Question 1

How much down payment do I need to buy a house?

Accepted Answer

Conventional loans allow as little as 3% down for first-time homebuyers, though 20% avoids PMI. FHA loans require 3.5% with mortgage insurance for the life of the loan. VA and USDA loans offer 0% down options for eligible borrowers. The average first-time homebuyer puts down 6-8%.

Question 2

What is PMI and how much does it cost?

Accepted Answer

Private Mortgage Insurance (PMI) is required on conventional loans with less than 20% down. Annual PMI rates range from 0.30% to 1.50% of the loan amount, depending on your credit score and down payment percentage. For example, with 5% down on a $380,000 loan, PMI costs roughly $190-$366/month depending on your credit score. PMI can be canceled once you reach 20% equity.

Question 3

5% vs 20% down payment — what's the real difference?

Accepted Answer

On a $400,000 home, the difference is $60,000 upfront (5% = $20,000 vs 20% = $80,000). With 20% down, you save roughly $2,400-$5,400/year in PMI premiums and have a lower monthly payment. However, waiting to save 20% could cost you thousands in rising home prices and lost equity. Our calculator compares all 5 scenarios side by side so you can make the best decision.

Question 4

How fast can I save for a down payment?

Accepted Answer

This depends on your monthly savings rate and home price target. For a $60,000 down payment, saving $1,000/month would take 60 months (5 years) without interest. Our savings timeline calculator factors in investment growth and your current savings balance to give you a realistic target date.

Question 5

What is LTV and why does it matter?

Accepted Answer

Loan-to-Value (LTV) is the ratio of your loan amount to the home's value. An 80% LTV (20% down) is the key threshold for avoiding PMI on conventional loans. Higher LTV ratios mean higher risk for lenders, which translates to higher PMI rates and sometimes higher interest rates.

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