Savings & Down Payment
You don't always need 20% down. Understand your options, what PMI really costs, and how to budget for closing costs.
Down Payment Options
| Down % | Program | Pros | Cons |
|---|---|---|---|
| 3% | Conventional (Fannie Mae HomeReady) | Low down payment, flexible income sources | PMI required, need 620+ score |
| 3.5% | FHA Loan | Lower credit requirements (580+), lenient DTI | MIP for life of loan (unless refinance), property standards |
| 5% | Conventional | Moderate down payment, PMI drops at 80% LTV | Higher PMI rate than 10-20% down |
| 10% | Conventional | Lower PMI, more equity from day one | Still requires PMI |
| 20% | Conventional | No PMI, best rates, strongest offer | Requires significant savings |
| 0% | VA Loan | No down payment, no PMI, competitive rates | Must be veteran/active duty/eligible spouse |
| 0% | USDA Loan | No down payment for rural areas | Income limits, geographic restrictions |
Understanding PMI
What is PMI?
Private Mortgage Insurance protects the LENDER (not you) if you default. Required when down payment is less than 20%.
How much does it cost?
Typically 0.3% to 1.5% of loan amount per year, added to monthly payment.
How do I get rid of it?
Automatically drops at 78% LTV based on original schedule. Can request removal at 80% LTV. Refinancing is another option.
Example: PMI on a $350,000 home with 10% down
- Loan amount: $315,000
- PMI at 0.5%: $1,575/year = $131/month
- PMI at 1.0%: $3,150/year = $263/month
Closing Cost Estimates
Closing costs typically run 2-5% of the home price. Here's what to expect:
Lender fees (origination, processing)0.5-1.5% of loan
Appraisal$400-700
Title insurance + search$1,000-3,000
Attorney fees$500-1,500
Recording fees$100-300
Transfer taxesVaries by state/county
Prepaid taxes & insurance3-6 months
Home inspection$300-600
Survey$300-500
Quick Comparison: $350,000 Home
5% Down
Down: $17,500
Loan: $332,500
PMI: ~$166/mo
10% Down
Down: $35,000
Loan: $315,000
PMI: ~$131/mo
20% Down
Down: $70,000
Loan: $280,000
PMI: None