Down Payment Goal Calculator

How to Use the Down Payment Goal Calculator

Saving for a Down Payment — The Math and the Trade-Offs

10 Facts About US Down Payments

Frequently Asked Questions

• What's the minimum down payment for a US home?+
  Three options: FHA at 3.5% (FICO 580+), conventional at 5% (FICO 620+), or 0% for VA loans (veterans) and USDA Rural Development (rural areas). Some Fannie Mae HomeReady / Freddie Mac HomePossible products allow 3% for low-income first-time buyers. Below 20% down means PMI on conventional or MIP on FHA — both add 0.5-1.5% annually to the cost of borrowing.
• Should I put down 5% and start building equity sooner?+
  Depends on home-price appreciation expectations. In rising markets (3-5% annual appreciation), buying earlier with 5% down typically beats waiting 2-4 years to save 20% — even after PMI costs. In flat or declining markets, the higher down-payment option wins. Run our Mortgage Refinance Calculator after you've owned 2-3 years; if you've gained 20% equity through appreciation + principal payments, you can refinance to drop PMI.
• Where should I park down-payment savings?+
  For under-3-year timelines: FDIC-insured high-yield savings (Marcus, Ally, Discover, Capital One — all 4-4.75% APY in 2026) or short-term US Treasury bills (4.5-5% yield, federal-only tax). For 3-5+ year timelines: blend in some short-duration bond ETFs (BSV, VGSH) or balanced funds. Avoid equity-heavy portfolios within 36 months of expected use — a market drawdown can delay the home purchase by years.
• Can I use 401(k) or IRA funds for a down payment?+
  Yes but generally inadvisable. 401(k) loans allow borrowing up to USD 50,000 (or 50% of vested balance, whichever is less) at low rates — but you must repay in 5 years or it becomes a taxable distribution, and if you lose your job, the loan is typically due immediately. Traditional IRA early withdrawal incurs 10% penalty plus ordinary income tax. The Roth IRA first-time home buyer exception allows USD 10,000 tax-free + penalty-free withdrawal — the cleanest option but only USD 10K. Generally: save outside retirement accounts for home down payment.
• What's the FHA 3.5% catch?+
  Mortgage Insurance Premium (MIP) is permanent on most FHA loans originated after June 2013, even after reaching 20% equity. The only way to drop FHA MIP is to refinance into a conventional loan once you have 20% equity. So while the low down-payment is helpful, the long-term cost is higher than a conventional 5% + PMI loan (where PMI auto-terminates at 78% LTV). For most buyers with FICO 620+, conventional at 5% wins long-term despite needing slightly more upfront.
• Are there down-payment assistance programs?+
  Yes — every US state has at least one DPA program for first-time buyers. CalHFA (California), TDHCA (Texas), SONYMA (New York), IHDA (Illinois), MassHousing (Massachusetts) are major programs. Typical assistance is 3-5% of purchase price as either a grant, forgivable loan, or deferred-payment second mortgage. HUD.gov has a searchable database; ask any mortgage lender about programs in your target state. Combining FHA (3.5% min) + state DPA can mean total upfront down-payment of 1-2% of purchase price.
• What about gift funds from family?+
  Allowed and common. US gift-tax exemption is USD 18,000 per person per year in 2026; above that requires the giver to file IRS Form 709 but doesn't usually trigger actual tax. For mortgage qualification, lenders typically require: (1) a signed gift letter stating the funds aren't a loan, (2) the donor's bank statement showing the source, and (3) the funds in your account for 60+ days before applying (or documented as a recent gift). FHA, conventional, and VA loans all accept gift funds; rules vary slightly by program.
• Should I include closing costs in the savings target?+
  Yes. Closing costs typically run 2-5% of purchase price on US mortgages. On a USD 400K home, that's USD 8,000-20,000 in addition to the down payment. For accurate planning, add closing costs to your savings target — a 5% down + 3% closing scenario means saving 8% of purchase price total. Some states have higher costs (NY at 5-7% closing) due to transfer taxes; some have lower (TX, CA at 2-3%) due to no transfer tax in most areas.
• How does US down-payment math compare to ASEAN?+
  Singapore HDB minimum down-payment is 10-20% depending on loan type (5% cash + 15% CPF for HDB loans; 5% cash + 20% CPF for bank loans). Malaysian standard is 10% minimum. Indonesia and Philippines vary by bank but typically require 20-30% for first-time buyers. The US 3.5% FHA minimum is among the lowest globally — designed specifically to widen home-ownership access. The trade-off is that US buyers carry far higher leverage at purchase than equivalent ASEAN buyers, contributing to longer payoff timelines and higher lifetime interest costs.
• I'm an ASEAN expat in the US — what down-payment strategy makes sense?+
  Depends on residency timeline. If staying 7+ years, US homeownership is usually wealth-building positive — go for 5-10% down to enter the market sooner with the smallest workable cash outlay. If uncertain (might return to ASEAN in 3-5 years), renting is usually better — transaction costs of buying + selling within 5 years often exceed rent premium. ASEAN expats often face an extra wrinkle: limited US credit history makes mortgage approval harder. Newcomer programs at HSBC and Citi accept ITINs and shorter credit history but typically require 20-30% down — pushing the down-payment savings goal higher.

Related Tools