The "20% down" rule is repeated everywhere — but it's a guideline, not a law. The right down payment depends on your cash, your timeline, and what else you could do with that money.
Minimum down payment by loan type
The real cost of putting less than 20% down
Under 20% down on a conventional loan means paying Private Mortgage Insurance (PMI). PMI typically runs 0.5–1.0% of the loan per year.
PMI rates are estimates on a $350,000 home. Actual rate depends on credit score, lender, and loan program.
PMI is not permanent. On conventional loans, lenders must cancel it automatically once your loan balance reaches 80% of the original purchase price. You can also request cancellation once you've paid down to 80% through payments or appreciation.
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Not sure how much you can afford to put down? Use the affordability calculator →
The 20% myth — and when to ignore it
The conventional wisdom says 20% is "right" because it eliminates PMI and gives you a lower payment. That's true. But consider the opportunity cost:
- In a rising market, getting in with 10% now and buying a $400,000 home that appreciates to $450,000 in 3 years produced $50,000 in equity — before you even hit 20% through payments. Waiting to save the extra 10% might have cost you that gain.
- If you have high-interest debt, using extra cash to pay off a 22% APR credit card beats PMI math every time. PMI costs ~$150–250/month; credit card interest can cost 10× that.
- Emergency fund depletion — draining savings to hit 20% then having no buffer for repairs, job changes, or emergencies is a real risk for new homeowners.
Down payment assistance programs
Most states offer down payment assistance (DPA) programs for first-time buyers — often as forgivable grants or low-interest second mortgages. Many go unused simply because buyers don't know they exist.
- Programs typically target buyers under 80–120% of area median income
- Assistance ranges from $2,500 to $25,000+ depending on the state and program
- Many require completion of a homebuyer education course
- Search "[your state] first-time homebuyer down payment assistance" to find current programs
Gift funds: what's allowed
Family members can gift the full down payment on conventional, FHA, VA, and USDA loans. The gift must be:
- Documented with a signed gift letter (lender will provide a template)
- From an eligible donor — typically a family member, not an employer or stranger
- Verified as a true gift, not a loan (lenders will check)
Some conventional programs require at least 5% of the down payment to come from the borrower's own funds when putting less than 20% down — confirm with your lender.
Bottom line
- Minimum conventional down payment: 3%. FHA: 3.5%. VA and USDA: 0%
- Under 20% = PMI; typically $100–$300/month until you reach 20% equity
- 20% down is not always optimal — consider your market, debt situation, and cash reserves
- Down payment assistance programs in most states — most buyers never apply
- Gift funds are allowed on most loan types with proper documentation
Calculate your payment at different down payment amounts →
More resources
- FHA vs. Conventional Loan: Which Is Better for You? →
- First-Time Homebuyer Guide →
- What Credit Score Do I Need to Buy a House? →
- Complete First-Time Homebuyer Guide →
- When to Refinance Your Mortgage →
Paying down high-interest debt before your mortgage application improves your DTI and may let you qualify for a better rate. Use the debt payoff calculator to build your payoff strategy before you apply.
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