How Much Down Payment Do You Actually Need?
The “20% down” rule scares a lot of people out of buying when they could already qualify. This guide breaks down the real minimum by loan type, explains PMI in plain English, and weighs the trade-offs of a smaller versus larger down payment. (US loan programs.)
You almost never need 20% down to buy a home. Conventional loans start around 3–5%, FHA at 3.5%, and VA and USDA loans can be 0%. Putting 20% down mainly matters because it lets you skip PMI (private mortgage insurance). Budget another 2–5% for closing costs.
The Short Answer
The minimum down payment depends on your loan, not on a magic 20% figure. Most buyers put down far less. The reason 20% gets so much attention is that it is the threshold where lenders stop charging private mortgage insurance (PMI) on conventional loans — not because you cannot buy with less.
The 20% Myth
Twenty percent is a useful target, not a requirement. It lowers your monthly payment, skips PMI, and shrinks total interest. But for many first-time buyers, waiting years to save 20% means paying rent the whole time and missing home-price appreciation. The right question is not “Can I hit 20%?” but “What can I put down comfortably while keeping an emergency fund?”
Minimum Down Payment by Loan Type
| Loan type | Typical minimum | Notes |
|---|---|---|
| Conventional | 3–5% | 3% for many first-time buyers; PMI until 20% equity |
| FHA | 3.5% | Flexible credit; mortgage insurance applies |
| VA | 0% | Eligible veterans and service members |
| USDA | 0% | Eligible rural and some suburban areas |
| Jumbo | 10–20% | Large loans above conforming limits |
What Is PMI?
On a conventional loan with less than 20% down, lenders add private mortgage insurance — typically about 0.3–1.5% of the loan per year — which protects the lender, not you. The good news: once you reach roughly 20% equity, you can request to cancel it, so PMI is often temporary rather than permanent.
A Worked Example
On a $400,000 home:
- 3.5% down (FHA): $14,000 up front — gets you in the door fastest.
- 20% down: $80,000 up front — no PMI and a smaller loan.
The gap is $66,000 in cash. For many buyers, putting down less and keeping savings is the more practical choice.
Don't Forget Closing Costs
On top of the down payment, plan for closing costs of about 2–5% of the price — lender fees, title, appraisal, and prepaid taxes and insurance. On a $400,000 home that is roughly $8,000–$20,000.
Smaller vs Larger Down Payment
The Most Common Mistake
The biggest mistake is draining your savings to hit 20%. Buying a home with zero cushion is risky — the first repair, job gap, or rate change can become a crisis. A smaller down payment that leaves three to six months of expenses in the bank is almost always safer than a bigger one that leaves you empty. Run both scenarios before you decide, and remember closing costs are separate from the down payment.
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- Mortgage vs Rent
Frequently Asked Questions
Do I really need 20% down to buy a house?
No. Conventional loans start around 3–5%, FHA at 3.5%, and VA and USDA loans can require nothing down. Twenty percent mainly matters because it lets you avoid PMI on a conventional loan.
What is the lowest down payment I can make?
Eligible buyers can use VA or USDA loans with 0% down. Otherwise the common floor is 3% on a conventional loan or 3.5% on an FHA loan.
What is PMI and how do I avoid it?
PMI is private mortgage insurance charged on conventional loans with less than 20% down. You avoid it by putting 20% down, and you can usually cancel it once you reach about 20% equity.
Is it better to put more money down?
More down means lower payments, no PMI, and less interest — but also less cash on hand. Less down lets you buy sooner and keep a cushion. The best choice depends on your savings, rate, and timeline.
How much should I save before buying a home?
Plan for your down payment plus 2–5% in closing costs, and keep three to six months of expenses as an emergency fund on top of that.