Do You Need to Put 20% Down to Buy a House?

Buying your home is a dream that only comes true once you save enough money for the down payment. Every type of loan you take for buying a home requires you to pay a percentage of the purchase price upfront. This is the part that isn’t financed by the mortgage loan.

It’s commonly believed that the down payment is usually 20% of the home price. For example, if the home costs $300,000, a 20% down payment would be $60,000. For many people, this is a huge financial burden.

This blog is for anyone who feels that a 20% down payment is too high. The good news is that you can achieve homeownership with a lower down payment, too.

Is a 20% Down Payment Required?

The amount you pay upfront is calculated as a percentage of the home’s price. So, the more expensive the home, the higher your down payment.

Whether your down payment is 20% or less depends on the mortgage type. According to the National Association of Realtors, in 2024, the median down payment in the U.S. was 18%. Some first-time buyers paid as little as 9%. For conventional loans, eligible borrowers can put down as little as 3%. For FHA loans, the minimum can be 3.5% for those meeting credit requirements.

As per Bankrate, the median home sale in the U.S. as of March 2025 was $403,700. A 20% down payment on this would be $80,740.

Note: No matter the loan type, a lower down payment means you borrow more, while a higher down payment reduces monthly payments and total interest. So, even if your mortgage allows a small down payment, paying more up front can save money over time.

Minimum Down Payment Requirements for Different Loans

For fixed-rate mortgages, the minimum down payment varies:

• Conventional loans: 3%
• Jumbo loans: 10%
• FHA loans: 3.5%
• VA loans: 0%
• USDA loans: 0%

Most loan types have qualifying criteria. For instance, FHA loans require a minimum credit score of 580 for the 3.5% down payment. USDA loans need the property to be in a designated rural area.

Why Should You Opt for a 20% Down Payment?

From the section above, it’s clear that no loan type requires a 20% down payment as a minimum. However, if you choose to pay less than the recommended amounts, you should be prepared to pay private mortgage insurance (PMI). Here’s why.

When a lender finances 80% of your home’s price, they want you to cover the remaining 20% upfront. If you don’t, they charge PMI to protect themselves in case of default. This means that a down payment under 20% adds PMI to your monthly mortgage payments. The PMI cost depends on your down payment amount and your mortgage’s interest rate.

There’s good news: for conventional loans, PMI doesn’t last for the entire loan term. Once you reach 20% home equity, either through monthly payments or home value appreciation, PMI can be removed. In most cases, it is removed automatically, but you can also contact your lender to have it removed.

For FHA loans, however, PMI continues for the life of the loan and includes an upfront payment as well. It’s important to carefully check your mortgage terms and your lender’s requirements to understand how PMI applies to your loan.

What Is Down Payment Assistance?

Many people find it challenging to save for a down payment. Borrowers in this situation can take advantage of down payment assistance programs. These programs are often offered by federal, state, and local governments to help homebuyers achieve their dream of owning a home.

If you qualify, these programs can cover your down payment and sometimes even your closing costs. Eligibility requirements vary depending on the program. Some options include:

• Federal level: Check the Department of Housing and Urban Development website for programs available in your state.
• State level: State Housing Finance Agencies often provide assistance for home purchases and homebuyer education.
• Local level: Many counties and cities offer down payment assistance programs, particularly for first-time buyers.

What Are the Benefits of a 20% Down Payment?

A 20% down payment means a significant amount is already covered, which reduces your monthly mortgage payments compared to a smaller down payment. You may also qualify for better interest rates and terms from your lender.

With a 20% down payment, you won’t need to pay private mortgage insurance (PMI), which further lowers your monthly payment. Lenders view a 20% down payment favorably, as it signals financial stability. This can improve your chances of securing a loan with favorable terms. Additionally, the higher your down payment, the sooner you start building equity in your home.

A smaller down payment may save money upfront, but it comes with long-term disadvantages:

• You’ll have a larger mortgage, meaning higher interest and monthly payments.
• You may need to pay PMI for a period, adding to your monthly costs.
• Lower down payments can lead to higher interest rates and additional loan costs.

Can I Make a Down Payment of More Than 20%?

If you can afford it without affecting your finances, putting down more than 20% offers several advantages:

• You borrow less, reducing overall borrowing costs.
• You avoid PMI and may qualify for lower interest rates.
• Your monthly mortgage payment is smaller, and the total interest paid over the loan term is lower.
• You start with higher equity, which improves your net worth and can help you pay off your mortgage sooner.

Why Less Than 20% May Not Be Ideal

A down payment below 20% often results in higher long-term costs. However, if saving 20% isn’t possible, a smaller down payment can still help you achieve homeownership.

Things to consider:

• Choose a lower down payment only if there’s no other way to buy your home.
• Make sure your household income allows for higher monthly payments.
• Opt for this if paying 20% upfront would deplete your savings.

Are you a first-time homebuyer looking for a trusted lender to guide you through the mortgage process? Connect with us at Total Mortgage.