Down payments · Honest guide
How Much Down Payment Do You Need to Buy a House?
Not 20%. That number appears in no law, no lender’s rulebook, and no loan program in America. The median first-time buyer puts down 10% — and 3%, 3.5% and 0% loans are ordinary. But a bigger down payment really is cheaper. Here’s the actual math, so you can decide.
Last updated July 2026
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How much you actually need, the short version
The belief that you need 20% down may be the most expensive misconception in American personal finance. It keeps people renting for years while they chase a number that no lender, agency or law requires. Twenty percent isn’t a requirement. It’s just the threshold above which you skip mortgage insurance.
The real minimums: 3% on a conventional loan, 3.5% on FHA, and 0% on VA and USDA. And the data backs it up — per the National Association of REALTORS®, the median first-time buyer put down 10%, not 20%.
But this page won’t sell you a slogan. A bigger down payment genuinely is cheaper: lower payment, less total interest, no PMI, and often a better rate. So below you’ll find the real numbers side by side — 3%, 5%, 10% and 20% on today’s median home at today’s rate — plus the calculation almost nobody runs: what waiting four years to save 20% actually costs you.
The facts
Do you really need 20% down?
No. Here is every minimum, by loan type, for 2026.
There is no legal 20% requirement anywhere in US mortgage lending. Twenty percent is simply the point at which conventional lenders stop requiring private mortgage insurance. Below it, you still buy the house — you just pay PMI, which (as you’ll see) cancels by law.
The 2026 minimums, program by program
Conventional — as low as 3%. Four programs reach 97% LTV. HomeReady (Fannie) and Home Possible (Freddie) need income at or below 80% of area median income, and are open to repeat buyers too — with reduced PMI and waived rate adjustments. Conventional 97 and HomeOne have no income limits, but need at least one first-time buyer on the loan. If you’re neither, standard conventional is 5% down.
FHA — 3.5% or 10%. With a credit score of 580 or higher: 3.5% down. With a score of 500–579: you still qualify, but need 10% down. No income limits. For 2026 the loan limit runs from a floor of $541,287 to a high-cost ceiling of $1,249,125.
VA — 0% down, and no monthly mortgage insurance, for eligible veterans and service members. Instead there’s a one-time funding fee (2.15% first use), waived entirely for veterans with a disability rating of 10% or higher.
USDA — 0% down in eligible areas (roughly 97% of US land area, including many suburbs), with income capped at 115% of AMI. Costs a 1% upfront fee plus 0.35% annually.
Jumbo — usually 10–20%+. Anything above the 2026 conforming limit of $832,750 ($1,249,125 in high-cost counties). Second homes need 10%; investment properties 15% (25% for 2–4 units). And many banks offer physician loans at 0–10% with no PMI.
The data
What do real buyers actually put down?
The 20%-down buyer is mostly a myth built out of one specific group: older repeat buyers.
Each year NAR surveys tens of thousands of actual transactions. The 2025 edition — covering deals from July 2024 through June 2025 — tells a very different story from the one in your head.
The numbers that should change how you think
Median down payment: 10% for first-time buyers. (For repeat buyers it was 23% — the highest since 2003 — because they’re rolling equity from a house they already own. That’s where the 20% impression comes from.)
First-time buyers are just 21% of the market — a record low since tracking began in 1981, down from around 40% historically. The median first-time buyer is now 40 years old, also a record.
92% of first-time buyers financed their purchase. Their down payments came from savings (59%), financial assets like a 401(k) or stocks (26%), and a gift or loan from family (22%).
And all-cash buyers hit a record 26% of the market — which is the other reason the competition feels like everyone has money. They don’t. They have equity, or they’re older.
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A good loan officer will price 3%, 5%, 10% and 20% side by side for your credit and your market — and check whether you’re eligible for any of the 2,679 down payment assistance programs. Free, with no obligation.
The thing everyone fears
Is PMI really that bad?
It’s the fee you pay for buying sooner. And on a conventional loan, federal law makes it disappear.
Private mortgage insurance protects the lender, not you, when you put less than 20% down. You pay it — typically $30 to $70 a month for every $100,000 you borrow, or roughly 0.46% to 1.5% of the loan per year. What drives the cost is your credit score and your LTV: at 760+ you might pay 0.46%; at 620–639, close to 1.5%. On a $400,000 loan, that’s anywhere from about $150 to $500 a month.
