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Costs

Down Payment

A down payment is the part of the purchase price you pay upfront in cash, with the loan covering the rest. It's shown as a percentage, so 5% down on a $400,000 home is $20,000. A bigger down payment lowers your loan amount and can reduce or remove mortgage insurance. Some programs allow as little as zero down.

The down payment is often the biggest hurdle people picture, and the good news is that the old rule of 20% down is a myth for most buyers. Conventional loans can start as low as 3% down, FHA at 3.5%, and VA and USDA loans can require nothing down for those who qualify.

A larger down payment isn’t just about getting approved. It shrinks your loan, lowers your monthly payment, and can knock out mortgage insurance sooner. But putting every dollar in isn’t always wise either, since you still want reserves for emergencies. I’ll help you find the number that balances both.

Related terms

LTV (Loan-to-Value Ratio)

LTV, or loan-to-value ratio, compares your loan amount to the home's value, shown as a percentage. If you borrow $360,000 on a $400,000 home, your LTV is 90%. A lower LTV means more equity, which can affect your rate, your mortgage insurance, and the programs you may qualify for.

PMI (Private Mortgage Insurance)

PMI, or private mortgage insurance, is a fee that protects the lender, not you, when you put less than 20% down on a conventional loan. It's usually added to your monthly payment. Once you build enough equity, you can often request to have PMI removed, which lowers your payment.

Cash to Close

Cash to close is the total amount of money you need to bring to the closing table. It rolls together your down payment and closing costs, then subtracts things already paid or credited to you, like your earnest money deposit and any seller credits. It's the real out-of-pocket number for closing day.

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Last updated: June 13, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

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