How the down payment calculator works
Your savings target is the down payment plus closing costs. Freddie Mac describes typical down payments as ranging from 3% to 20% of the purchase price and closing costs as typically 2% to 5%. The time to reach the target assumes you save a fixed amount each month and your savings earn interest, compounded monthly:
Target = price × down% + price × closing%
Months = ln((Target × i + D) / (S × i + D)) / ln(1 + i)
S = current savings, D = monthly deposit, i = annual return ÷ 12
(with no interest: Months = (Target − S) / D)
Worked example
A $350,000 home, 10% down, 3% closing costs, $15,000 saved and $1,200 added monthly at 4%:
| Down payment | $35,000 |
|---|---|
| Closing costs | $10,500 |
| Cash needed | $45,500 |
| Still to save | $30,500 |
| Time to goal | 2 years |
| Loan amount | $315,000 |
| Monthly P&I at 6.5% | $1,991.01 |
Choosing a down payment
- 20% or more avoids PMI on a conventional loan and lowers the payment.
- Less than 20% gets you in sooner but adds PMI — often worth it if prices or rents are rising faster than you can save. Freddie Mac estimates PMI at roughly $30–$70 a month per $100,000 borrowed.
- 3.5% down is the FHA minimum for borrowers with credit scores of 580 or higher; FHA loans carry their own mortgage insurance (see the FHA calculator).
- Keep an emergency fund separate. Draining savings for a bigger down payment leaves nothing for repairs after you move in.
Frequently asked questions
Is 20% down required?
No. Many conventional loans allow as little as 3% down and FHA allows 3.5%. Below 20% you usually pay mortgage insurance.
Can gift money be used for a down payment?
Most loan programs allow documented gifts from family, usually with a signed gift letter. Rules differ by program, so ask your lender.
Should closing costs come out of the same savings?
Yes, unless the seller or lender is paying them. That is why the target includes both.
Sources
- Freddie Mac, “Understanding homebuying costs,” My Home by Freddie Mac (accessed September 2026)
- Freddie Mac, “Breaking down PMI,” My Home by Freddie Mac (accessed September 2026)
- U.S. Department of Housing and Urban Development, Single Family Housing Policy Handbook 4000.1 (minimum required investment and credit score rules)