✅ On a conventional loan, PMI cancels by law
This is the fact that reframes the whole decision. Under the Homeowners Protection Act of 1998, on a conventional loan for your primary residence:
You can request cancellation at 80% LTV of the home’s original value, with a good payment history and no junior liens. Your servicer must automatically terminate it at 78% LTV — no appraisal, no request needed, as long as you’re current. And there’s a final termination at the midpoint of the loan (the month after year 15 of a 30-year mortgage) even if you haven’t hit 78%.
You can also speed it up. Extra principal payments get you there faster. And Fannie Mae lets you cancel based on the home’s current appreciated value — at 75% LTV if the loan is 2–5 years old, or 80% if it’s more than 5 years old, with a lender-ordered appraisal. In a rising market, appreciation can kill your PMI years ahead of schedule.
⚠️ But FHA mortgage insurance is different — and usually permanent
FHA doesn’t charge PMI; it charges MIP, and the rules are far less friendly. You pay 1.75% upfront plus 0.55% annually for most loans. The catch: with less than 10% down, MIP lasts the entire life of the loan. With 10% or more down, it drops off after 11 years. There is no automatic 78% cancellation. (USDA’s 0.35% annual fee also lasts the life of the loan.)
This is exactly why the standard play exists: buy with FHA now if that’s what your credit allows, then refinance into a conventional loan once you have roughly 20% equity — and the mortgage insurance disappears entirely. Other routes around PMI: lender-paid MI (a permanently higher rate instead of a monthly premium), single-premium MI (paid upfront), or an 80/10/10 piggyback — an 80% first mortgage, a 10% second, and 10% down.
The real numbers
What does each down payment actually cost?
Same house, same rate, four scenarios. This is the whole decision in one place.
Let’s use real 2026 figures: the national median existing-home price of $440,600 (an all-time high, per NAR’s June 2026 data), at Freddie Mac’s 30-year rate of 6.49%. Principal and interest only, good credit. PMI is illustrative — get a real quote.
$440,000 home at 6.49%, four ways
3% down — $13,200 cash · $426,800 loan · ~$2,695/mo P&I + ~$205 PMI = ~$2,900/mo · ~$26,400 needed at closing · ~$543,000 total interest
5% down — $22,000 cash · $418,000 loan · ~$2,639/mo + ~$178 PMI = ~$2,817/mo · ~$35,200 at closing · ~$532,000 interest
10% down — $44,000 cash · $396,000 loan · ~$2,500/mo + ~$99 PMI = ~$2,599/mo · ~$57,200 at closing · ~$504,000 interest
20% down — $88,000 cash · $352,000 loan · ~$2,223/mo + no PMI = ~$2,223/mo · ~$101,200 at closing · ~$448,000 interest
(Cash at closing assumes roughly 3% in closing costs on top of the down payment.)
Reading the table honestly
Going from 5% to 20% costs you $66,000 more cash and saves ~$594 a month. But be careful how you read that: most of the lower payment isn’t a return — it’s simply that you’ve already handed over the money. The real benefit of that $66,000 is the interest you avoid (about $84,000 over 30 years) plus the PMI you skip.
Now the other side. That same $66,000, invested at a 7% long-run return, becomes roughly $130,000 in ten years and $255,000 in twenty. So the 5%-down buyer who invests the difference may well finish ahead — especially since their PMI falls off within a few years anyway. Neither answer is universally right. It depends on whether you have the cash to spare, and what else you’d do with it.
The hidden cost
What does waiting to save 20% cost you?
This is the calculation that changes minds — and the one no one runs.
🚨 The 20% target moves while you chase it
Say it takes you four years to save the extra $66,000 that takes you from 5% to 20% down. Here’s what happens in those four years.
At a modest 4% annual appreciation, your $440,000 house becomes about $515,000. So your 20% target has risen from $88,000 to about $103,000 — you’ve been chasing a moving target. Meanwhile you’ve missed roughly $75,000 of appreciation, four years of paying down principal, and you’ve paid rent the entire time.
