If you’ve been putting off buying a home because you think you need 20% down, you’re not alone—and you might be waiting for a milestone you don’t actually need. The 20% down payment rule is one of the most common myths in real estate, and it’s keeping many first-time buyers on the sidelines longer than necessary.
Here’s what you actually need to know.
The 20% Down Payment Myth—Busted. The idea of a 20% down payment originated from a single benefit: avoiding private mortgage insurance (PMI). That’s a real cost worth understanding, but it is not a requirement for homeownership.
Consider a $400,000 home:
•20% down = $80,000 out of pocket
•5% down = $20,000
•3% down = $12,000
•0% down = possible for eligible buyers
According to the National Association of Realtors, the median down payment for first-time homebuyers consistently remains well below 20%. Most buyers use one of the loan types outlined below.
Down Payment Requirements by Loan Type:
Conventional Loan: As Low as 3% DownConventional loans are the most common mortgage type. Qualified first-time buyers can put as little as 3% down, though 5% is more typical. PMI applies when your down payment is under 20%, but it can be removed once you reach sufficient equity.
•$400,000 home at 3% down = $12,000
•$400,000 home at 5% down = $20,000
FHA Loan: 3.5% Down with Flexible Credit Requirements. Backed by the Federal Housing Administration, FHA loans require just 3.5% down and are especially popular among first-time buyers because they accommodate lower credit scores and higher debt-to-income ratios.
•$400,000 home at 3.5% down = $14,000
•More lenient credit score minimums than conventional loans
•Mortgage insurance is required for the life of the loan (in most cases)
VA Loan: 0% Down for Veterans and Active Military. For eligible veterans, active-duty service members, and surviving spouses, the VA loan offers one of the most powerful benefits in real estate: zero down payment, no PMI, and competitive interest rates.
•$400,000 home: $0 down required
•No private mortgage insurance
•Must meet VA service eligibility requirements
Down Payment Assistance Programs: Help You May Not Know AboutOne of the most underutilized resources for first-time buyers is down payment assistance (DPA). These programs—offered at the federal, state, and local level—can significantly reduce what you need upfront.
•Grants that don’t need to be repaid
•Forgivable loans (forgiven after a set period of residency)
•Low-interest second mortgages
•Income and purchase price limits vary by program and location
Many buyers are surprised to find they qualify. It’s always worth checking what’s available in your area before assuming you have to go it alone.
Other Ways First-Time Buyers Cover Their Down Payment: Down payment funds don’t have to come entirely from a savings account. Common sources include:
•Gift funds from a family member (allowed under most loan programs with proper documentation)
•Tax refunds or year-end bonuses
•Proceeds from selling an asset
•Dedicated savings over time with a clear goal in mind
Don’t Forget Closing Costs. In addition to your down payment, plan for closing costs—typically 2–4% of the purchase price. On a $400,000 home, that’s another $8,000–$16,000.
The good news: there are strategies to reduce this number, including:
•Seller concessions (asking the seller to cover a portion of costs)
•Lender credits in exchange for a slightly higher interest rate
•Negotiating favorable terms as part of your offer
So How Much Should You Put Down?
The right down payment isn’t the lowest one available—it’s the one that fits your financial picture. The goal is to find a balance between:
•A monthly payment you can comfortably afford
•Preserving enough cash reserves for emergencies and move-in costs
•Your long-term financial and homeownership goals
Sometimes putting less down makes sense. Sometimes putting more down does. It depends on your situation—and that’s exactly what a good strategy session will help you figure out.
Your Next Step Toward Homeownership. Most people don’t need 20% down. They need clarity, a plan, and the right guidance.
In a Your First Home Strategy Session, we’ll walk through your specific options, map out a realistic timeline, and build a personalized homeownership roadmap together.
If you’re wondering whether homeownership is possible for you right now, the best first step is simply a conversation. Reach out to schedule your strategy session today.
Frequently Asked Questions:
Can I buy a home with no down payment?
Yes, in certain cases. VA loans allow eligible veterans and military members to purchase with 0% down. Some USDA loans also offer 100% financing in eligible rural areas.
Is PMI permanent?
Not on conventional loans. PMI can typically be removed once you reach 20% equity in your home, either through payments or appreciation. On FHA loans, mortgage insurance may last the life of the loan, depending on your down payment amount.
How do I find down payment assistance in my area?
A knowledgeable local real estate agent or mortgage lender can help you identify programs specific to your state, county, or city. Many programs go unused simply because buyers don’t know they exist.