Why You Don’t Need 20% Down to Buy a Home

Why You Don’t Need 20% Down to Buy a Home

For years, one of the most common misconceptions in homebuying has been the idea that you need to put down 20% of the purchase price to buy a home. While a 20% down payment does have its benefits, the truth is: it’s not required — and it might even be holding you back from becoming a homeowner sooner.

The 20% Myth

Let’s say you’re eyeing a $400,000 home. A 20% down payment would be $80,000 — a daunting number for most buyers, especially first-timers. This belief often causes potential buyers to delay their home search while they try to save that much, not realizing they have other options.

What Are Your Options?

In reality, many mortgage programs offer low down payment options — and some require no down payment at all:

• FHA Loans: As little as 3.5% down

• Conventional Loans: Some programs allow as low as 3% down

• VA Loans: 0% down for eligible veterans and active-duty military

• USDA Loans: 0% down for qualifying rural properties

These programs exist to make homeownership more accessible — and millions of people take advantage of them every year.

But What About PMI?

One of the reasons people push for 20% down is to avoid Private Mortgage Insurance (PMI). While PMI is an added monthly cost, it’s not permanent — and it’s often a small price to pay to start building equity sooner rather than later. Plus, PMI typically drops off once you’ve reached 20% equity in your home.

The Cost of Waiting

Delaying your purchase to save 20% could actually cost you more in the long run. Home prices and interest rates may rise while you’re saving — meaning the home you can afford today could be out of reach a year from now. Plus, the longer you rent, the more money you’re putting toward someone else’s investment.

Bottom Line

You don’t need 20% down to buy a home. With the right guidance and loan program, you could be much closer to owning a home than you think. If you’re unsure what options are available to you, talk to a trusted lender or real estate agent who can walk you through your choices and help you take the next step.