And what would buying now have cost you? Paying PMI for the three to eight years until it cancels typically runs $15,000 to $20,000 in total.
$15,000–$20,000 of PMI, versus $75,000 of missed appreciation. That’s the case against “save 20% first,” in one line. PMI is temporary. A lost decade of appreciation is not.
The one thing that should stop you
None of the above justifies emptying your savings account. After you close, you should still hold three to six months of expenses. Homes generate surprises — a water heater, a roof, a job loss — and a homeowner with no cash is one bad month from disaster. Some loans (second homes, investment properties, jumbo, and many manually underwritten files) also require documented reserves, measured in months of your full payment including taxes, insurance and HOA dues.
The rule: put down the least that still lets you keep a real emergency fund — unless you genuinely have surplus cash and prefer the guaranteed savings to investing it.
The other cash
What about closing costs?
Your down payment isn’t the only money you need at the table. But the seller can often cover the rest.
Fannie Mae’s own guidance puts closing costs at 2% to 5% of the purchase price, paid in addition to your down payment. The variation by state is enormous — the average purchase closing cost runs about $17,545 in Washington, D.C. and over $13,000 in New York, but just $1,551 in South Dakota and $1,640 in Iowa. What’s inside: origination fees, the appraisal ($500–$800), credit report, title insurance and search, recording fees, transfer taxes — and the two everyone forgets, prepaid taxes and insurance plus escrow reserves.
💰 How much the seller can legally pay for you
This is negotiable money most buyers never ask for. Seller concessions (formally, interested party contributions) are capped by program:
Conventional: 3% if you put down less than 10%, 6% with 10–25% down, 9% with more than 25% down. (Investment properties: 2%.)
FHA: up to 6%.
VA: up to 4% in concessions — plus the seller can pay all customary closing costs on top of that.
USDA: up to 6%.
Lender credits can also cover closing costs in exchange for a slightly higher rate. And remember the hard line: your down payment cannot be financed or paid by the seller — but your closing costs often can. Also budget earnest money (1–3%), which credits back to you at closing.
Finding the money
Where can the down payment come from?
Savings are the most common source, but far from the only allowed one. Two rules govern everything here: the money must be sourced and seasoned (lenders typically want 60 days of statements), and it cannot come from an unsecured loan, a credit card cash advance, or undocumented cash. Money from under the mattress generally can’t be used.
🏡 2,679 assistance programs exist. Almost nobody checks.
As of early 2026 there were 2,679 homebuyer assistance programs nationwide, 2,073 of them actively funded. They come as grants, forgivable second mortgages, deferred “silent” seconds, and matched savings. California has 424, Florida 271, Texas 196.
Two facts that demolish the usual excuse: 62% are open to first-time buyers, and 11% have no income limit at all — while many others reach 120–140% of area median income. They stack on top of FHA, conventional, VA and USDA loans, and usually just require a homebuyer education course. Start with your state’s Housing Finance Agency.
Gifts, and retirement accounts
Gift funds are more permissive than people think. On a conventional loan for a one-unit primary residence, 100% of the down payment can be a gift — there’s no minimum contribution from your own pocket. (For 2–4 units or a second home, you must put in 5% of your own funds.) You need a gift letter confirming no repayment is expected, and the donor must be a relative or someone with a family-like relationship — and cannot be an interested party like the seller, agent or builder. FHA is broader still, allowing gifts from employers, unions and charities.
Retirement accounts — with care. A 401(k) loan lets you borrow the lesser of $50,000 or 50% of your vested balance, and a loan for a primary residence can run well past the usual five-year term. Roth IRA contributions come out any time, tax- and penalty-free. A Traditional IRA allows a $10,000 lifetime first-time-buyer exception — it waives the penalty but not the income tax. One warning worth repeating: there is no first-time homebuyer withdrawal exception for a 401(k). Weigh the opportunity cost before you touch any of it.
The other side
When is a bigger down payment actually better?
Being honest cuts both ways. Sometimes you really should put more down.
