Is It Better to Put More Money Down? How to Decide
It depends on what you'll have left after closing. Putting more money down lowers your loan balance, your principal and interest payment and the total interest you pay, and reaching 20% down on a conventional loan avoids private mortgage insurance. But using all your savings usually isn't the right move. The best down payment is the largest one that still leaves you enough cash for closing costs, moving, repairs and emergencies.
I'm Paul Mattos, a mortgage broker with Refine Mortgage, licensed in North Carolina and South Carolina. When I help buyers compare down payments, I look at the full monthly payment and the savings left after closing, not just the loan amount.
What Changes When You Put More Down
Your down payment determines how much of the price you finance:
5% down: you finance 95% of the price
10% down: you finance 90%
20% down: you finance 80%
Each option can change your monthly payment, mortgage insurance, pricing and cash to close. Each also leaves a very different amount in your bank account. And the down payment is only part of the cash you need. Closing costs and prepaid items come on top of it. See how much money you need to buy a home.
Start With Three Savings Buckets
Before choosing a down payment, split your savings into three buckets:
Cash to buy: down payment, closing costs, prepaid insurance and interest, escrow deposits and inspections
Known expenses after buying: moving, furniture, appliances and repairs you already plan to make
Emergency savings: money for a job interruption, medical bill, insurance deductible or surprise repair
Your down payment comes from whatever is left after buckets two and three are covered, not the other way around. Also keep in mind that the savings you want to keep are separate from any reserves the lender requires. We check both.
When Putting More Down Makes Sense
You Want a Lower Monthly Payment
A smaller loan means a lower principal and interest payment when the rate and term are the same. Property taxes, insurance and HOA dues don't change with your down payment, so compare the full payment. You can run scenarios with my mortgage calculator.
You Can Reduce or Avoid PMI
On a conventional loan, putting less than 20% down usually means private mortgage insurance. Putting more down can lower its cost, and reaching 20% generally avoids borrower-paid PMI altogether.
The 20% line deserves a close look. Moving from 18% to 20% down may change your payment more than moving from 10% to 12%, because it can eliminate PMI. Ask for both scenarios instead of assuming every extra dollar has the same effect.
If you do put less than 20% down, conventional PMI doesn't last forever. You can generally request cancellation when your balance reaches 80% of the original value, and it ends automatically at 78%. See how to remove PMI without refinancing.
FHA, VA and USDA handle mortgage insurance and fees differently. For example, FHA's annual mortgage insurance lasts for the life of the loan with less than 10% down but ends after 11 years with 10% or more.
You're Close to a Pricing Threshold
Loan pricing and mortgage insurance often change at certain down payment levels. If you're near one, ask for estimates on both sides and see whether the extra cash buys a meaningful improvement.
You Have Plenty of Cash Left Over
If you'll still have healthy savings after closing and you prefer lower debt, putting more down can make sense. You start with more equity and pay less interest over time.
When Keeping More Cash Makes Sense
A Bigger Down Payment Would Drain Your Savings
HVAC failures, insurance deductibles and income interruptions don't wait until you've rebuilt savings. If a larger down payment leaves bucket three empty, a smaller one is usually safer.
The Home Needs Work
If the inspection shows an aging roof, HVAC or water heater, keep cash for those repairs separate from your emergency fund.
Your Income Varies
Self-employed borrowers and buyers with commission, bonus, overtime or seasonal income often benefit from a larger cash cushion for slower months.
You Have Other Near-Term Goals
Childcare, a vehicle, a business expense or paying off higher-interest debt may be a better use of some of that cash.
Should You Put 20% Down to Avoid PMI?
Sometimes. If you can put 20% down and still keep healthy savings, avoiding PMI can be worth it. If reaching 20% would leave you short for closing, repairs or emergencies, a smaller down payment with PMI is often more comfortable, and you can remove PMI later as you build equity.
If you're only a few percent away from 20%, compare both scenarios on the same home. And if you're deciding between 5% and something lower, see can I buy a house with 5% down.
More Down vs. Paying Points
A larger down payment reduces the amount you borrow. Discount points are an upfront charge for a lower interest rate. If you have extra cash, compare:
Putting more toward the down payment
Paying discount points
Keeping the cash
A combination
Points generally make more sense the longer you keep the loan. The lowest advertised rate isn't always the least expensive option.
How Your Down Payment Affects Seller Credits
On a conventional loan, the down payment changes how much the seller can contribute toward your costs:
Less than 10% down: generally up to 3% of the price
10% to just under 25% down: up to 6%
25% or more down: up to 9%
FHA allows up to 6% regardless of the down payment. Seller credits can cover eligible closing costs, prepaids and points, but they can't replace your required down payment or come back to you as cash. A seller credit can let you keep more of your own savings. See how seller credits can lower your payment.
Does More Money Down Strengthen an Offer?
Sometimes a seller sees a larger down payment as a stronger offer, but it's not a guarantee. Sellers also weigh price, contingencies, earnest money, timing and the strength of your pre-approval. The best down payment for an offer is one you can document and comfortably deliver.
If You Have Less Saved
You don't always need a large down payment. Conventional loans allow as little as 3% to 5% down for eligible buyers, FHA allows 3.5%, and VA and USDA may allow no down payment. Gift funds and down payment assistance may also help. See using gift funds for a down payment and my first-time homebuyer programs guide.
Down Payment FAQs
Should I use all my savings for a down payment?
Usually not. Cover closing costs, moving, known repairs and an emergency cushion first, then put the rest toward the down payment.
Is it better to put 20% down?
Only if you'll still have enough savings left. Avoiding PMI is valuable, but conventional PMI can be removed later, while an empty savings account can cause real problems right after you move in.
Does a bigger down payment get me a lower rate?
Sometimes, at certain thresholds, but not always. Ask for estimates at each down payment you're considering.
How much should I keep in savings after buying a house?
There's no single number. It depends on your income stability, the home's age and condition, and any lender reserve requirements.
Does putting more down make it easier to get approved?
It can help, but it doesn't replace acceptable credit, income, debts and property eligibility.
How I Compare Down Payment Options
When you find a home, I prepare a property-specific Total Cost Analysis comparing each down payment on the same home:
Loan amount, rate and principal and interest
Mortgage insurance or program fees
Property taxes, homeowners insurance and HOA dues
Closing costs and seller credits
Total cash needed and the money left after closing
I'll also ask how long you plan to keep the home and whether any big expenses are coming. A loan can meet underwriting rules and still leave you with a payment or savings balance you're not comfortable with. You can read what past clients say on my reviews page.
Compare Your Options Before You Offer
If you're buying in North Carolina or South Carolina, I'll show you several down payment scenarios and what each one means for your payment, cash to close and savings afterward. We can talk by phone or video.
Schedule a mortgage consultation or start your mortgage application.
Paul Mattos
Mortgage Broker | Refine Mortgage
Carolina Home Financing
NMLS# 2339069 | Licensed in NC and SC
Call or text: 980-221-4959
Email: paulm@refinemortgage.net
Refine Mortgage Inc. | NMLS# 2417960 | Equal Housing Lender. This article provides general educational information and is not financial advice, a commitment to lend, a rate quote, or an offer of specific credit terms. Down payment requirements, mortgage insurance, seller contribution limits and pricing vary by lender, loan program, borrower, and property. Approval, pricing, and program availability depend on credit, income, assets, property, appraisal, and underwriting requirements. Not all applicants will qualify.
