A Bigger Down Payment, or More Breathing Room?

If putting 20% down would leave you cash poor on the day of closing, I'd want to see a smaller down payment beside it before making a recommendation.

A smaller mortgage can save you money. But you still have to live in the house, and a repair won't wait for you to rebuild the bank account.

I'd compare the monthly cost of keeping that cash with what the cash needs to do for you.

What would another $35,000 down change?

Imagine a $350,000 purchase. You have $90,000 available, and we assume $10,000 in closing costs and prepaid expenses under either option.

With 20% down, you'd put $70,000 toward the price and borrow $280,000. With 10% down, you'd put $35,000 toward the price and borrow $315,000.

Here's the cash comparison:

The smaller down payment keeps $35,000 more available after these modeled purchase expenses. Moving costs and anything you spend afterward would still come out of the remaining cash.

Those closing costs are an assumption, not an estimate for your purchase. Actual costs can change with the loan and down payment.

Keeping the cash has a monthly cost

For illustration, give both mortgages a 30-year fixed term at 6.5% interest. Holding the rate equal isolates the effect of borrowing more. It doesn't mean a lender would offer the same rate under both options.

At 20% down, monthly principal and interest would be about $1,769.79. At 10% down, it would be about $1,991.01.

For the smaller-down-payment option, add an entirely hypothetical $100 monthly private mortgage insurance premium. That brings principal, interest and assumed PMI to $2,091.01, about $321 more a month than the 20%-down option.

This is an educational example, not a current rate quote or loan offer. The 6.5% figure is an interest rate, not an APR. These payments exclude property taxes, homeowners insurance and any HOA charges. The PMI amount is invented, not a premium quote. Borrower qualification and applicable property and appraisal requirements still apply.

The CFPB explains conventional-loan PMI, including why a down payment below 20% can add that cost. The no-PMI conventional example assumes the appraised value supports the purchase price, keeping that loan at no more than 80% of the property's value. Other loan programs have different rules.

Is keeping $35,000 worth about $321 a month to you?

I'd first ask whether you can comfortably afford the larger full payment.

If you can, and the house needs repairs that would use most of the $10,000 left under the larger down payment, I'd give serious consideration to keeping more cash. I'd want you to have emergency reserves after paying for the work, too.

If you already have enough money set aside for those expenses, the larger down payment becomes more appealing. You'd owe less from the start and avoid the assumed PMI cost in this comparison.

The cash you keep isn't a saving on the house price. You're choosing to borrow another $35,000, with interest on that additional debt. I'd want that borrowing cost explained before you decide that more cash in the bank is automatically the better outcome.

Set the cash cushion before choosing the down payment

Write down what you'll need for the move and the work the inspection identifies. Then decide what should remain available for an emergency. Keep that money separate when you calculate what you can put down.

The CFPB's down-payment planning guide recommends allowing for closing expenses and a cash cushion alongside other savings goals. Confirm any reserve requirements for your particular loan. Fannie Mae's rules show how requirements can depend on the transaction. Those rules aren't universal across loan programs. Meeting a lender's requirements doesn't decide what cushion will make you comfortable.

You don't have to choose only between these two percentages. Ask about a middle option and get its actual rate, mortgage insurance and money-to-close figures.

Bring your down-payment options to me. I'd compare the full payment and the cash left afterward before recommending how much of your savings to put into the house.