Down Payment Calculator
Calculate your minimum down payment, PMI/CMHC thresholds, and target savings goal.
Back to our main guide: The Ultimate First-Time Home Buyer Checklist.
Understanding Your Down Payment Requirements
The down payment is often the biggest hurdle for first-time home buyers. It is the upfront cash you pay toward the purchase of a home. The amount you need depends largely on the price of the home and the type of mortgage you are getting. While the traditional advice is to put down 20%, the reality is that many buyers, especially first-time buyers, put down significantly less.
United States Minimum Requirements
In the US, the minimum down payment varies by loan type:
- FHA Loans: Backed by the Federal Housing Administration, these require a minimum of 3.5% down if your credit score is 580 or higher.
- Conventional Loans: Some conventional loans backed by Fannie Mae or Freddie Mac allow for down payments as low as 3% for first-time buyers.
- VA and USDA Loans: Eligible veterans and rural home buyers can often secure loans with 0% down.
However, if you put down less than 20% on a conventional loan, you will be required to pay Private Mortgage Insurance (PMI). PMI protects the lender in case you default on the loan. It typically costs between 0.3% and 1.5% of the original loan amount per year, added to your monthly payment. Once you reach 20% equity in your home, you can usually request to have PMI removed.
Canadian Minimum Requirements
In Canada, the rules set by the government are strictly based on the purchase price of the home:
- For homes up to $500,000, the minimum down payment is 5%.
- For homes between $500,000 and $999,999, the minimum is 5% on the first $500,000, plus 10% on the portion of the price above $500,000.
- For homes $1,000,000 or more, a strict 20% minimum down payment is required.
Similar to the US, if your down payment is less than 20% in Canada, you must purchase mortgage default insurance (commonly known as CMHC insurance). Unlike PMI, which is a monthly fee that can eventually be canceled, CMHC insurance is calculated as a lump sum percentage (ranging from 2.80% to 4.00%) of the mortgage amount and is usually added to your total mortgage balance.
Strategies to Save for Your Down Payment Faster
Saving tens of thousands of dollars is daunting, but breaking it down into actionable steps makes it achievable.
- Automate Your Savings: Treat your down payment fund like a monthly bill. Set up an automatic transfer from your checking account to a high-yield savings account the day after you get paid.
- Audit Your Expenses: Track every dollar for a month. Identify discretionary spending—like dining out, subscription services, or expensive hobbies—and redirect those funds to your savings.
- Windfalls and Bonuses: Commit to saving any "found money." This includes tax refunds, work bonuses, inheritance, or money from selling unwanted items.
- Explore Assistance Programs: Many states, provinces, and municipalities offer down payment assistance programs (DPAs) for first-time buyers in the form of grants or low-interest, forgivable loans.
Remember that your down payment is just one piece of the puzzle. You also need to save for closing costs (typically 2-5% of the purchase price), moving expenses, and an emergency fund for unexpected home repairs. Check out our Closing Costs Calculator to get a full picture of the cash you'll need on closing day.
Frequently Asked Questions
Do I really need a 20% down payment?
No. While 20% is ideal because it allows you to avoid mortgage insurance (PMI/CMHC) and secures a lower monthly payment, many first-time buyers put down between 3% and 5%. It often makes more financial sense to buy sooner with a smaller down payment rather than waiting years to save 20% while home prices rise.
Can I use gifted money for my down payment?
Yes, most lenders allow you to use monetary gifts from family members toward your down payment. However, the giver must provide a formal "gift letter" stating that the money is truly a gift and not a loan that needs to be repaid, as a loan would affect your debt-to-income ratio.
Does my down payment include closing costs?
No. Your down payment goes directly toward the equity in your home. Closing costs are separate fees (such as appraisal, title search, and origination fees) paid to third parties to process the transaction. You need to save for closing costs in addition to your down payment.