The Truth About Down Payments

If you’re thinking about buying a home, you’ve probably heard the common advice: “You need 20% down.” While that figure still gets tossed around often, it’s not a requirement—and believing it could delay your homeownership goals by years.

Let’s break down what’s true (and what’s not) when it comes to down payments in today’s market.

Myth: You Must Put 20% Down

The Truth:You can put 20% down—but you don’t have to. In fact, many buyers—especially first-time homeowners—put down far less.

Typical minimums:

• Conventional loan: As little as 3–5% down

• FHA loan: 3.5% down

• VA loan (for veterans): 0% down

• USDA loan (rural areas): 0% down

The 20% benchmark is usually tied to avoiding private mortgage insurance (PMI), but it’s not a requirement to qualify for a loan.

What Happens If You Put Less Than 20% Down?

When you put down less than 20%, most lenders require PMI (Private Mortgage Insurance) on conventional loans or MIP (Mortgage Insurance Premium) on FHA loans. This protects the lender in case you default—but it’s not permanent.

• PMI can often be removed once you reach 20% equity in the home

• MIP (on FHA loans) may remain for the life of the loan, depending on your loan terms

Tip: Ask your lender how long you'll be paying mortgage insurance and what your options are for eliminating it later.

Benefits of a Lower Down Payment

• Buy sooner: You don’t have to wait years to save a full 20%

• Keep cash on hand: You’ll have money for closing costs, emergency savings, or home improvements

• Take advantage of market timing: If interest rates or prices are expected to rise, buying sooner can save you more in the long run

When a Larger Down Payment Might Be Smart

• You want to avoid PMI

• You’re trying to reduce your monthly payment

• You want to strengthen your offer in a competitive market

• You’re planning to buy a second home or investment property

Larger down payments reduce your loan amount and may help you qualify for better interest rates. But it’s all about balance—don’t drain your savings just to hit 20%.

Other Down Payment Resources

• Down payment assistance programs: Many state and local programs help first-time buyers cover part of their down payment or closing costs.

• Gift funds: Lenders often allow family members to gift part or all of the down payment (rules vary by loan type).

• Grants and forgivable loans: Some programs provide non-repayable funds to qualifying buyers—especially in certain professions or underserved areas.

Final Thoughts

The truth about down payments is simple: you have options. You don’t need 20% to buy a home, and putting less down isn’t a mistake if it aligns with your financial goals. The key is to work with a lender and agent who can help you understand your loan choices, monthly payments, and long-term impact.

Thinking about buying but unsure how much you need? I’d be happy to connect you with a trusted lender and help you map out a down payment strategy that fits your timeline and budget.