How Much Down Payment Do You Need for a House?
The 20% figure has kept more people renting than any interest rate ever has. Here's the actual minimum, what 20% really buys, and how to decide which side of it you belong on.
You don't need 20% down. Conventional loans start as low as 3%, FHA loans at 3.5%, and VA and USDA loans at 0% for eligible buyers. The 20% number isn't a rule — it's the point where private mortgage insurance stops being charged. Both paths are legitimate; the rest of this page is the math for choosing.
The real minimums by loan type
- Conventional: 3% down. Standard programs for qualified (often first-time) buyers go to 97% financing. On a $350,000 home that's $10,500.
- FHA: 3.5% down with a credit score of 580+. More forgiving on credit and debt ratios — the trade-off is mortgage insurance that's harder to shed (see below).
- VA: 0% down for eligible veterans and service members, with no monthly mortgage insurance at all. Comfortably the best deal in American lending if you qualify.
- USDA: 0% down for eligible buyers in designated rural areas — which cover more suburban-feeling places than people expect.
- Jumbo (above conforming limits): 10–20%+. This is where large down payments genuinely are required.
Worth knowing: most first-time buyers put down well under 20%. The myth persists because 20% is the threshold lenders prefer, not the one they require.
What 20% actually buys you
- No PMI — typically 0.5–1.5% of the loan per year, gone entirely.
- A smaller loan, so a smaller payment and less lifetime interest.
- Often a slightly better rate, since lenders price risk by loan-to-value.
- A stronger offer in a competitive market — sellers read it as certainty of closing.
- Instant equity buffer, which matters if prices dip and you need to sell.
Real benefits. The question is whether they're worth what waiting costs.
The real math: 5% vs 20% on a $350,000 house
Same house, same 6.5% rate, 30-year loan:
- 5% down ($17,500): $332,500 borrowed → about $2,102 principal & interest, plus roughly $222 of PMI ≈ $2,324/month
- 20% down ($70,000): $280,000 borrowed → about $1,770/month, no PMI
So $52,500 more upfront saves about $554 a month — and that's before property tax and insurance, which are identical either way. Run your own figures on the mortgage calculator.
Now the part people skip: how long does saving that extra $52,500 take? At $1,000 a month, roughly four and a half more years of renting — years of paying someone else's mortgage, with no equity and no control over rent increases, in a market that may not wait for you. Sometimes that's the right trade. Often it isn't.
PMI: what it costs and how it ends
Private mortgage insurance protects the lender, not you, and it's the price of getting in with less cash. Typically 0.5–1.5% of the loan annually, folded into your payment.
The key detail almost nobody mentions: on a conventional loan, PMI is temporary. You can request cancellation once you reach 20% equity, and it terminates automatically at 78% loan-to-value. Between principal payments and appreciation, that often arrives years earlier than the amortization schedule implies.
FHA is different. With less than 10% down, FHA mortgage insurance lasts the life of the loan — the standard escape is refinancing into a conventional loan once you have enough equity. If you're choosing between FHA and a 3% conventional loan, that distinction is worth more than the 0.5% difference in down payment.
The forgotten second number: closing costs
The down payment isn't the only cash you need at the table. Closing costs typically run 2–5% of the purchase price — lender fees, title, appraisal, and prepaid property taxes and insurance. On that $350,000 house, that's another $7,000–$17,500.
Buyers who budget only the down payment discover this weeks before closing, which is a genuinely bad time to discover it. Some of it is negotiable (seller concessions), but plan as though it isn't.
The mistake that undoes all of it
Don't empty your emergency fund to reach 20%. A house is a machine for generating unexpected expenses — a water heater fails, the roof needs work, the job market turns — and a homeowner with zero liquid savings is one repair away from putting it on a credit card at 24%.
The stronger position is nearly always: smaller down payment, intact emergency fund. PMI at $222 a month is a manageable, cancellable cost. High-interest debt taken on in a crisis is neither. Size your cushion with the emergency fund calculator before you decide what's left for a down payment.
Two more checks before you commit: what payment you can actually carry (home affordability calculator, or the full walkthrough in how much house can I afford?), and where a mortgage payment puts your debt-to-income ratio — lenders want the total under about 36%, and that ceiling binds more buyers than the down payment does.
How to actually save it
- Pick the real target. Down payment + closing costs, not just the headline percentage. For a $350,000 home at 5% down, that's roughly $17,500 + $10,500 ≈ $28,000.
- Automate a fixed monthly transfer the day after payday. Set the amount with the savings goal calculator.
- Keep it liquid and earning. House money you'll need in 1–3 years belongs in a high-yield savings account, not in the market — a 20% drawdown the month before closing is not a risk worth taking.
- Check first-time buyer programs. Most U.S. states run down payment assistance schemes with grants or forgivable second loans, and plenty of buyers who qualify never look.
- Don't finance anything new. A car loan taken during the saving phase raises your DTI and can shrink your approval by more than the down payment gains you.
Run your numbers
Frequently asked questions
How much down payment do you need for a house?
Less than most people think. Conventional loans can go as low as 3% down, FHA loans start at 3.5%, and VA and USDA loans allow 0% down for eligible buyers. The 20% figure isn't a requirement — it's the threshold where private mortgage insurance is no longer charged.
Do you have to put 20% down on a house?
No. 20% down simply avoids private mortgage insurance (PMI) and lowers your monthly payment. Most first-time buyers put down considerably less than 20% and pay PMI until they reach 20% equity, at which point it can be removed on a conventional loan.
What is PMI and how much does it cost?
Private mortgage insurance protects the lender if you default, and it's typically required on conventional loans with less than 20% down. It commonly runs about 0.5%–1.5% of the loan amount per year. On conventional loans you can request cancellation at 20% equity, and it terminates automatically at 78% loan-to-value.
Is the down payment the only upfront cost?
No — closing costs typically add another 2%–5% of the purchase price, covering lender fees, title, appraisal, and prepaid taxes and insurance. Budget for both, and keep your emergency fund intact on top of them.
