Down Payment

A down payment is the portion of a purchase you cover in cash, with a lender financing the balance. On a house, common down payments range from as little as 3 percent on some conventional loans up to 20 percent or more. The size of your down payment drives several things at once: a bigger one means a smaller loan, a lower monthly payment, and less total interest over the life of the loan.

The 20 percent threshold matters because putting down at least that much on a conventional mortgage usually lets you avoid private mortgage insurance, an extra monthly cost that protects the lender, not you. A larger down payment also lowers your loan-to-value ratio, which can earn a better interest rate. The tradeoff is liquidity: cash tied up in a down payment is no longer available for emergencies or investing. Our mortgage calculator and home affordability calculator show how different down payments change the numbers.