How to Calculate a 20% Down Payment on a House

When buying a home, the most common piece of financial advice you will hear is: "Always put 20% down."

While it is entirely possible to buy a house with a much smaller down payment (sometimes as low as 3% or 3.5% with an FHA loan), the 20% mark remains the gold standard in real estate. Let's explore how to calculate it and why it matters so much.

How to Calculate 20% of a Home Price

Calculating a 20% down payment is straightforward math. You simply multiply the total purchase price of the home by 0.20.

The Formula: Purchase Price × 0.20 = Down Payment

Example: If you are looking at a house that costs $350,000:

• $350,000 × 0.20 = $70,000

You would need to bring $70,000 in cash to closing, and you would take out a mortgage for the remaining $280,000.

A Mental Math Shortcut

If you are walking through an open house and don't want to pull out a calculator, here is a quick mental trick:

1. Take the home price and drop the last zero (this gives you 10%).
2. Double that number (this gives you 20%).

Example on a $420,000 house: Drop a zero: $42,000. Double it: $84,000.

Why Put 20% Down?

1. Avoiding PMI: If you put down less than 20%, lenders consider you a "higher risk" borrower. To protect themselves, they force you to pay Private Mortgage Insurance (PMI) every single month until you reach 20% equity. PMI can easily add $100 to $300 to your monthly bill.
2. Lower Monthly Payments: Borrowing less money means your monthly principal and interest payments will be significantly lower.
3. Better Interest Rates: Lenders reward buyers who bring 20% to the table with the lowest possible interest rates, saving you tens of thousands of dollars over a 30-year loan.

Plan Your Purchase

To see exactly how different down payment percentages will affect your total monthly bill (including property taxes and insurance), try running the numbers through our free Mortgage Calculator before you start house hunting!