The math: multiply the house price by 0.03
A 3 percent down payment means you pay 3 percent of the purchase price upfront and borrow the rest. On a $300,000 house, that's $9,000. On a $400,000 house, it's $12,000. On a $200,000 house, it's $6,000. The calculation is straightforward: take the price, multiply by 0.03, and that's your down payment amount.
The reason this matters is that the lower your down payment, the more you borrow and the more interest you pay over the life of the loan. A 3 percent down payment is the minimum most conventional lenders allow, though some programs go lower.
Key Takeaways
- A 3 percent down payment on a $300,000 house is $9,000; on $400,000 it is $12,000; on $500,000 it is $15,000.
- With a 3 percent down payment, you will owe mortgage insurance (PMI) because you are borrowing more than 80 percent of the home's value.
- The total cost of PMI varies by lender and loan type but typically adds $100 to $300 per month to your mortgage payment.
- FHA loans allow down payments as low as 3.5 percent and may have different insurance costs than conventional loans with 3 percent down.
- Your actual monthly payment depends on the interest rate, loan term, property taxes, homeowners insurance, and PMI — not just the down payment amount.
Why mortgage insurance gets added to your payment
When you put down less than 20 percent, lenders require private mortgage insurance (PMI) on conventional loans. PMI protects the lender if you stop paying, but you pay the premium. With a 3 percent down payment, you are borrowing 97 percent of the home's value, so PMI is mandatory.
PMI costs vary by lender, credit score, loan amount, and the specific property. A rough range is 0.5 to 1.5 percent of the loan amount per year, split into monthly payments. On a $291,000 loan (3 percent down on a $300,000 house), that could be $145 to $365 per month added to your mortgage payment. Ask your lender for a specific PMI quote before you commit.
PMI stays on your loan until you reach 20 percent equity in the home, either through payments or home value increase. Once you hit that threshold, you can request removal. Some loans allow automatic removal at 22 percent equity.
Down payment amounts at common price points
| House Price | 3% Down Payment | Amount Borrowed |
|---|---|---|
| $200,000 | $6,000 | $194,000 |
| $250,000 | $7,500 | $242,500 |
| $300,000 | $9,000 | $291,000 |
| $350,000 | $10,500 | $339,500 |
| $400,000 | $12,000 | $388,000 |
| $500,000 | $15,000 | $485,000 |
Closing costs are separate from your down payment
Your down payment is only part of the cash you need at closing. You also pay closing costs — typically 2 to 5 percent of the loan amount — for appraisal, title search, title insurance, attorney fees, recording fees, and lender fees. On a $291,000 loan, closing costs could run $5,800 to $14,550.
Some lenders allow you to roll closing costs into the loan, but that increases your total debt and the interest you pay. Others let you negotiate with the seller to cover part of closing costs. Ask your lender and real estate agent what is typical in your area and what options exist for your situation.
FHA loans as an alternative to 3 percent conventional
FHA loans, backed by the Federal Housing Administration, allow down payments as low as 3.5 percent. The math is similar: 3.5 percent of a $300,000 house is $10,500. However, FHA loans require mortgage insurance for the life of the loan if your down payment is less than 10 percent, whereas conventional PMI can be removed once you reach 20 percent equity.
FHA mortgage insurance has two parts: an upfront premium (usually 1.75 percent of the loan amount, often rolled into the loan) and an annual premium (0.55 to 0.8 percent of the loan amount per year, paid monthly). On a $291,000 FHA loan, the upfront premium would be about $5,093, and the annual premium would add roughly $160 to $240 per month.
FHA loans are useful if your credit score is lower or your debt-to-income ratio is tight, because FHA has more flexible underwriting. Compare the total cost of FHA insurance against conventional PMI before deciding.
What affects your total monthly payment beyond the down payment
Your down payment size is just one piece of your monthly housing cost. The interest rate, loan term (15 or 30 years), property taxes, homeowners insurance, and PMI all add up. A lower down payment means a higher loan amount, which means more interest paid over time — even if your monthly payment looks manageable at first.
Use a mortgage calculator to see the full picture. Input the house price, your down payment amount, the interest rate your lender quoted, your property tax rate (your real estate agent or county assessor can provide this), and an estimate for homeowners insurance. The calculator will show your principal and interest payment, plus estimates for taxes, insurance, and PMI. That total is what you actually pay each month.
Frequently Asked Questions
Can I put down less than 3 percent on a conventional loan?
No. Conventional loans require a minimum 3 percent down payment. If you have less saved, look into FHA loans (3.5 percent minimum), state or local first-time buyer programs, or down payment assistance through nonprofits or employers. Some programs cover part or all of the down payment.
Does a 3 percent down payment hurt my chances of being approved?
It does not disqualify you, but lenders look at your credit score, income, debt-to-income ratio, and employment history. A 3 percent down payment signals you have less financial cushion, so lenders may require a higher credit score or lower debt ratio to offset the risk. Ask your lender what their specific requirements are.
When can I stop paying PMI?
On a conventional loan, you can request PMI removal once you reach 20 percent equity in the home. This happens through a combination of payments and home value increase. Some lenders remove it automatically at 22 percent equity. On an FHA loan with less than 10 percent down, PMI stays for the life of the loan.
Is a 3 percent down payment a good idea?
It depends on your situation. A 3 percent down payment lets you buy sooner if you do not have 20 percent saved, but you pay PMI and borrow more. If you can save to 5 or 10 percent, your monthly payment drops because PMI decreases and your loan is smaller. Run the numbers for your specific house price and interest rate to decide.
What if I want to put down more than 3 percent later?
You can make extra payments toward principal at any time without penalty on most loans. This reduces your loan balance, builds equity faster, and can help you reach 20 percent equity sooner so PMI can be removed. Check your loan documents to confirm there is no prepayment penalty.