How Much to Put Down on a House: The Framework Most Buyers Get Wrong

Stop Optimizing for Total Interest

Most "how much to put down" articles center on total interest paid over 30 years. That is the wrong metric. A 30-year holding period assumption is unrealistic for most buyers (the median tenure is 10-13 years), and the total-interest number draws attention away from the metrics that actually determine whether the purchase is financially sound.

The right framework: cash to close, post-close liquidity, monthly payment burden, mortgage insurance thresholds, and loan-bucket boundaries. Those are the variables that determine whether you are financially comfortable after closing, not whether you minimized some abstract 30-year interest total.

The CFPB's Loan Estimate framework focuses on estimated total monthly payment, estimated cash to close, and mortgage insurance. That is a much better decision framework than "minimize lifetime interest."

The Decision Hierarchy

Before choosing a down payment percentage, answer these questions in order:

1. Can I cover cash to close and still have reserves? CFPB recommends subtracting closing costs (typically 2-5% of purchase price) from available cash, then keeping enough for unexpected expenses, maintenance, and at least three months of living expenses.
2. Do I need to reach 20% to avoid PMI? Conventional loans with less than 20% down typically require private mortgage insurance. PMI can be cancelled at 80% LTV and auto-terminates at 78%.
3. What loan bucket am I in? Mortgages fall into three categories based on loan amount. A conforming loan (up to $832,750 in 2026) is backed by Fannie Mae or Freddie Mac and typically gets the best rates. A high-balance loan ($832,751 to $1,249,125 in high-cost areas) still has government backing but carries slightly higher pricing. A jumbo loan (above these limits) is not government-backed, often requires higher down payments, stricter underwriting, and carries higher rates. Crossing these thresholds changes pricing, terms, and available products.
4. Does a larger down payment materially improve my monthly payment? Fannie Mae's LLPA matrix has pricing buckets at 60%, 70%, 75%, 80%, 85%, 90%, and 95% LTV. Moving between buckets can matter; moving within one usually does not.

Find Your Optimal Down Payment

Use the calculator below to see your cash to close, reserve runway, monthly payment (including PMI), and loan bucket at different down payment levels. Adjust the down payment slider and watch how the reserve warning and PMI status change.

Case Study: A Tech Couple in Seattle

Priya and Raj earn $350,000 combined (base salary $280K, RSU vesting ~$70K/yr). They have $250,000 in liquid savings and are looking at a $900,000 home. Closing costs at 3% are $27,000. Their monthly non-housing expenses are $6,000. How much should they put down?

The answer: 20% down. It eliminates PMI, puts the loan under the conforming limit ($720K vs. $832,750 threshold), and still leaves 7 months of reserves. The 10% scenario has great liquidity but adds $338/month in PMI and pushes the loan into high-balance territory. The 25% scenario literally runs out of cash. For an RSU-heavy household where income can drop if the stock falls or grants get cut, 7 months of reserves at 20% down is the pragmatic sweet spot.

The 20% Threshold: Important but Not Universal

20% down eliminates PMI on a conventional loan and often improves pricing. It is an excellent default if, and only if, it still leaves strong post-close liquidity. CFPB explicitly warns buyers not to put down so much that they lack emergency savings or cash for maintenance.

The median first-time buyer in NAR's 2025 profile put 10% down, not 20%. Fannie Mae supports 97% LTV conventional purchases for eligible fixed-rate loans. So 20% is an important threshold, but it is not a universal minimum.

Loan-Bucket Boundaries Matter More Than Round Numbers

The Fannie Mae LLPA matrix has separate pricing adjustments at 60%, 70%, 75%, 80%, 85%, 90%, and 95% LTV, plus additional surcharges for high-balance loans. Going from 10% to 15% down, or 15% to 20%, can move you between pricing tiers.

In HCOL markets, the most important boundary is often the conforming limit. The 2026 baseline is $832,750 with a high-cost ceiling of $1,249,125. A Seattle or Bay Area buyer who puts 20% down on a $1.2M house has a $960,000 loan, which is above the baseline conforming limit. Putting 25% down ($900,000 loan) or 30% ($840,000) could move the loan from jumbo to high-balance territory, changing pricing and terms.

For Tech Workers with RSUs

If a significant portion of your compensation is RSUs, the standard "how much can you afford" framework needs adjustment.

