How much should you put down?

A bigger down payment lowers your loan — but the cash you don’t put down can grow if you invest it. See what the difference could become, and weigh the trade-off.

Home price $400,000

Put down instead 5%

= $20,000 down (conventional allows as little as 3%)

Annual return if invested 8%

The S&P 500 has averaged ~10%/yr since 1957 (before inflation; not guaranteed).

Over 30 years

Put 20% down

$80,000

Cash kept to invest$0

Put 5% down

$20,000

Cash kept to invest$60,000

Invest that difference and in 30 years it could be

$603,759

Rule of 72: at 8%, your money doubles about every 9.0 years.

The other side: putting more down means a lower monthly payment, less interest over the life of the loan, and no PMI at 20%. This tool shows only what the cash could earn if invested instead — it’s a trade-off, not a recommendation.

Not sure how much to put down? Let’s run your real numbers.

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Hypothetical illustration for education only. Not investment, tax, or financial advice, and not a recommendation to invest instead of putting money toward a home. Assumes a constant annual return compounded yearly, with no fees or taxes; real returns vary year to year and investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. The S&P 500 long-run average (~10%/yr since 1957) is shown for context only. A larger down payment has real benefits — a lower payment, less total interest, and no mortgage insurance at 20% down. Talk to a licensed financial advisor about investing, and to Better Rate Mortgage about your loan options. Better Rate Mortgage · NMLS #2401335 · Equal Housing Lender.

Down payment questions, answered

Do you really need 20% down to buy a house?

No. The 20%-down rule is the most common mortgage myth. Conventional loans allow as little as 3% down, FHA loans 3.5%, and VA and USDA loans require 0% down for eligible buyers. Most first-time buyers put down far less than 20%.

What is the minimum down payment by loan type?

Conventional loans require as little as 3% down, FHA loans 3.5%, VA loans 0% for eligible veterans and service members, and USDA loans 0% in eligible rural areas. Private mortgage insurance (PMI) applies on conventional loans until you reach 20% equity.

Loan type	Minimum down	Mortgage insurance
Conventional	3%	PMI until 20% equity
FHA	3.5%	MIP (often life of loan)
VA	0%	None (funding fee may apply)
USDA	0%	Guarantee fee

Is it better to put more money down or invest the difference?

It is a trade-off. A larger down payment lowers your monthly payment, cuts total interest, and removes PMI at 20% down. But cash you keep can grow if invested: $60,000 invested at an 8% annual return becomes about $603,000 over 30 years (the S&P 500 has averaged roughly 10% per year since 1957). The right answer depends on your goals and risk tolerance.

What are the benefits of a larger down payment?

A larger down payment means a lower monthly payment, less total interest over the life of the loan, no private mortgage insurance once you reach 20% equity, more immediate home equity, and a stronger, more competitive offer to sellers.