pay PMI and borrow more, which raises your monthly payment.

An estate agent handing over a house key. — Pavel Danilyuk · Pexels · Pexels

How to work out a down payment: typical percentages, the 20% PMI threshold in the US, and how the amount you put down changes your monthly payment.

What counts as a normal down payment

A down payment is the share of the price you pay in cash up front; the rest is borrowed. Most buyers land between 5% and 20%. Putting down more shrinks the loan and the monthly payment, and signals lower risk to the lender — often earning a better interest rate.

On a $400,000 home, 5% is $20,000, 10% is $40,000, and 20% is $80,000. The gap between those figures is exactly what you either keep in the bank or convert into a smaller, cheaper loan.

The 20% threshold and mortgage insurance

In the US, a down payment below 20% usually triggers private mortgage insurance (PMI) — an extra monthly premium that protects the lender, not you. PMI can be cancelled once your equity reaches 20%, so many buyers aim for that mark to avoid the cost entirely.

The lesson is the same everywhere: 20% is the level at which lenders relax. Below it you either pay for insurance, accept a higher rate, or face a lower loan-to-value cap. Crossing 20% removes those frictions.

How the down payment changes your payment

Every extra dollar you put down is a dollar you do not borrow, so it shrinks both the loan balance and the interest charged on it. On a 30-year loan, moving from 10% to 20% down on a $400,000 home cuts the borrowed amount from $360,000 to $320,000 — a meaningful drop in the monthly payment and in total interest over the life of the loan.

There is a trade-off, though. A larger down payment ties up cash you might want for closing costs, moving, repairs or an emergency fund. The right level balances a comfortable monthly payment against keeping enough liquidity after you have the keys.

Down payment calculatorWork out your down payment, the loan it leaves, the cash you still have to find and the month you get there.Try the tool →

Frequently asked questions

Is 20% down required to buy a home?: No. 20% is a threshold that avoids US PMI and unlocks better terms, but many loans allow far less — some as little as 3%. You simply borrow more and pay a higher monthly payment.
Do closing costs count as part of the down payment?: No. Closing costs are separate and paid on top of the down payment. Budget for both: the down payment is the equity you put in, while closing costs cover taxes, legal and lender fees.
Does a bigger down payment lower my interest rate?: Often, yes. A larger down payment means a lower loan-to-value ratio, which lenders read as lower risk and may reward with a slightly better rate, alongside a smaller balance to charge interest on.
Should I put down everything I have saved?: Usually not. Keep a cash buffer for closing costs, moving and repairs, plus an emergency fund. Emptying your savings for a larger down payment can leave you house-rich but cash-poor.

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