Put 5% down on $300,000 and you borrow $285,000 plus ~$200/month PMI for years. Put 20% down and you borrow $240,000 with zero PMI. The gap between those two buyers exceeds $60,000 over a decade — from one decision made before house-hunting started. Down payment and PMI is where first-time buyers win or lose the most money with the least attention. Here is the full picture.
Part of the mortgage calculator guide. Compare down-payment scenarios in the mortgage calculator; size your budget in the affordability calculator.
For informational purposes only — not financial advice. Estimates may vary; consult a qualified financial advisor for decisions. See /terms.
What PMI costs (and when it dies)
Private mortgage insurance protects the lender — you pay it, they benefit — on conventional loans under 20% down, typically 0.5–1.5% of the loan yearly ($120–360/month on $285,000). It cancels automatically around 22% equity by law and on request at 20% with appraisal and good history. FHA loans use MIP with different (often permanent) rules — confirm your loan type before planning the exit. Fastest PMI kill: buy near 20%, then direct early overpayments at principal until the appraisal threshold, per overpayment guide.
3% vs 10% vs 20%: honest comparison ($300k home, 6%)
| Down | Loan | Monthly P&I | PMI/mo | 10-yr extra cost vs 20% |
|---|---|---|---|---|
| 3% ($9k) | $291,000 | ~$1,745 | ~$250 | ~$60,000+ |
| 10% ($30k) | $270,000 | ~$1,619 | ~$180 | ~$35,000+ |
| 20% ($60k) | $240,000 | $1,439 | $0 | Baseline |
Rates and examples as of Sept 2026, illustrative only — not a lender offer. Excludes taxes, insurance, HOA, fees and ARM resets.
PMI exit plan: the fastest $200/month raise
Killing PMI early is among the highest-return moves a low-down-payment buyer makes: every extra principal dollar toward 20% equity can save ~$200/month until PMI drops. Tactics in order: overpay from month one with “PMI exit” as the explicit goal (track balance vs 80%-of-value quarterly); request removal at 20% with appraisal + clean history — servicers rarely volunteer it; consider a one-time lump when bonuses land if it crosses the threshold (crossing 6 months early saves ~$1,200); and recheck after renovations only with permits documented, since unpermitted work appraises at zero. Never refinance solely to drop PMI unless the rate math also works — break-even decides per refinance guide. Watch the schedule cross the line in amortization guide tables.
Down-payment strategy (no judgment, just math)
- Waiting to save 20% while renting: compare rent paid during saving years against PMI + higher interest of buying now — in fast-appreciating markets, buying at 10% wins; in flat markets, waiting wins. Run both in rent-vs-buy guide.
- Gift funds: most programs allow documented family gifts — paper-trail them early; last-minute large deposits trigger underwriting delays.
- Assistance programs: first-time-buyer grants and 3%-down conventional options exist — cheaper than draining emergency savings to zero for 20%.
- Never zero the emergency fund: a 20% down payment that leaves 2 weeks' reserves converts one roof leak into credit-card debt. Keep 3–6 months liquid, then maximize down payment.
For informational purposes only — not financial advice. Estimates may vary; consult a qualified financial advisor for decisions. See /terms.