Transparent method
The formula
Worked example
Example inputs
How to interpret the result
The down payment is only one of the cash needs at a purchase. On a $425,000 home, 20 percent is $85,000, and adding $12,000 of closing costs and $18,000 of reserves brings the cash needed to about $115,000. The loan is $340,000. Setting aside reserves after closing is what keeps a repair or a lost paycheck from becoming a crisis in the first months, when money is tightest.
Before you rely on it
What to check
Get a Loan Estimate for the exact closing costs, which vary by lender and location, and decide the reserve you want before you choose a down payment size.
The common error
Where people go wrong with down payment calculator
Spending every dollar on the down payment. A smaller down payment with mortgage insurance can leave a healthier cash cushion than a larger one that empties your accounts.
Sensitivity evidence
How purchase price changes the cash needed at closing
| Purchase price | Cash needed at closing | Estimated loan amount | Down payment |
|---|---|---|---|
| $340,000 | $98,000 | $272,000 | $68,000 |
| $382,500 | $106,500 | $306,000 | $76,500 |
| $425,000worked example | $115,000 | $340,000 | $85,000 |
| $467,500 | $123,500 | $374,000 | $93,500 |
| $510,000 | $132,000 | $408,000 | $102,000 |
Every input, tested
Which input moves the cash needed at closing most
| Input | Tested from | To | Cash needed at closing at each end | Swing |
|---|---|---|---|---|
| Purchase price | $382,500 | $467,500 | $106,500 to $123,500 | $17,000 (15%) |
| Down-payment percentage | 18.0% | 22.0% | $106,500 to $123,500 | $17,000 (15%) |
| Cash reserves after closing | $16,200 | $19,800 | $113,200 to $116,800 | $3,600 (3.1%) |
| Estimated closing costs | $10,800 | $13,200 | $113,800 to $116,200 | $2,400 (2.1%) |
Two variables at once
Cash needed at closing by purchase price and down-payment percentage
| Purchase price \ Down-payment percentage | 16.0% | 20.0% | 24.0% |
|---|---|---|---|
| $340,000 | $84,400 | $98,000 | $111,600 |
| $382,500 | $91,200 | $106,500 | $121,800 |
| $425,000 | $98,000 | $115,000 | $132,000 |
| $467,500 | $104,800 | $123,500 | $142,200 |
| $510,000 | $111,600 | $132,000 | $152,400 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Purchase price | $425,000 |
| Down-payment percentage | 20.0% |
| Estimated closing costs | $12,000 |
| Cash reserves after closing | $18,000 |
| Cash needed at closing | $115,000 |
| Estimated loan amount | $340,000 |
| Down payment | $85,000 |
Where the inputs come from
Purchase price is the contract price. The percentage is what you plan to put down; 20% avoids PMI on a conventional loan, and 3% to 5% is common for first-time buyers. Estimated closing costs come from a Loan Estimate or two to five percent of the price. Cash reserves after closing are what you want left in the bank, which lenders may also require for some loans.
Using the cash needed at closing in a real decision
Test a lower percentage to see how much cash it frees and what it adds to the payment.
When the result stops applying
The calculation leaves out moving costs, the earnest money deposit (which is part of the down payment) and prepaid taxes and insurance, which can be significant. Some programs require a minimum contribution from your own funds. Gifts may be allowed for part of the down payment with documentation.
What to compare it with
Set a target cash figure and work backward to a price. Compare a smaller down payment with PMI against saving longer for 20%, using the PMI calculator to price the insurance. Look up down-payment assistance in your state, which can supply several thousand dollars. Keep reserves in the plan, because the first months in a home bring unplanned costs. The closing cost calculator refines the cash figure.
People also ask
Frequently asked questions
Do I need 20% down?
No. Many loans accept 3% to 5% down, and VA and USDA loans can need none, though a conventional loan with under 20% down usually brings private mortgage insurance. Compare the extra monthly cost with the cash you keep.
Is earnest money part of the down payment?
Yes. Earnest money is a deposit you make when the offer is accepted, and it is credited toward your down payment or closing costs at closing. If the deal falls apart for a reason the contract does not protect, you could lose it.
Are there down-payment assistance programs?
Many states, cities and housing agencies offer grants or low-interest second loans to eligible buyers, usually with income limits and a homebuyer education class. Ask a lender who works with these programs, since they layer on top of the first mortgage.