Do You Really Need 20% Down to Buy a Home?
Spoiler: You Don’t. Let’s Kill This Myth with Facts
Let’s start with the myth that won’t die.
“You need 20% down to buy a home.”
Nope. Not true. Never was.
If this belief had a face, we’d put it on a milk carton because it’s missing from reality and overdue for a correction.
Where Did the 20% Rule Even Come From?
The 20% down payment idea originates from one primary source: avoiding mortgage insurance. If you put down less than 20%, most lenders require PMI (Private Mortgage Insurance) on conventional loans. That’s it. That’s the whole origin story.
But here’s the part that doesn’t get talked about:
PMI is not the villain.
It’s a tool.
It’s a trade-off.
It’s what gives buyers a way into the market without waiting another five years to save a substantial amount of money.
Yes, you can still buy with less than 20% down, and millions of people do it every year.
So, How Much Do You Actually Need?
Let’s break it down.
✅ Conventional Loans
- As little as 3% down for first-time buyers
- 5% down for many others
- PMI required, but it often drops off automatically once you hit 20% equity
✅ FHA Loans
- Only 3.5% down is required
- More flexible credit guidelines
- Upfront and monthly mortgage insurance (but refinancing later is an option)
✅ VA Loans
- 0% down if you’re eligible
- No PMI
- Yes, it’s as good as it sounds
✅ USDA Loans
- 0% down in qualifying rural and suburban areas
- Income limits apply
- Surprisingly available in more places than people think
✅ Down Payment Assistance (DPA) Programs
- Local, state, or employer-based grants or forgivable loans
- These programs can cover part or all of your down payment and sometimes closing costs, too
Why the 20% Myth Still Lives
Three reasons:
- Old-school advice that won’t update itself
- Someone’s uncle bought a house in 1986 and continues to advise as if it were still relevant. We love him, but no.
- Fear disguised as logic
- “Better safe than sorry” sounds wise, until you miss out on five years of home equity because you waited for perfect conditions.
- Online calculators that oversimplify
- They assume 20% is the default. But you’re not default. You’re you. And your plan should be built around your actual options, not outdated assumptions.
Okay… but Should You Put 20% Down?
This is where things get real.
If you have 20% saved and want to avoid mortgage insurance? Great. Run the numbers and see if it yields a monthly payment that makes you feel comfortable.
But if you’re scraping together every dollar just to hit 20%, and it means draining your emergency fund or waiting years to make a purchase?
It’s not worth it.
Why?
Because while you’re saving more, prices are rising
While you’re hesitating, rents keep climbing
And while you’re waiting for perfection, equity growth is passing you by
Sometimes it makes more sense to get in the game sooner
Start building wealth
Then refinance or move up later with a stronger position
What About PMI? Isn’t That a Waste?
Let’s set this straight, too.
PMI is not a scam
It’s a monthly cost that makes homeownership possible for those without massive savings
It’s usually temporary
And in many cases, it’s cheaper than the amount your rent will go up next year
Example:
You buy a $350,000 home with 5% down
Your PMI might be around $100 to $150 per month
Meanwhile, the average rent increase in many cities is $150 to $300 per year
So… do the math
The Real Question You Should Be Asking
Not “Do I need 20%?”
Ask:
What’s the smartest down payment for my situation?
One that:
- Fits your current savings without draining you
- Keeps your emergency fund intact
- Gets you into the right home, not just any home
- Allows you to continue saving, investing, and living
Final Thought
You don’t need 20% down to be a smart buyer
You need a brilliant plan
One that fits your income, your savings, and your life
The old rule doesn’t apply anymore
And clinging to it could cost you more than it saves you