• Do not underwrite your housing to unvested RSUs. Fannie Mae's selling guide requires RSUs to have vested and been distributed without restrictions to count as qualifying income. Lenders typically want 12-24 months of income history. Future grants and refreshes are not guaranteed.
• Preserve more liquidity. If your employer stock falls, your job and your equity comp can both get hit simultaneously. FINRA classifies this as concentration risk. A larger post-close reserve buffer (6-12 months instead of 3-6) is warranted.
• Consider selling vested stock to fund the purchase. Fannie allows vested stocks as acceptable down payment sources. Selling some employer stock to diversify and fund the purchase can be more prudent than preserving the concentration just to keep cash.

For most RSU-heavy buyers, the practical answer is: 10-20% down on a house that is conservative relative to base salary, or 20%+ only if substantial diversified reserves remain afterward. The decision is driven by income volatility and concentration risk, not by minimizing lifetime interest.

See the Equity Compensation guide for RSU tax strategy.

FHA vs. Conventional: When Less Than 20% Down

Not all sub-20% loans are equal. CFPB notes that FHA can be attractive for buyers with lower credit scores or very small down payments, but for borrowers with stronger credit and 10-15% down, FHA is often more expensive than conventional. FHA mortgage insurance lasts 11 years if original LTV is 90% or less, and for the full mortgage term if LTV is above 90%. Conventional PMI can be cancelled at 80% LTV. For most high earners, conventional with PMI is the better choice over FHA.

Shop Lenders, Not Just Down Payments

CFPB found mortgage price dispersion of roughly 50 basis points APR across lenders. At current rates, 6.5% vs. 7.0% on a $300,000 30-year loan is about $100 per month. Shopping lenders can matter as much as, or more than, tweaking the down payment by a few percentage points once you are already in a decent loan bucket.

Frequently Asked Questions

Should I always put 20% down?

Not always. 20% eliminates PMI and often improves pricing, but only if it still leaves you with strong reserves (6+ months of expenses). If 20% would strip your liquidity, a smaller down payment with PMI can be the safer choice. The median first-time buyer puts 10% down.

Is total interest over 30 years a good metric?

It is a standardized disclosure, not a good decision variable. Most buyers do not hold for 30 years (median tenure is 10-13 years). Better metrics: cash to close, post-close reserves, monthly payment, PMI cost, and loan bucket.

What are conforming loan limits in 2026?

Baseline conforming: $832,750. High-cost ceiling: $1,249,125. Loans above these limits enter high-balance or jumbo territory with different pricing and terms.

Should I count RSU income when deciding how much house to buy?

Be cautious. Lenders require vested and distributed RSUs with 12-24 months of history. Unvested grants and future refreshes are not guaranteed income. Size your housing obligation to base salary, not total comp including optimistic RSU projections.

When does FHA make sense over conventional?

FHA is typically better for buyers with credit scores below 700 or very small down payments (3.5%). For buyers with good credit and 10%+ down, conventional with PMI is usually cheaper because conventional PMI can be cancelled while FHA MIP often lasts the life of the loan.

Key Takeaways

• Do not optimize for total interest paid. Optimize for cash to close, post-close liquidity, monthly payment, PMI, and loan-bucket thresholds.
• 20% down is a strong default, not a universal rule. It eliminates PMI and improves pricing, but only if it does not impair your reserves.
• Loan-bucket boundaries matter more than round numbers. Conforming ($832,750), high-balance ($1,249,125), and jumbo thresholds change pricing and terms. In HCOL markets, crossing these boundaries can matter more than the percentage down.
• RSU-heavy buyers need larger buffers. Concentration risk means your income and your employer stock can both decline simultaneously. Size housing to base salary, not total comp.
• Shop lenders. CFPB found 50bp APR dispersion. That is $100/month on a $300K loan. Lender shopping can matter as much as the down payment.

Related Guides

• Emergency Fund Sizing: The Job-Risk Matrix — how to size the post-close cash reserve that keeps you in the house during an income shock
• Rent vs. Buy — the full financial analysis of homeownership vs. renting
• Mortgage Points: When They’re Worth It — the other big cash-at-closing decision, with a break-even calculator
• The True Cost of Owning a Home — the three-view TCO framework with an interactive calculator
• Funding the Down Payment: Gift, Family Loan, or Sell the Stock? — once you know how much to put down, where the cash should come from
• Equity Compensation Tax Strategy — RSU taxation and how it interacts with major purchases
• Where to Park Your Cash — what to do with your savings while building a down payment
• FIRE Calculator — how housing costs affect your path to financial independence
• Are You About to Be House-Poor? — what happens to your monthly burden ratio when RSUs drop 40% and you’ve drained reserves into the down payment