Down Payment: The Real Impact
The down payment changes three things: your monthly payment, your interest rate, and whether you pay PMI. On a $350,000 house, the difference between 5% down ($17,500) and 20% down ($70,000) is about $52,500 upfront—but 20% down saves $150-400/month in lower payments plus PMI elimination.
How Much Down Payment Do You Need?
| Loan Type | Minimum Down | PMI Required? | Notes |
|---|---|---|---|
| Conventional | 3-5% | Yes, until 20% equity | Best rates at 20%+ |
| FHA | 3.5% | Yes, for life of loan* | Easier qualification |
| VA | 0% | No | Veterans only |
| USDA | 0% | Yes (guarantee fee) | Rural areas only |
| Jumbo | 10-20% | Varies | Above conforming limits |
*FHA mortgage insurance premiums (MIP) last the life of the loan unless you put 10%+ down, then MIP drops after 11 years.
PMI Costs
Private Mortgage Insurance protects the lender if you default. It costs 0.5-1.5% of the loan amount annually. On a $300,000 loan at 1%, that's $3,000/year or $250/month added to your payment. PMI automatically cancels at 78% LTV (22% equity) on conventional loans. You can request removal at 80% LTV.
Saving Strategies
Set up an automatic transfer to a high-yield savings account. At $1,500/month, you'd save $18,000 in a year. Put that in an account paying 4-5% APY and the interest helps too. Some states offer first-time buyer programs with grants or matched savings.
Down payment assistance programs exist in every state. Some cover 3-5% of the purchase price as grants or forgivable loans. Check your state housing finance authority.
Closing Costs: Don't Forget Them
Beyond the down payment, budget 2-5% of the home price for closing costs. On a $350,000 house, that's $7,000-$17,500 for appraisal, title insurance, attorney fees, recording fees, and prepaid items. Some sellers will negotiate covering a portion of closing costs.