One of the most persistent myths in homebuying is that you need 20% saved before you can even think about purchasing. For many buyers, that's simply not true.
Where the 20% Idea Comes From
Putting 20% down on a conventional loan lets you avoid private mortgage insurance (PMI) — an added monthly cost that protects the lender if you default. It also reduces your monthly payment and gives you immediate equity. Those are real advantages, but they're not the only path to homeownership.
Lower Down Payment Options
Conventional loans can go as low as 3% down in some programs, though you'll typically carry PMI until you reach 20% equity. If you're putting down less than 20%, factor that monthly insurance cost into your budget.
FHA loans (backed by the Federal Housing Administration) allow down payments as low as 3.5% for buyers who meet the credit requirements. FHA mortgage insurance works a bit differently than conventional PMI, and how long you pay it depends on how much you put down.
VA loans (for qualifying Veterans and active-duty service members) and USDA loans (for eligible buyers in qualifying areas) both offer zero-down-payment options for those who meet the program criteria. These can be significant advantages if you qualify.
Practical Ways to Build Your Down Payment
- Set up a dedicated savings account and automate contributions so it happens without thinking
- Look into whether your employer offers any homebuyer assistance benefits
- Ask a mortgage advisor about down payment assistance programs in your area — many exist at the state and local level and are underused
- If you receive a tax refund or bonus, directing it to your down payment fund accelerates the timeline
The Real Question
Before spending years saving toward an arbitrary number, it's worth knowing exactly what you need for the loan programs you'd actually qualify for. The answer might surprise you.
Start a pre-approval conversation with us — we'll help you figure out the realistic path to your first (or next) home.
