Down Payment Calculator
Use our Down Payment Calculator to determine the down payment required to buy a home based on the property purchase price and other factors. Our calculator also shows you the total upfront cost required to buy a home including the money you put down plus estimated closing costs. Use our calculator to understand how different down payments affect the mortgage required to buy a home as well as your housing costs.
Watch our Down Payment Calculator "How To" videoHow Our Down Payment Calculator Works
Your down payment is the portion of the property purchase price that you contribute. Our Down Payment Calculator shows you how your down payment and total funds required to buy a home change based on the the following inputs:
Property Purchase Price. The price of the home you buy is the most important factor that determines your down payment. The more expensive home you buy, the higher your down payment.
Down Payment as a Percentage of the Purchase Price. Most lenders require you to make a down payment of 20% to receive the best mortgage terms although low down payment programs enable you to buy a home with 3% down or less. The more money you put down, the smaller the mortgage amount you need to buy a home. The lower your down payment, the higher the loan amount you need.
Mortgage Rate. The lower the interest rate, the higher the mortgage amount you can afford and the smaller the down payment you need.
Mortgage Term. The longer your loan, the lower your monthly payment and higher the loan amount you can afford.
Our calculator enables you to determine the total cost to buy a home including the following information:
Down Payment Required. Your down payment depends on the price of the home you want to buy and the percentage of the purchase price you put down.
Estimated Closing Costs. These are costs required by third parties including escrow and title companies to process your loan. Closing costs vary based on your mortgage amount, property purchase price, location and other factors. The more expensive the home you buy, the higher the closing costs. It is important to consider closing costs to make sure that you have the necessary funds to close your loan. For example, you may have saved for your down payment and not realized how expensive closing costs are.
Lender Costs. These are the fees charged by the lender to process and fund your mortgage. Lender costs are typically a fixed amount.
Total Upfront Money Required to Purchase the Home. This is total amount of funds you need to come up with to buy the home you want including both the down payment and closing costs. You may also be required to hold savings in reserve depending on your loan program and lender.
Mortgage Amount. This is the amount of money you borrow to buy the property. The lower your down payment, the higher your mortgage.
Loan-to-Value (LTV) Ratio. Your LTV ratio, or the ratio of your mortgage amount to the value of your property, is inversely related to your down payment which means the more money you put down, the lower your LTV ratio. Lenders usually apply a maximum LTV ratio to determine your loan amount as well as your eligibility for certain loan programs.
Mortgage Payment. This is your estimated monthly payment based on your loan amount. The higher your down payment, the lower your mortgage amount and payment.
Estimated Property Tax and Homeowners Insurance. When you buy a home it is important to understand housing expenses such as property tax and homeowners insurance. These costs vary based on property value and location as well as level of coverage.
Total Monthly Housing Expense. This includes your mortgage payment plus property tax and homeowners insurance so you can determine if you can afford the total monthly cost to own a home.
Down Payment to Buy a Home
Most Lenders Require a Down Payment of 10% - 20% of the Home Purchase Price
Most lenders require a minimum down payment of 10% - 20% to qualify for a mortgage and 20% to receive the lowest interest rate from the lender. For example, if you are buying a home for $100,000 you would be required to make a down payment of $20,000 to receive the best mortgage terms from the lender ($100,000 (property value) * 20% (down payment) = $20,000). The down payment requirement may change based on mortgage program and loan amount with some lenders requiring higher down payments on jumbo loans. The down payment requirement can vary by lender so borrowers should contact multiple lenders to understand their policies. Use our Down Payment Calculator to understand how your loan amount and monthly payment change depending on how much you put down.
Low / No Down Payment Mortgage Programs
While 10% - 20% is the required down payment for most mortgages, there are multiple no and low down payment mortgage programs that enable borrowers to buy homes with little or no money down. For example, the USDA and VA home loan programs enable you to buy a home with no down payment, the HomeReady and Home Possible mortgage programs enable you to buy a home with a 3.0% down payment and the FHA mortgage program enables you to buy a home with a 3.5% down payment. Many large banks or credit unions also offer their own low down payment mortgage programs. In some cases, these programs may require borrowers to pay additional fees or a higher interest rate but they make owning a home more attainable for more borrowers.
Your Down Payment and Mortgage Insurance
If you make a down payment of less than 20% of the property purchase price you are typically required to pay some form of mortgage insurance, which protects the lender in the event you default on your loan. For conventional loans, borrowers pay private mortgage insurance (PMI) which is an additional ongoing monthly fee on top of your mortgage payment. In some cases borrowers pay PMI as a separate monthly fee (borrower paid PMI) and in other cases borrowers pay PMI by paying a higher interest rate (lender paid PMI) FHA and USDA mortgage borrowers are required to pay an upfront and ongoing mortgage insurance premium while VA mortgage borrowers are only required to pay an upfront funding fee. The amount of mortgage insurance varies depending on the mortgage program and other factors such as credit score and loan-to-value (LTV) ratio. Borrowers should understand how mortgage insurance increases their upfront and ongoing monthly mortgage costs if they make a down payment of less than 20%.
Additional Costs
In addition to your down payment, borrowers are required to pay for mortgage closing costs and potentially hold savings in reserve when the loan closes. Closing costs vary depending on your loan amount and property value and can run thousands of dollars. Our Down Payment Calculator shows you the additional costs involved in buying a home so you no how much money you need to close the purchase and avoid any surprises. Additionally, some lenders and mortgage programs require borrowers to maintain a minimum amount of savings in reserve at the time your mortgage closes. Although it may not be required by your lender, FREEandCLEAR recommends that you hold enough savings in reserve to cover three-to-six months of total monthly housing expense. For example if your total monthly housing expense is $1,5000, you would keep at least $4,5000 in reserves at the time your mortgage closes. Borrowers should understand the total amount of funds required to pay for their down payment, closing costs and savings in reserve to make sure they have sufficient funds to qualify for a mortgage.
The Relationship Between Your Down Payment and Loan-to-Value (LTV) Ratio
Loan-to-value (LTV) ratio is your mortgage amount divided by the fair market value of the property being financed according to an appraisal report. For example, if your mortgage amount is $80,000 and your property value is $100,000, your LTV ratio is 80% ($80,000 (loan amount) / $100,000 (property value) = 80% (LTV ratio)). Lenders usually apply a maximum LTV ratio of 80% to 90% although low down payment programs permit higher LTV ratios up to 100% in some cases. Your LTV ratio is inversely correlated to your down payment which means the more money you put down, the lower your LTV ratio and the easier it is to qualify for a mortgage. Lenders import LTV ratio limits because they want to make sure there is sufficient equity in the property in case you default on your mortgage. When you buy a home, from the lender's standpoint, the lower the LTV ratio the better which means you make a higher down payment. Be sure to understand your lender's LTV ratio limit before you apply for a mortgage.
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Sources
Thibos, Megan. “How to decide how much to spend on your down payment.” CFPB. Consumer Financial Protection Bureau, January 30 2017. Web.