How much down payment do I need to buy a house?
Conventional mortgages typically require 3%–20% down. FHA loans allow as little as 3.5% down with a qualifying credit score. VA and USDA loans can allow 0% down for eligible buyers. Putting down less than 20% on a conventional loan usually triggers Private Mortgage Insurance (PMI) until you reach 20% equity, so many buyers target 20% to avoid that added cost.
What is PMI and how can I avoid it?
Private Mortgage Insurance (PMI) protects the lender — not you — if you default on a conventional loan with less than 20% down. It typically costs 0.3%–1.5% of the loan amount per year, added to your monthly payment. You can avoid it by putting down at least 20%, using a piggyback loan structure, or choosing a loan program (like VA) that does not require it.
Is it better to put down more or less on a home?
A larger down payment reduces your loan amount, lowers your monthly payment, avoids or reduces PMI, and reduces total interest paid over the life of the loan. A smaller down payment preserves cash for emergencies, renovations, or other investments, and lets you buy sooner rather than saving for years. The right balance depends on your cash reserves, the mortgage rate, and your other financial goals.
What other cash do I need besides the down payment?
Closing costs typically add another 2%–5% of the purchase price, covering items like loan origination fees, appraisal, title insurance, attorney fees, and prepaid property taxes/insurance. On a $400,000 home with 10% down, that is $40,000 down plus roughly $8,000–$20,000 in closing costs — so always budget total cash needed, not just the down payment.
Does a down payment apply the same way to a car loan?
Yes, the same principle applies: a larger down payment on a car reduces the loan amount and monthly payment, and helps avoid being "underwater" (owing more than the car is worth) given how quickly vehicles depreciate. Financial advisors commonly recommend at least 20% down on a new car and 10% on a used car.