"You need 20% down to buy a house" is the single most expensive piece of bad advice in U.S. personal finance. It causes first-time buyers to delay purchases by 3–5 years while prices and rents both climb. The actual minimums for the major U.S. loan programs are far lower — and the math on whether to put 20% down is more nuanced than the rule of thumb suggests.

Minimum down payments by loan type

  • VA loan (eligible veterans, active duty, surviving spouses): 0% down, no PMI
  • USDA loan (rural and some suburban areas, income-limited): 0% down, has guarantee fees instead of PMI
  • FHA loan (broadly available, allows lower credit scores): 3.5% down with credit score 580+, 10% if 500–579
  • Conventional 97 (Fannie/Freddie programs for first-time buyers): 3% down
  • Conventional standard: 5% down minimum, PMI until 20% equity
  • Jumbo loans (above conforming limit, ~$806,500 in 2025): typically 10%–20%

What 5%, 10%, and 20% actually cost you

On a $400,000 home at 6.75% over 30 years, here's the monthly comparison:

  • 5% down ($20,000): $380K loan = $2,464 P&I + ~$285 PMI = $2,749/mo
  • 10% down ($40,000): $360K loan = $2,334 P&I + ~$210 PMI = $2,544/mo
  • 20% down ($80,000): $320K loan = $2,075 P&I, no PMI = $2,075/mo

The gap between 5% down and 20% down is $674/month — but you've tied up an extra $60,000 in equity to get it. That's an effective return on the extra cash of about 13.5% annually (mostly avoided PMI and lower interest). If you can earn more than that elsewhere with similar risk, don't put 20% down. Most people can't reliably, so paying 20% if you have it is usually the better call.

When putting less than 20% makes sense anyway

Three cases:

  1. You'd drain your emergency fund. A house generates surprise expenses. A 3-month cash buffer matters more than avoiding PMI.
  2. Prices are rising faster than PMI costs you. In a market appreciating 5%+/year, waiting 2 years to save the extra down payment costs you 10% on the price — far more than 2 years of PMI.
  3. You qualify for a 0%-down VA or USDA loan. The math changes entirely when there's no PMI.

How to drop PMI faster

Conventional PMI drops automatically at 78% LTV (loan-to-value) on the original schedule. You can request removal at 80% LTV by current value, which means home appreciation can let you drop PMI 1–3 years early on a fast-appreciating purchase. FHA mortgage insurance (MIP) is stickier — most FHA loans carry it for the life of the loan, which is why many borrowers refinance to conventional once they cross 80% LTV.

Closing costs are not the down payment

Plan for an additional 2%–4% of purchase price in closing costs beyond the down payment: lender fees, appraisal, title insurance, prepaid taxes, and prepaid insurance. On a $400,000 home, that's another $8,000–$16,000. First-time buyers routinely save the down payment and forget the closing costs.

Try the calculator

Our down payment calculator tells you exactly how long it'll take to save the down payment for the home you want — at your savings rate, accounting for the home's likely price appreciation while you save.