The 20 percent down payment is the number everyone quotes, and it is a good target, but it is not a requirement. Plenty of buyers put down far less and do fine. The real question is not whether you can put 20 percent down, but what each choice costs and what it frees up.
Here is what the down payment actually changes, and how to pick the right amount for you.
What a down payment changes
A larger down payment does three things: it shrinks the loan (lowering the payment and total interest), it often earns a slightly better rate, and at 20 percent it removes private mortgage insurance. A smaller down payment keeps more cash in your pocket for emergencies, moving costs, and the inevitable expenses of a new home, which is not nothing.
The right balance depends on how much cash you have and how much you value a lower payment versus a bigger safety net.
How PMI factors in
If you put less than 20 percent down on a conventional loan, you pay private mortgage insurance until you reach 20 percent equity. It is a real cost, but a manageable one, and it is temporary, cancellable at 80 percent loan-to-value and automatic at 78 percent. For many buyers, paying PMI for a few years beats waiting years longer to save a full 20 percent while home prices climb.
Putting every dollar into a down payment to hit 20 percent, leaving nothing for emergencies, is riskier than paying PMI. Keep a cushion; a new home always finds ways to cost money.
Low-down-payment options
Several programs allow much less than 20 percent: conventional loans can go as low as 3 percent, FHA loans as low as 3.5 percent, and VA and USDA loans can require nothing down for those who qualify. Each has trade-offs, FHA carries its own mortgage insurance, for example, so compare the full cost, not just the entry price.
Whatever you choose, put a timeline on your savings with the calculator above, and remember that a slightly smaller home bought sooner can beat a bigger one bought years later.
Frequently asked questions
Do I need 20 percent down to buy a house?
No. Conventional loans can go as low as 3 percent down, FHA as low as 3.5 percent, and VA or USDA loans can require nothing for those who qualify. Twenty percent avoids PMI and earns a better rate, but it is not required.
What is PMI and when does it go away?
Private mortgage insurance is added when you put less than 20 percent down on a conventional loan. You can request cancellation at 20 percent equity, and it ends automatically at 78 percent loan-to-value.
Is it better to put more down or keep cash?
A larger down payment lowers your payment and interest, but draining your emergency fund to reach 20 percent is risky. Keep a cushion for the surprises a new home always brings.
How much should a first-time buyer put down?
Enough to get a loan you can comfortably afford while keeping an emergency fund intact. Many first-time buyers use low-down-payment programs and accept PMI rather than waiting years to save 20 percent.
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