How this instrument works
A deposit is not a separate cost bolted onto a house. It is a slice of the price you cover yourself, and whatever slice you leave uncovered becomes the mortgage principal. That is why this sheet returns two outputs rather than one: put 20 into Down payment, % against a 350,000 contract and the pair reads 70,000 and 280,000 — a partition, not two independent sums, so they always reconcile to the figure you typed.
The percentage runs against the purchase price, never against the mortgage, and that single detail is where most of the arithmetic goes wrong. Lenders read the mirror image of the same fraction and call it loan-to-value, which is just 100 minus what you enter. Cover a fifth of the price and underwriting sees 80 percent LTV — the ratio it actually prices, and the reason the number 20 turns up so often in conversation. No statute requires it.
What the two outputs deliberately exclude is everything else the closing table wants. Origination and title fees, recording charges, the first year of hazard insurance and an escrow cushion for property taxes are all separate line items, commonly a few percent of the loan on top. Earnest money is not an addition either — it was already part of the deposit, credited back on the settlement statement. Cash to close is a larger figure than anything shown here.
- Type the agreed figure into Purchase price, $ — the contract price, not the listing price and not the appraisal.
- Set Down payment, % to the share you intend to cover yourself; the field moves in half-point steps.
- Read Down payment for the cash the closing table expects from you.
- Read Amount to borrow for the principal a lender would finance, then carry that figure into a mortgage sheet to get a monthly payment.
Worked example — a fifth down on a $350,000 house
A contract lands at 350,000 and you plan to cover a fifth of it yourself. Purchase price, $ = 350000, Down payment, % = 20. Multiply first: 350000 × 20 ⁄ 100 = 70000, so Down payment reads $70,000. Subtract that from the price and Amount to borrow reads $280,000. Loan-to-value sits at 80 percent, and the two outputs add back to 350,000 exactly.
Now drop the percentage to 10. The deposit halves to $35,000 and Amount to borrow climbs to $315,000 — every dollar withheld at closing is a dollar financed, one for one. At 6.5 percent over 30 years those two principals cost $1,769.79 and $1,991.01 a month, so the 35,000 kept in your pocket surfaces as $221.22 extra every month, roughly $79,639 across the full term. Watching that trade move is what the percentage field is for.
Questions
Is this the same as the cash I need at closing?
No — it is usually the largest part of that total, not the total. Settlement adds origination, appraisal, title and recording charges, plus prepaid interest, a first insurance premium and an escrow reserve for property taxes; together those commonly run a few percent of the loan. Earnest money is not an addition, because it was always part of the deposit and shows up as a credit on the settlement statement. Check the Cash to Close box on a Loan Estimate rather than treating this figure as the whole budget.
Does the percentage apply to the price or to the loan?
To the price, always, and before anything is subtracted. Twenty percent of a $350,000 contract is $70,000, leaving $280,000 financed. Running that same 20 against the $280,000 instead returns $56,000, which is only 16 percent of the price — a $14,000 shortfall discovered at the worst possible moment. Lenders quote the share of price too, so the two descriptions match line for line.
Why does everyone talk about 20 percent?
Because that is the point where loan-to-value reaches 80, and 80 is the threshold at which conventional mortgage insurance stops being charged. LTV is only the complement of this field: 20 in means 80 percent financed, 10 in means 90. Federal law lets a borrower request cancellation once the scheduled balance falls to 80 percent of original value, and requires automatic termination at 78. Nothing sets a legal minimum, and programmes exist at 3.5 percent and at zero, each carrying its own insurance or guarantee fee instead.
What if the appraisal comes in below the contract price?
Your dollars stay where they are and the ratio moves against you, because underwriting uses the lesser of contract and appraised value. On a $350,000 contract appraised at $340,000, a $70,000 deposit still leaves $280,000 financed — but that is 82.4 percent of the appraised value, not 80. The gap gets closed with extra cash, a renegotiated price, or different loan terms. This sheet models none of that; it works purely from the number you typed as the price.
Can I work backwards from the cash I actually have?
Yes — divide, then multiply by 100. With $58,000 available against a $350,000 house, 58000 ⁄ 350000 × 100 = 16.57 percent. The percentage field steps in halves, so 16.5 produces a deposit of $57,750 and leaves $292,250 to finance. Nudging the field until Down payment matches your bank balance is usually quicker than doing the division, and it shows the borrowing line moving in step.
Why is there no monthly payment on this sheet?
Because a payment needs two things this instrument never asks for: an interest rate and a term. What lives here is a partition of the price — exact, and completely independent of rates. The same $70,000 and $280,000 appear whether money costs 3 percent or 8. Carry Amount to borrow into a mortgage sheet and the monthly figure follows; on the numbers above, $280,000 at 6.5 percent over 30 years works out at $1,769.79.
References
- Consumer Financial Protection Bureau — Owning a home
- Ask CFPB — plain answers on mortgages, insurance and closing
- Federal Reserve — Consumer's guide to settlement costs
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.