The 20% Myth — and Why It Persists
Ask most people how much you need to put down on a home and they'll say 20%. That figure has lodged itself in American homebuying culture for decades, but it reflects a guideline — not a legal requirement. The 20% threshold is significant for one specific reason: it's the point at which most conventional lenders no longer require private mortgage insurance (PMI), an extra monthly cost that protects the lender (not you) if you stop making payments.
The myth has real consequences. Research consistently shows that the belief you need 20% down causes many would-be buyers to delay purchasing, sometimes for years, while saving toward a target they don't actually need to hit. For a $350,000 home, 20% means $70,000 in cash at closing — a barrier that is simply out of reach for many households, especially first-time buyers. See our breakdown of common first-time buyer myths for more misconceptions worth challenging.
3%
Minimum down payment on qualifying conventional loans
Fannie Mae and Freddie Mac both offer programs allowing first-time buyers to put as little as 3% down on a conforming conventional mortgage.
~13%
Median down payment for first-time buyers
According to the National Association of Realtors' Profile of Home Buyers and Sellers, first-time buyers typically put down significantly less than 20%.
0%
Down payment required on VA and USDA loans
Eligible veterans and rural-area buyers may qualify for government-backed mortgages that require no down payment at closing.
Minimum Down Payments by Loan Type
Your actual minimum down payment depends on what kind of mortgage you qualify for. Here's a clear-eyed look at the main options:
- Conventional loans: The minimum is typically 3% for first-time buyers through programs like Fannie Mae's HomeReady or Freddie Mac's Home Possible. Standard conventional loans generally require 5% to 10% for repeat buyers.
- FHA loans: Backed by the Federal Housing Administration, these require 3.5% down for borrowers with credit scores of 580 or higher — or 10% for scores between 500–579. Note that FHA loans carry mortgage insurance premiums (MIP) for the life of the loan in most cases, not just until you hit 20% equity.
- VA loans: Available to eligible veterans, active-duty service members, and some surviving spouses, VA loans typically require no down payment and no PMI, though a funding fee usually applies.
- USDA loans: Designed for rural and some suburban areas, USDA loans also offer zero-down-payment options for income-qualified borrowers.
Understanding these distinctions matters because the loan type shapes your total cost — not just the down payment amount. For plain-language explanations of terms you'll encounter across loan documents, our homebuying vocabulary guide is worth bookmarking.
What Different Down Payment Levels Actually Cost You
The size of your down payment ripples through nearly every aspect of your mortgage. To understand why, consider three scenarios on a $350,000 home at a hypothetical fixed interest rate:
| Down Payment | Loan Amount | PMI Likely? | Monthly Impact |
|---|---|---|---|
| 3% ($10,500) | $339,500 | Yes | Higher principal + PMI |
| 10% ($35,000) | $315,000 | Yes | Lower principal, PMI still applies |
| 20% ($70,000) | $280,000 | No | Lower principal, no PMI |
PMI typically costs between 0.5% and 1.5% of the loan amount annually, which on a $300,000 loan translates to roughly $125–$375 per month added to your payment. That's a meaningful sum — but it may still be worth buying earlier rather than saving for years, depending on your market and financial situation. This is exactly the kind of trade-off worth discussing with a licensed financial adviser or HUD-approved housing counselor.
Request PMI Cancellation When You're Eligible
Once you believe your loan balance has fallen to 80% of the home's original purchase price, you can submit a written request to your servicer to cancel PMI. Under the Homeowners Protection Act, lenders must automatically cancel PMI when the balance reaches 78% of the original value — but proactively requesting it at 80% can save you several months of premiums.
Don't forget that your down payment isn't the only cash you need at closing. Closing costs generally add another 2–5% of the purchase price. Our guide to closing costs explains what those fees cover and which may be negotiable.
Down Payment Assistance: A Widely Underused Resource
Thousands of down payment assistance (DPA) programs operate across the country at the state, county, and city level — and surveys suggest that a large share of eligible buyers don't know they exist. These programs offer grants, forgivable loans, or low-interest second loans to help cover the down payment and sometimes closing costs.
Eligibility typically depends on factors like household income, the purchase price of the home, your status as a first-time buyer, and the specific loan type you're using. Some programs are reserved for certain professions — teachers, first responders, healthcare workers — while others are income-based without occupational restrictions.
The best starting point is your state's housing finance agency (HFA), which administers or catalogs most assistance programs available in your state. HUD-approved housing counselors can also help you identify programs you may qualify for at no cost to you.
Frequently Asked Questions
No. The 20% figure is a common misconception. Conventional loans can require as little as 3% down, FHA loans require 3.5% for qualified borrowers, and VA and USDA loans may require no down payment at all. The 20% threshold matters mainly for avoiding PMI on conventional loans.
Private mortgage insurance protects the lender if you default, and it's typically required when your down payment is below 20% on a conventional loan. Once your equity reaches 20% of the home's original value — through payments or appreciation — you can request PMI cancellation. Lenders are legally required to cancel it automatically when your balance reaches 78% of the original purchase price.
FHA loans require a minimum 3.5% down payment for borrowers with a credit score of 580 or higher. Borrowers with scores between 500 and 579 are generally required to put at least 10% down. FHA loans also require mortgage insurance premiums (MIP) regardless of down payment size.
Many programs cover a portion of the required down payment, while some provide enough to cover it entirely depending on income limits, home price caps, and the loan type involved. Eligibility and program specifics vary significantly by state and locality, so checking with your state's housing finance agency is the best first step.
Not necessarily. Putting more down lowers your loan balance and monthly payment, but it also reduces your liquid savings. You'll want to keep emergency reserves and account for closing costs separately. A financial adviser can help you weigh the trade-offs based on your overall picture.
A larger down payment generally improves your loan-to-value ratio, which can qualify you for a lower interest rate with many lenders. However, your credit score, debt-to-income ratio, and loan type also heavily influence the rate you receive.
The content on this site is provided for informational purposes only and should not be considered a substitute for professional advice. While we strive to provide accurate and up-to-date information, we make no guarantees regarding its completeness or accuracy. Always consult a qualified professional for advice specific to your circumstances before making any decisions