The down payment that works depends on your loan type and what you can afford to put down
There is no single "good" down payment for a $400,000 house—it depends on your loan type, your financial situation, and what monthly payment you can handle. A conventional loan typically requires 3% to 20% down. A Federal Housing Administration (FHA) loan allows as little as 3.5% down. A Veterans Affairs (VA) loan or USDA loan may require no down payment at all if you meet the program requirements.
The larger your down payment, the lower your monthly mortgage payment and the less interest you pay over the life of the loan. But a larger down payment also means less money in your savings account for emergencies, home repairs, or other expenses. The "good" down payment is the one that leaves you financially stable after closing.
Key Takeaways
- A 20% down payment ($80,000) on a $400,000 house eliminates private mortgage insurance (PMI), but 3% to 10% down is common and still results in a manageable monthly payment.
- FHA loans let you put down as little as 3.5% ($14,000), but you will pay mortgage insurance for the life of the loan unless you refinance later.
- VA and USDA loans may require zero down payment if you meet military service or rural property requirements.
- Your monthly payment, property taxes, homeowners insurance, and HOA fees (if any) must fit within your budget after accounting for other debts.
- Closing costs typically run 2% to 5% of the purchase price and are separate from your down payment—plan to have cash on hand for both.
How down payment size changes your monthly payment and total cost
On a $400,000 house with a 30-year fixed mortgage at 7% interest (rates vary by market and your credit score), here is how down payment size affects what you owe each month:
| Down Payment % | Down Payment Amount | Loan Amount | Monthly Payment (Principal + Interest) | PMI (if applicable) |
|---|---|---|---|---|
| 3% | $12,000 | $388,000 | $2,583 | ~$200–$250 |
| 5% | $20,000 | $380,000 | $2,532 | ~$150–$200 |
| 10% | $40,000 | $360,000 | $2,398 | ~$100–$150 |
| 20% | $80,000 | $320,000 | $2,131 | None |
These numbers show principal and interest only. Your actual monthly payment also includes property taxes, homeowners insurance, and possibly HOA fees—which can add $400 to $800 or more per month depending on your location and the property.
The difference between 3% and 20% down is roughly $450 per month in mortgage payment alone, plus the cost of PMI. Over 30 years, that adds up. But putting down 20% means having $80,000 in cash available right now, which many buyers do not have or cannot afford to spend without emptying their savings.
When you pay private mortgage insurance and how to avoid it
Private mortgage insurance (PMI) is required on conventional loans when you put down less than 20%. It protects the lender if you stop paying, but you pay the premium—typically 0.5% to 1.5% of your loan amount per year, divided into your monthly payment.
On a $388,000 loan (3% down on $400,000), PMI might run $150 to $250 per month. On a $360,000 loan (10% down), it might be $100 to $150 per month. The exact amount depends on your credit score, the size of your down payment, and the lender's pricing.
PMI is not permanent. Once your loan balance drops to 80% of the home's original purchase price—through a combination of payments and home appreciation—you can request removal. This usually takes 8 to 12 years with a standard 30-year mortgage, though it happens faster if your home value rises or you make extra payments toward principal.
FHA loans work differently. You pay an upfront mortgage insurance premium (1.75% of the loan amount, rolled into your loan) and an annual mortgage insurance premium for the life of the loan if you put down less than 10%. This makes FHA loans more expensive over time, even though they allow smaller down payments.
Down payment requirements by loan type
Conventional loans typically require 3% to 20% down, depending on the lender and your credit score. Lenders offering 3% down loans usually require a credit score of 620 or higher and may charge higher interest rates. Most buyers with good credit (680+) can find 5% to 10% down options.
FHA loans require a minimum 3.5% down payment and are designed for first-time buyers or those with lower credit scores (as low as 580). The tradeoff is that you pay mortgage insurance for the entire loan term unless you refinance to a conventional loan later.
VA loans are available to military members, veterans, and surviving spouses. They typically require zero down payment and no PMI. Interest rates are often lower than conventional loans. You do pay a VA funding fee (1% to 3.3% of the loan amount), which can be rolled into the loan.
USDA loans are for rural properties and are available to borrowers with moderate income who meet location and property requirements. They also typically require zero down payment and no PMI, though you pay a may provide fee (1% to 2% of the loan amount).
Closing costs are separate from your down payment
Your down payment is only part of the cash you need at closing. Closing costs—which include appraisal, title search, title insurance, attorney fees, lender fees, and property taxes—typically run 2% to 5% of the purchase price. On a $400,000 house, that is $8,000 to $20,000.
Some of these costs can be negotiated or rolled into your loan, but most buyers need to bring cash to closing. Plan to have your down payment plus closing costs available before you make an offer. If you are putting down 5% ($20,000) and closing costs are 3% ($12,000), you need $32,000 in total cash.
Some lenders offer "no closing cost" loans, but this usually means the costs are rolled into your loan amount or paid through a higher interest rate. You still pay them—just over time instead of upfront.
How much down payment fits your budget
The right down payment is one that leaves you with an affordable monthly payment and an emergency fund. Most lenders use a debt-to-income ratio: your total monthly debt payments (including the new mortgage) should not exceed 43% to 50% of your gross monthly income.
If you earn $6,000 per month gross, your total debt payments should stay under $2,580 to $3,000. If you already have a car payment ($400), student loans ($300), and credit card payments ($200), you have $900 in existing debt. That leaves roughly $1,680 to $2,100 for your mortgage payment, property taxes, insurance, and HOA fees combined.
A larger down payment lowers your monthly mortgage payment, which makes it easier to stay within this ratio. But if putting down 20% leaves you with less than $10,000 in savings, a smaller down payment (5% to 10%) may be smarter. You need reserves for home repairs, property taxes, insurance increases, and job loss.
Use a mortgage calculator to run different down payment scenarios and see what monthly payment you can actually afford. Then work backward to find the down payment that gets you there.
Frequently Asked Questions
Is 10% down payment good for a $400,000 house?
Yes, 10% down ($40,000) is a solid middle ground. Your monthly payment stays reasonable, you avoid the steepest PMI costs, and you keep $40,000 in savings for emergencies and repairs. It is more common than 20% down and more affordable than 3% to 5% down.
Should I put down 20% to avoid PMI?
Only if you can afford it without draining your savings. PMI on a smaller down payment costs $100 to $250 per month, but having an emergency fund is worth more than saving that amount. If 20% down leaves you with less than $15,000 in reserves, a smaller down payment is the safer choice.
Can I use a gift for my down payment?
Yes, most lenders allow down payment gifts from family members. You will need a gift letter stating the money is a gift, not a loan, and the donor's bank statement showing the funds were transferred. The gift can cover your entire down payment or part of it.
What if I do not have enough for a down payment right now?
FHA loans allow 3.5% down, which is the lowest conventional option. VA and USDA loans require zero down if you meet the requirements. You can also save for 6 to 12 months to build a larger down payment, which will lower your monthly payment and reduce PMI costs.
Does a larger down payment get me a better interest rate?
Sometimes, but not always. Interest rates are set by the market, your credit score, and the loan type—not primarily by down payment size. A 20% down payment may may have access to you for a slightly lower rate (0.1% to 0.25% lower), but the savings are usually small compared to the benefit of keeping cash in savings.