Down Payment Impact Calculator
Compare the financial consequences of putting 3%, 5%, 10%, or 20% down. See exact monthly mortgage payments, Private Mortgage Insurance (PMI) removal, and total lifetime interest savings.
How Your Down Payment Shapes Your Mortgage
The down payment is one of the most powerful levers in residential home financing. While traditional advice often insisted on a full 20% down payment, modern conventional and government-backed lending guidelines provide multiple low down payment pathways:
- 3% Down (Conventional 97 / HomeReady): Ideal for first-time buyers with strong credit who want to enter the housing market sooner without waiting years to accumulate large cash reserves.
- 3.5% Down (FHA Loan): Government-insured loan option with more forgiving credit score parameters (minimum 580 score). Note that FHA mortgage insurance (MIP) usually lasts the entire loan life unless refinanced.
- 5% to 10% Down: Lowers the initial loan balance, reducing monthly principal and interest while keeping cash in reserve for furnishings, moving costs, and emergency funds.
- 20% Down: The gold standard for eliminating Private Mortgage Insurance (PMI) from Day 1, lowering monthly overhead by $100–$250/mo, and achieving the lowest possible interest rates from lenders.
The True Cost of Private Mortgage Insurance (PMI)
PMI typically costs between 0.4% and 1.2% of the initial loan amount annually. On a $400,000 home with 5% down ($380,000 loan), annual PMI runs approximately $2,280 ($190 per month). Under the federal Homeowners Protection Act of 1998, once your loan balance reaches 80% of the home's original appraised value, you have the legal right to request PMI removal.