Financial decision
Twenty percent is not a requirement. It is a threshold — and for most buyers, an expensive one to wait for.
The belief that you need twenty percent down keeps more people renting than any other single idea in housing. Twenty percent removes mortgage insurance. It does not unlock the loan. Understanding what each option actually costs — including the cost of waiting — is the whole decision.
At a glance
The standard conventional minimum for most buyers. Requires mortgage insurance until you reach the cancellation threshold, which can arrive far sooner than the loan schedule suggests.
Enough equity to avoid mortgage insurance entirely on a conventional loan, with the lowest monthly payment and the strongest position on a competitive offer.
| Factor | 5% Down | 20% Down |
|---|---|---|
| Cash required | $20,000 on a $400k home | $80,000 on a $400k home |
| Mortgage insurance | Yes, cancellable | None |
| Monthly payment | Higher | Lower |
| Cash reserves left over | More | Often depleted |
| Offer strength | Solid with a strong pre-approval | Strongest |
| Opportunity cost | Start building equity now | Years of continued rent |
Mortgage insurance is temporary. The years you spend renting while saving for twenty percent are not.
Plain English first, then the rule as it is published, then what it means for your file.
“A borrower may request cancellation of private mortgage insurance when the principal balance of the loan reaches 80 percent of the original value of the property.”
You do not need to refinance to remove it. Once the balance hits 80% of the original value — through payments, extra principal, or an approved new appraisal under lender rules — you can ask for cancellation in writing.
“Private mortgage insurance shall be terminated automatically on the date the principal balance is first scheduled to reach 78 percent of the original value.”
Even if you never ask, conventional insurance ends by law once you are current and the scheduled balance hits 78%. This is the key difference from most FHA loans, where the premium can last the life of the loan.
Rent is high, prices in your market are rising, and the insurance premium is smaller than the annual cost of waiting. Also the right call when depleting savings would leave you without reserves.
You already have the funds without emptying your emergency reserve, you want the lowest possible payment, or you are competing in a market where cash strength decides offers.
Twenty percent is a preference, not a rule. Run the actual numbers: for most buyers in most markets, the cost of waiting exceeds the cost of temporary mortgage insurance.
Yes. Down payment does not overcome an income or credit problem. Qualification is driven by your ratios and credit profile as well as your equity.
Usually a modestly better one, because loan-level pricing improves as loan-to-value falls. The larger saving is eliminating the insurance premium.
Servicers may allow cancellation based on a current appraisal once seasoning requirements are met. Ask your servicer for their written cancellation policy.
Every rule stated on this page is traceable to the agency handbook that governs it. Guidelines change — confirm anything time-sensitive with a licensed loan officer before acting on it.
Reviewed by Brian Mix, licensed loan officer (NMLS #111175) · Last checked July 2026.
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