Three questions, one calculator
Saving for a home usually raises three questions, and the calculator above has a mode for each:
- Cash for a price: I like a $400,000 home. How much cash do I need?
- Price for my cash: I have $60,000. What price can that cover?
- Savings plan: I need $80,000. How long until I get there?
All three include closing costs, which many down payment calculators leave out. Closing costs are paid in cash at the same time as the down payment, so leaving them out understates the cash you need by thousands.
The formulas
Closing costs = price × closing %
Cash needed = down payment + closing costs
Loan = price − down payment
Working backwards from the cash you have:
And for a savings plan, month by month:
The calculator repeats the last line until the balance reaches your goal.
Worked example 1: cash for a $400,000 home
With 3% closing costs, a 6.5% 30-year rate and PMI at 0.5% a year:
| Down payment | Amount | Cash incl. closing | Loan | P&I a month | PMI a month |
|---|---|---|---|---|---|
| 3% | $12,000 | $24,000 | $388,000 | $2,452.42 | $161.67 |
| 3.5% | $14,000 | $26,000 | $386,000 | $2,439.78 | $160.83 |
| 5% | $20,000 | $32,000 | $380,000 | $2,401.86 | $158.33 |
| 10% | $40,000 | $52,000 | $360,000 | $2,275.44 | $150.00 |
| 20% | $80,000 | $92,000 | $320,000 | $2,022.62 | None |
Two things jump out. First, closing costs add a fixed $12,000 at every level, so they are half the cash needed at 3% down. Second, going from 3% to 20% down cuts the monthly payment by about $590 ($430 of principal and interest plus $162 of PMI), but needs $68,000 more cash up front.
Worked example 2: what $60,000 can buy
You have $60,000 and expect closing costs of 3% of the price.
| Down payment | Price your cash covers | Loan needed |
|---|---|---|
| 3.5% | $923,077 | $890,769 |
| 5% | $750,000 | $712,500 |
| 10% | $461,538 | $415,385 |
| 20% | $260,870 | $208,696 |
At 10% down: $60,000 ÷ (10% + 3%) = $461,538. Of that, $46,154 is the down payment and $13,846 covers closing costs.
The low-down-payment rows look exciting, but your cash is only half the story. A lender also checks that your income can carry the payment on a $890,000 loan, which few incomes can. Pair this result with the house affordability calculator, which works from your income and debts.
Worked example 3: saving $80,000
You have $15,000 saved, can put away $1,000 a month and need $80,000.
- At 0% interest: (80,000 − 15,000) ÷ 1,000 = 65 months, or 5 years 5 months
- In an account paying 4% a year: 57 months (4 years 9 months), with $8,793 of the total coming from interest
- Saving $1,500 a month at 4%: 40 months (3 years 4 months)
Interest helps, but the monthly deposit matters more. To see how a long-term balance compounds, try the compound interest calculator.
Minimum down payment by loan type
| Loan type | Minimum down | Notes |
|---|---|---|
| Conventional (first-time buyer programs) | 3% | Fannie Mae HomeReady, Freddie Mac Home Possible and similar; PMI applies |
| Conventional (standard) | 5% | PMI until you reach 20% equity |
| FHA | 3.5% | 10% with a 500–579 credit score; upfront and annual MIP |
| VA | 0% | Eligible veterans and service members; funding fee instead of PMI |
| USDA | 0% | Eligible rural and suburban areas; income limits apply |
| Jumbo | 10% to 20% | Loans above the conforming limit; varies by lender |
The FHA loan calculator and VA loan calculator show how each program’s insurance and fees change the payment.
What closing costs include
Typical closing costs run about 2% to 5% of the price. They usually include:
- Lender fees: origination, underwriting, and any points you buy to lower the rate
- Appraisal and credit report fees
- Title search and title insurance
- Government recording fees and, in some states, transfer taxes
- Prepaid items: the first year of home insurance, several months of property tax for escrow, and interest up to your first payment
Your lender must give you a Loan Estimate within three business days of your application, listing these costs. Use the real figures from it once you have one.
Is it worth waiting to save 20%?
On the $400,000 home in example 1, 5% down means about $158 a month of PMI. PMI ends automatically when the balance is scheduled to reach 78% of the original value, which at 6.5% takes 135 payments, so it adds up to about $21,375 in total. Saving the extra $60,000 to reach 20% at $1,000 a month would take about five years, and in those five years you would pay rent and the home price may change. There is no single right answer:
- If prices and rents in your area are rising fast, buying sooner with PMI often wins.
- If you are close to 20% already, a few more months of saving can remove PMI entirely and cut the payment.
- If your credit score is lower, PMI is expensive, and an FHA loan or a larger down payment may be cheaper.
Where to keep down payment savings
Money you need within a few years should not swing with the stock market. Common choices are high-yield savings accounts, money market accounts, certificates of deposit and short-term Treasury bills. Keep the account separate from everyday spending, and keep statements: lenders ask for two months of bank statements and will ask you to explain large recent deposits.
Tips
- Keep an emergency fund. Draining every dollar into the down payment leaves nothing for the furnace that breaks in month two. Many buyers keep three to six months of expenses aside.
- Ask about assistance. State and local housing agencies offer down payment and closing cost grants or low-interest second loans, especially for first-time buyers.
- Negotiate seller credits. In a slower market, sellers may pay part of your closing costs, which frees your cash for the down payment.
- Compare 5% vs 20% honestly. Put the PMI cost next to the years of rent you would pay while saving the extra 15%. The rent vs buy calculator can help.
Common mistakes
- Forgetting closing costs. They are the most common reason buyers come up short at the closing table.
- Counting the earnest money twice. The deposit you pay with your offer is usually credited toward your down payment or closing costs, not added on top.
- Ignoring PMI cancellation. PMI on a conventional loan is not forever; it ends when you reach 22% equity on the original schedule, or earlier on request at 20%.
- Mixing up percent of price and percent of loan. Down payments are a percent of the price; PMI is a percent of the loan.