How Much Down Payment Do You Really Need?

Quick Answer

You do not need 20% down to buy a home. The conventional program minimum down payment is 3% of the price for qualified buyers, FHA's program minimum is 3.5%, and VA and USDA loans allow no down payment for eligible borrowers; terms and eligibility vary. Putting down less than 20% on a conventional loan means paying private mortgage insurance until your balance reaches 80% of the original value (you can request removal then; it ends automatically at 78%), but it also lets you buy years sooner. The right down payment balances getting in the door against your monthly payment and cash reserves.

Minimum down payment by loan type

• VA loan — no down payment required for eligible veterans, active duty, and surviving spouses.
• USDA loan — no down payment required in eligible rural and many suburban areas (income limits apply).
• Conventional — program minimum of 3% of the price for many first-time buyers; commonly 5% otherwise.
• FHA — program minimum of 3.5% of the price with a 580+ credit score.
• Jumbo — program minimums are typically higher, often 10%–20% of the price, since these exceed conforming limits.
• Terms and eligibility vary by program and lender.

What a smaller down payment costs you

Put less than 20% down on a conventional loan and you'll pay private mortgage insurance (PMI) — a monthly amount that protects the lender, not you. The good news: PMI is temporary. Once your balance reaches 80% of the original value you can request removal; some lenders also allow removal based on appreciation with a new appraisal. It ends automatically at 78%. On FHA loans the equivalent (MIP) usually lasts the life of the loan unless you refinance.

A smaller down payment also means a larger loan balance and a higher monthly payment. The trade-off is time: waiting years to save 20% often costs more in rising home prices and rent than PMI ever would.

When putting more down makes sense

• You want to eliminate PMI immediately (20%+ on conventional).
• You want the lowest possible monthly payment and have healthy cash reserves left over.
• You're buying in a competitive market and want a stronger, cleaner offer.
• Rates are high and you'd rather reduce the balance you're financing.

Where the down payment can come from

Down payment funds can come from savings, a documented gift from family, retirement account provisions, and — in Texas — down-payment-assistance programs through TSAHC and TDHCA. Gift funds are allowed on most programs with a simple gift letter. A broker can map exactly which sources your loan program permits.

Frequently Asked Questions

Do I really need 20% down to buy a house?

No. The 20% figure only matters because it's the point where conventional loans no longer require PMI. Program minimums are lower: 3% of the price on conventional for qualified buyers, 3.5% on FHA, and no down payment on VA or USDA if eligible; terms and eligibility vary. Most buyers put down far less than 20%.

What is PMI and when does it go away?

PMI (private mortgage insurance) is a monthly charge on conventional loans when you put less than 20% down. It protects the lender. Once your balance reaches 80% of the original value you can request removal; some lenders also allow removal based on appreciation with a new appraisal. It ends automatically at 78%. It is not permanent.

Can I use gift money for my down payment?

Yes. Most loan programs allow all or part of your down payment to come from a documented gift, usually from a family member, accompanied by a gift letter stating it doesn't need to be repaid. Your lender will verify the source, so keep records of the transfer.

Is it better to put more down or keep cash in reserve?

It depends on your goals. Putting more down lowers your payment and can eliminate PMI, but draining your savings leaves you exposed to emergencies. Many advisors suggest keeping several months of reserves rather than maximizing the down payment. A broker can model both scenarios so you see the payment difference.

What down payment do I need for a zero-down loan?

VA and USDA programs allow no down payment for eligible borrowers — VA for qualifying veterans, active-duty service members, and surviving spouses, and USDA for buyers in eligible areas within income limits. You'll still need funds for closing costs, though those can sometimes be covered by seller concessions or assistance.