Down Payment Strategies: How Much Should You Put Down on a House?
Compare 3%, 5%, 10%, and 20% down payment scenarios. Understand the trade-offs between equity, PMI costs, and interest savings.
By Sarah Jenkins, CFA
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Reviewed by David Vance, CFP
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5 min read
The Myth of the Mandatory 20% Down Payment
While putting 20% down eliminates Private Mortgage Insurance (PMI) and lowers monthly principal and interest payments, modern conventional loans allow down payments as low as 3% for first-time buyers and 5% for standard conventional mortgages.
Down Payment Trade-Off Matrix
| Down Payment % | PMI Required? | Monthly Payment Impact | Upfront Liquidity Trade-off |
|---|---|---|---|
| 3% – 5% | Yes (High) | Highest monthly obligation | Preserves cash reserves for emergencies |
| 10% | Yes (Low) | Moderate monthly obligation | Balanced cash preservation vs payment |
| 20%+ | No (Eliminated) | Lowest monthly obligation | Ties up liquid capital in home equity |
Opportunity Cost vs Home Appreciation
Delaying a home purchase for years to save a full 20% down payment can sometimes cost more in lost home equity appreciation than paying monthly PMI. Using our mortgage engine allows you to model both scenarios side-by-side.