For decades, the idea of a 20% down payment has been drilled into the minds of aspiring homeowners. But in today’s real estate market, that “rule” is more myth than reality. In fact, most first-time homebuyers put down far less than 20%. With rising home prices and expanded mortgage programs, buying a home is more accessible than ever—if you understand your options.
This guide breaks down how much you actually need to put down, alternative loan options, and what to consider before jumping into homeownership.
Why the 20% Down Payment Myth Persists
The 20% benchmark originally came from conventional lenders who wanted to reduce risk. A higher down payment means smaller loan amounts, lower default rates, and no need for private mortgage insurance (PMI). While that’s still ideal for some buyers, it’s far from necessary.
According to the National Association of Realtors, the median down payment for first-time homebuyers in 2024 was just 8%. For repeat buyers, it hovered around 15%.
Minimum Down Payments by Loan Type
Here’s how low your down payment could be, depending on the mortgage type:
| Loan Type | Minimum Down Payment | Ideal For |
|---|---|---|
| Conventional Loan | 3% – 5% | Buyers with solid credit scores |
| FHA Loan | 3.5% | Buyers with lower credit or higher debt |
| VA Loan | 0% | Active-duty military, veterans |
| USDA Loan | 0% | Buyers in qualifying rural areas |
4 Real-World Examples
- Conventional Loan (3%)
Home Price: $300,000
Down Payment: $9,000 - FHA Loan (3.5%)
Home Price: $300,000
Down Payment: $10,500 - VA Loan (0%)
Home Price: $300,000
Down Payment: $0 - 20% Down Payment (Traditional)
Home Price: $300,000
Down Payment: $60,000
As you can see, you can get into a home for as little as a few thousand dollars instead of tens of thousands.
Pros and Cons of Smaller Down Payments
Pros:
- Buy a home sooner
- Preserve cash for repairs, emergencies, or investment
- Leverage government-backed loan programs
Cons:
- Higher monthly payments
- Private Mortgage Insurance (PMI) may be required
- Less equity upfront
What About PMI?
If you put down less than 20% on a conventional loan, you’ll likely pay private mortgage insurance, which typically costs 0.5% to 1.5% of the loan amount annually. However, PMI can be removed once you reach 20% equity.
Down Payment Assistance Programs
Many local and state programs offer grants or zero-interest loans to help with down payments. These programs often target:
- First-time buyers
- Low-to-moderate income households
- Specific geographic areas
To see what’s available in your area, check with your state housing finance authority or visit DownPaymentResource.com.
Smart Tips to Buy with Less Down
- Boost Your Credit Score – Qualify for better rates and terms.
- Compare Lenders – Some allow lower down payments than others.
- Get Pre-Approved – Know exactly how much home you can afford.
- Budget for Closing Costs – Typically 2%–5% of the home price.
- Don’t Drain Your Savings – Keep a safety cushion post-purchase.
Final Thoughts
The 20% down payment myth is outdated. Today, you can buy a home with 3%, 3.5%, or even 0% down, depending on your financial profile and loan eligibility. While putting down more can save on interest and PMI, it’s not a requirement to start building equity and creating stability through homeownership.
By understanding your mortgage options and using available assistance programs, homeownership could be closer than you think.