Caitlyn Moorhead

Sun, May 18, 2025, 2:01 PM5 min read

One of the main concerns about buying a home is just how large your down payment should be or what your home loan will entail. In reality, there’s no one correct answer, and this can certainly be confusing for first-time homebuyers.

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Standard wisdom for years has been that homebuyers should put down 20%, but that isn’t actually some type of industry mandate — it’s more a general metric for lenders and Realtors alike. Although some real estate experts may tell you that you need to put down 20% — and in many cases, that may be appropriate — it’s not as if you can’t legally buy a house unless you pony up that much cash.

However, when it comes to everything from saving money to closing costs, the question remains: How much do you actually need to put down on a house? Let’s explore.

While there are no “rules” for how much you need to save for a down payment on a home, there are minimums that certain loan types require. Individual lenders are free to request whatever down payment they wish for their mortgage loan program. Here are a few considerations:

• If you qualify for a VA or USDA loan due to your affiliation with the military, you may be able to get a loan with 0% down.

• FHA loans, which are generally extended to those with lower credit scores, can be acquired with a down payment as low as 3.5%.

• Most conventional loans, including adjustable-rate loans, require at least 5% down, although some lenders may go down as low as 3% for a minimum down payment.

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The most common reason why 20% is often suggested for a down payment is that it allows you to avoid private mortgage insurance, commonly referred to as PMI. Private mortgage insurance helps protect lenders against default, as statistically speaking, a smaller down payment makes default more likely.

PMI will raise the cost of your mortgage by a significant amount, commonly 0.5% to 1.5% of your loan amount per year. On a $300,000 loan, this means your PMI will add somewhere between $125 to $375 per month to your mortgage payment.

Not only might that be enough to make a home unaffordable for you, but it’s also money that is essentially going right down the drain of your monthly payments. While your mortgage payment itself will actually help you build equity in your home, your PMI just lines the pocket of the insurance company and their potentially higher interest rates.