One of the most persistent myths in home buying is that you need 20% down to buy a house. For most first-time buyers, that simply isn't true — and waiting years to save 20% can cost more in rising home prices than it saves in mortgage insurance.
Where the 20% Number Actually Comes From
Putting 20% down avoids private mortgage insurance (PMI) on a conventional loan and typically qualifies you for the most favorable pricing. But 20% is a threshold for avoiding PMI — not a requirement to get a loan at all. Plenty of well-qualified buyers put down far less and still get competitive terms.
Low Down Payment Programs
- Conventional 97% LTV programs allow as little as 3% down for qualifying first-time buyers, with PMI added to the monthly payment until enough equity is built (typically 20-22%).
- FHA loans require just 3.5% down for borrowers with a credit score of 580 or higher (10% down for scores between 500-579). FHA loans carry mortgage insurance premiums (MIP) that, unlike conventional PMI, often last for the life of the loan unless you put down 10% or more.
- VA loans, available to eligible veterans, active-duty service members, and some surviving spouses, can allow 0% down with no monthly mortgage insurance, though a one-time VA funding fee typically applies.
- USDA loans also allow 0% down for eligible buyers purchasing in designated rural and suburban areas, subject to income limits.
Down Payment Assistance
Many states and local housing authorities offer down payment assistance programs — grants, forgivable second loans, or low-interest loans that help cover the down payment and sometimes closing costs. Availability and terms vary significantly by state and program, and they often come with income limits, purchase price caps, or a requirement to complete a homebuyer education course. If you're buying in Florida, Georgia, or South Carolina, ask your loan officer what's currently available in your specific county — these programs change frequently and aren't always well advertised.
Gift Funds
Most loan programs allow some or all of a down payment to come from a gift from a family member (and in some cases a close friend or employer), provided it's documented properly with a gift letter and, often, a paper trail showing the funds moved from the giver's account. Undocumented large deposits are one of the most common things that slow down underwriting, so if you're receiving gift funds, loop your loan officer in before the money moves.
The Case for Putting Down More Than the Minimum
A larger down payment reduces your loan amount, which lowers your monthly payment and total interest paid over the life of the loan. It can also help you avoid or reduce mortgage insurance, and it gives you more equity cushion from day one. The tradeoff is liquidity — money in your home isn't available for emergencies or other investments. There's no universally right answer; it depends on your cash reserves, other financial goals, and how comfortable you are with a higher monthly payment versus a larger reserve balance.
The Case for Putting Down Less
Especially in a market where home prices are rising, the "cost" of waiting to save a bigger down payment can outweigh the mortgage insurance you'd pay by buying sooner with less down. Keeping some savings in reserve for moving costs, repairs, and emergencies also matters — being "house poor" with no cushion is a real risk worth avoiding.
The right down payment amount depends on your specific finances, the loan programs you qualify for, and your comfort level — it's worth running the actual numbers side by side rather than assuming any one percentage is the right target.