Do You Need 20% Down to Buy a Home?
- 14 Days To Close
- 22 hours ago
- 5 min read
For years, the idea that you must put 20% down to buy a home has been treated like a rule. But here's the truth: it’s a myth that keeps too many people from owning a home. Today, buyers across the U.S. are getting into homes with far less. You just need to know your options.
If you’re dreaming of owning a home, don’t let the 20% myth slow you down.
Understanding Down Payments
What is a Down Payment?
A down payment is the upfront money you pay toward the total cost of the home. The rest of the purchase price is typically covered by a mortgage loan. For example, if you buy a $300,000 home and put down 20%, that’s $60,000 out of pocket.
That kind of cash isn't realistic for many buyers, especially when rent, inflation, and other costs are rising. The good news is you don’t need 20% down to get into a home.
Why is 20% the "Gold Standard"?
Lenders like 20% down because it reduces their risk and eliminates the need for private mortgage insurance (PMI). PMI is an extra monthly fee that protects the lender in case you default. While avoiding PMI can be helpful, it shouldn’t stop you from buying if you can afford a smaller down payment. In fact, most buyers today put down far less.
Exploring Alternatives to 20% Down
There are several popular loan options that make it easier to get started with less cash upfront. Here are three of the most common.
FHA Loans
FHA loans are backed by the Federal Housing Administration and are one of the most popular low down payment options. You can qualify with as little as 3.5% down and a credit score as low as 580. These loans are ideal for first-time homebuyers and people with moderate incomes.
They do require mortgage insurance, but many buyers find the trade-off worth it to get into a home sooner. Learn more or apply now at 14DaysToClose.com/prequal.
VA Loans
If you’re a veteran, active-duty service member, or part of a military family, VA loans may be your best option. These loans are backed by the Department of Veterans Affairs and offer zero down payment, no PMI, and competitive interest rates.
It’s one of the most powerful benefits of military service, and yet millions of eligible buyers don’t realize they qualify. Want a one-on-one convo about your VA opportunities? We can help you find out at 14DaysToClose.com/skip-the-line.
Conventional Loans
Conventional loans are not backed by the government but are still a strong option. Many allow down payments as low as 3%, especially for first-time homebuyers. You’ll likely pay PMI if you put down less than 20%, but it can often be removed once you build up equity.
With good credit and solid income, a conventional loan can offer flexibility without the high upfront cost.
Down Payment Assistance Programs
Many local and state programs offer grants or second loans to cover part (or all) of your down payment and closing costs. Some are based on income, others on location or profession. Teachers, first responders, and healthcare workers often qualify for special help. Interested? We've compiled a list of Florida homebuyer programs that you should definitely check out.
How Market Conditions and Costs Affect Your Down Payment
In a buyer’s market, there are typically more homes for sale than there are buyers. This puts the power in your hands. With less competition, sellers are often more willing to negotiate. That can mean help with closing costs, accepting a lower down payment, or even buying down your interest rate. Timing your purchase during these market conditions can be a smart financial move that saves you thousands.
Even with a low down payment, you still need to plan for closing costs, which usually range from 2% to 5% of the loan amount. These fees cover things like lender charges, title services, and home inspections. The good news is some loan programs allow you to roll closing costs into your loan or negotiate with the seller to cover them. This is why it’s important to work with a team that knows how to structure deals to your advantage.
Understanding Loan-to-Value Ratio and Mortgage Insurance
Your loan-to-value (LTV) ratio is the percentage of the home’s value that you’re borrowing. For example, if you’re buying a $250,000 home and putting $25,000 down, your LTV is 90%. A lower LTV typically means better loan terms, but many lenders approve loans with LTVs of 95% or higher.
A higher LTV often means you’ll need mortgage insurance. This could be private mortgage insurance (PMI) for conventional loans or a mortgage insurance premium (MIP) for FHA loans. VA loans are the exception and do not require monthly mortgage insurance. While it’s an added cost, many buyers view it as a temporary trade-off to get into a home sooner. Once you’ve built enough equity, you may be able to remove or refinance out of it.
Debunking Common Myths
So a lot of buyers hit pause on their home search because of outdated or flat-out wrong information. The truth is, the homebuying process has evolved, and there are more options than ever to help you get the keyswithout draining your bank account.
Let’s clear up a few of the biggest myths that keep people on the sidelines.
Myth 1: You Must Always Put 20% Down
False. Most homebuyers in the U.S. put down less than 20%. With FHA, VA, and conventional loans, you can get into a home with as little as 0% to 3.5% down.
Myth 2: Lower Down Payments Mean Higher Risks
Not always. What matters more is how well you manage the monthly payments. If you’re financially stable and have steady income, a smaller down payment can make more sense than waiting years to save.
Myth 3: Only Conventional Loans Exist
Not true. FHA, VA, and USDA loans are all government-backed and designed to help buyers who might not fit into the conventional mold. There are also hundreds of down payment assistance options across the country.
Do You Really Need 20% Down to Buy a Home? Here's What to Do Instead
The 20% rule is outdated. The real question isn’t “Do you need 20% down to buy a home?” It’s “What’s the smartest way for you to buy based on your current finances?” At 14 Days To Close, we help buyers across the country discover flexible loan options, down payment help, and fast-track approvals. Whether it’s late at night or on a weekend, we’re here to guide you every step of the way.