If I had a dollar for every buyer who told me they're "still saving up for their 20%," I'd have a healthy down payment of my own by now. It's one of the most common, and most costly, myths in home buying. Here's the truth, and the real numbers behind it.
The 20% rule isn't a rule
Twenty percent down is one path, not the only one. Most first-time buyers qualify for programs requiring far less:
| Program | Minimum down | Good for |
|---|---|---|
| FHA | 3.5% (580+ credit score) | Buyers with average credit or limited savings |
| Conventional 97 / HomeReady / Home Possible | 3% | Strong credit, first-time or moderate-income buyers |
| VA | 0% | Eligible veterans and service members |
| USDA | 0% | Eligible rural and some suburban properties |
Even with weaker credit, FHA still only asks for 10% down, not 20. The tradeoff with a smaller down payment is mortgage insurance, PMI on conventional loans, MIP on FHA loans, which adds a monthly cost until you build enough equity. That's a real cost worth planning for, but it's not a wall blocking you from buying sooner.
PMI isn't forever (usually)
On a conventional loan, private mortgage insurance automatically cancels once you hit 22% equity, and you can request cancellation yourself at 20%. FHA's insurance works differently: if you put down less than 10%, it typically stays for the life of the loan. That's one more reason the "best" loan depends on your specific numbers, not a one-size-fits-all rule.
The down payment isn't the only cash you'll need
This is the part that catches people off guard. Your down payment is just one of three separate amounts of cash to plan for:
- Earnest money: a deposit (often 1-3% of the price) you put down when your offer is accepted, showing you're serious. It's credited back toward your purchase at closing, it's not an extra cost, but it is cash you need available early.
- Closing costs: typically 2-5% of the purchase price, covering lender fees, title work, inspections, and more. These are separate from your down payment entirely.
- Your down payment itself: whatever percentage your loan program requires.
Add those together, and the real "cash to close" number is often bigger than buyers expect, even with a low-down-payment loan. The good news: closing costs can sometimes be negotiated into the seller's side of the deal, and down payment gift funds from family are allowed on most loan types.
The bottom line
Waiting to save 20% isn't wrong, it's just one option among several. The smarter first step is figuring out which loan program actually fits your credit, your savings, and your timeline, then knowing the full cash picture: earnest money, closing costs, and down payment together.
If you're trying to figure out what that actually looks like for your situation, that's exactly the kind of conversation worth having before you start house hunting.
Let's map out your real numbers
Every buyer's situation is different, let's figure out what actually makes sense for yours.
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