I input my numbers in the calculator and it states, I should purchase the house for 127k.

I planned on putting 20% down and my loan would have been about 127k anyway. 

Should I factor in the down payment?

HMMMMM,.... No.  that is the max allowable PRICE to clear that $...  some people ignore the cash they have in the property... but in this case you are now planning to pay 127 PLUS 20% more on the property....