Five situations where more money down wins
1. Your rate improves through LLPAs. Fannie and Freddie price loans by credit score and LTV through a risk grid called loan-level price adjustments. Crossing into a lower-LTV bucket can genuinely cut your rate. Two wrinkles worth knowing: first-time buyers at or below 100% of AMI (120% in high-cost areas) get all LLPAs waived, as do HomeReady and Home Possible loans. And counterintuitively, the 80.01–85% LTV bucket sometimes prices better than higher-equity buckets for certain credit tiers, because the mortgage insurance offsets the risk. Ask your loan officer to price two or three scenarios — the answer isn’t always obvious.
2. Competitive markets. More cash down makes a stronger, more credible offer.
3. Jumbo or high-cost markets, where 10–20% may simply be required.
4. You have surplus cash and expect low investment returns. Guaranteed interest savings can beat uncertain markets.
5. Investment properties, where 15%+ is required anyway and more down improves your cash flow.
And when a smaller one is smarter
When it protects your emergency fund — the single most important rule on this page. When buying now beats waiting, because appreciation and rate risk dwarf PMI. When the money stays invested and earns more than 6.49%. When you’re using assistance that requires only a small contribution. And when you still carry high-interest debt — clearing a 22% credit card beats prepaying a 6.49% mortgage every single time.
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Quick answers
Down payments: common questions
Do you really need 20% down to buy a house?
No. There is no 20% requirement in any US law or loan program. Conventional loans go to 3% down, FHA to 3.5%, and VA and USDA to 0%. Twenty percent is simply the threshold above which conventional lenders stop requiring private mortgage insurance. The median first-time buyer, per NAR, puts down 10%.
What is the absolute minimum down payment?
Zero, if you qualify for a VA loan (veterans and service members) or a USDA loan (eligible rural and many suburban areas, income under 115% of AMI). Otherwise it’s 3% on a conventional loan through HomeReady, Home Possible, Conventional 97 or HomeOne, or 3.5% on FHA with a credit score of 580 or higher.
Is PMI a waste of money?
It’s the price of buying sooner, and usually a cheap one. On a conventional loan it costs roughly $30–$70 a month per $100,000 borrowed — and it cancels by federal law: you can request removal at 80% LTV, and your servicer must terminate it automatically at 78%. Paying PMI for a few years typically costs $15,000–$20,000, far less than the appreciation you’d miss waiting to save 20%.
Does FHA mortgage insurance ever go away?
Usually not. Unlike conventional PMI, FHA charges MIP — 1.75% upfront plus 0.55% annually — and with less than 10% down it lasts the entire life of the loan. With 10% or more down it drops off after 11 years. That’s why many buyers use FHA to get in, then refinance into a conventional loan once they reach about 20% equity, eliminating mortgage insurance entirely.
Should I wait and save 20%?
Usually not. If it takes four years to save the difference, a home appreciating at just 4% a year grows from $440,000 to about $515,000 — so your 20% target rises too, and you’ve missed roughly $75,000 of appreciation while paying rent. Buying now and paying PMI until it cancels typically costs $15,000–$20,000. The exception: never drain your emergency fund to buy sooner.
Can my parents pay my down payment?
Yes. On a conventional loan for a one-unit primary residence, 100% of the down payment can be gifted — you need no money of your own. You’ll need a gift letter stating no repayment is expected, and the donor must be a relative or have a family-like relationship, and cannot be the seller, agent or builder. FHA is even broader, allowing gifts from employers, unions and charities.
What counts as a first-time buyer?
Not what you’d think. For most programs it means you’ve had no ownership interest in a principal residence in the past three years. So if you owned a home four years ago and have rented since, you likely qualify again. Note that HomeReady and Home Possible don’t require first-time status at all — only Conventional 97 and HomeOne do.
How much cash do I need beyond the down payment?
Closing costs run 2–5% of the purchase price, and vary enormously by state — around $17,500 in Washington, D.C. versus about $1,550 in South Dakota. They include origination, appraisal, title, recording, transfer taxes and prepaid taxes and insurance. The good news: the seller can often cover them — up to 3–9% on conventional, 6% on FHA and USDA, and 4% plus normal costs on VA.
Is down payment assistance only for low-income buyers?
No — that’s a common and costly assumption. Of the 2,679 programs nationwide, 11% have no income limit at all, and many others reach 120–140% of area median income. Sixty-two percent are open to first-time buyers, and they stack on top of FHA, conventional, VA and USDA loans. Most just require a homebuyer education course.