A 20% down payment is generally not considered realistic for most first-time homebuyers, as typical down payments are much lower, often around 6–9%. While 20% avoids private mortgage insurance (PMI) and lowers monthly payments, many buyers use options requiring only 3% to 5% down.
You may qualify for a lower interest rate
Since you're assuming more of the financial risk, a 20% down payment puts you in a great spot to negotiate with your lender for a more favorable mortgage rate. A lower interest rate can save you thousands of dollars over the life of the loan.
Putting 20% down reduces the size of your monthly mortgage payment, making you more likely to qualify for and afford, your mortgage.
If you're applying for a conventional mortgage with less than 20% down, your lender may require that you purchase private mortgage insurance. Typically, most homebuyers wrap the premium for the insurance into their monthly mortgage payment.
As a general rule, you should aim to make a down payment of at least 20% on a new car, and at least 10% on a used car, to help you qualify for a better rate and lower monthly payment. That said, the right down payment amount depends on your own financial situation, including your credit.
Set your car payment budget
50% for needs such as housing, food and transportation — which, in this case, is your monthly car payment and related auto expenses. 30% for wants such as entertainment, travel and other nonessential items. 20% for savings, paying off credit cards and meeting long-range financial goals.
Range: Generally, a down payment of 10% to 20% of the car's price is expected. With Bad Credit: We recommend aiming for the higher end of this range to secure better loan terms.
Ideally buyers would be able to put down at least 20% of the home price to avoid paying private mortgage insurance, but it's not a requirement. With the median home price in the US at $435,300 (as of June 2025),1 the highest in US history, the average homebuyer would need $87,060 just for the down payment.
If your down payment is less than 20% of the price of your home, you'll typically need to buy mortgage loan insurance. If you're self-employed or have a poor credit history, your lender may require a larger down payment. Normally, the minimum down payment must come from your own funds.
A larger down payment means lower fees and interest over the life of the loan, while the costs of a smaller down payment add up over time: you may pay more in fees and interest. You can often secure better rates with a larger down payment, but you also need to understand how much you can afford.
To afford a $400,000 house, you typically need an annual income between $100,000 to $125,000, which translates to a gross monthly income of approximately $8,333 to $10,417, based on a $400,000 home price.
5: The home price should be about 5 times your annual income. 20: You should aim to pay off the mortgage within 20 years. 30: You should make a down payment of about 30% 40: Your monthly mortgage payment (EMI) should not exceed 40% of your net monthly income.
Overpaying your mortgage can have big benefits, including clearing your repayments sooner and paying less interest.
What is the 3-7-3 Rule? Within 3 business days of your completed loan application, your lender must provide initial disclosures. This includes the Loan Estimate (LE), which outlines your estimated loan terms, interest rate, closing costs, and monthly payment breakdown.
Down Payment = Home Price x Down Payment Percentage
For example, for a $300,000 home with a 20% down payment, your down payment would be $60,000.
A household earning $70,000 — about $10,000 below the median U.S. salary — could comfortably afford to spend about $257,000 on a house, assuming they put 20% down on a 30-year mortgage with a 6.5% rate.
Experts' interest rate prediction for 2025 suggests that while rates may decrease, they may not drop significantly. According to some financial institutions, the average 30-year fixed mortgage rate could settle between 5.5% and 6.5% by mid-2025.
The rule requires the buyer's solicitor to inform the lender when a seller is attempting to sell the property when the seller was registered at the land registry less than six months prior to the agreed sale. The lender will not usually lend in that case.
Contrary to popular belief, a 20% down payment is not a mandatory requirement for purchasing a home, as numerous loan programs, including FHA, VA, and USDA options, allow for significantly lower or even 0% down payments for qualified individuals.
The benefits of paying half down on a house are quite clear, as you can significantly reduce your monthly mortgage payments. You'll have less to pay every month and have more money in your pocket for other expenses. You'll be paying less on the mortgage's interest if you pay 50% up front.
How much house can I afford? In general, the cost of housing should be 25% – 30% of your gross (pre-tax) income. Your monthly mortgage payment will vary based on how much money you put into the down payment, your interest rate, and other factors.
For example, a 20% down payment on a $200,000 house is $40,000.
Putting down at least 20% on a house is the wisest move—it keeps you from paying private mortgage insurance (PMI) and saves you thousands in interest over time. If you're a first-time home buyer, a 5–10% down payment is okay—but be ready for a higher monthly payment with PMI tacked on.
Pay with cash
Paying for your new or used vehicle in cash eliminates your interest costs and finance fees, which can save you thousands. It also means you will not make monthly car payments, which lowers the “transportation” line item in your monthly budget.
You may have heard that you should always put down 20% when buying a car. While that's a solid guideline, it's not a one-size-fits-all rule. New vehicles: A 20% down payment can help offset early depreciation and reduce your overall loan balance.