How much down payment do I really need?

The real minimums by program

VA (veterans, active duty, eligible surviving spouses): 0% down. No PMI. No monthly mortgage insurance. This is the best deal in mortgage lending.

USDA (eligible rural/suburban areas, income-capped): 0% down. No monthly PMI, but a small annual guarantee fee.

Conventional 97 / HomeReady / Home Possible: 3% down for first-time buyers (defined as no ownership in the past 3 years).

Conventional standard: 5% down.

FHA: 3.5% down with 580+ FICO. 10% down with 500–579 FICO.

Jumbo: Typically 10%–20% down minimum. Some 10.01% down programs exist for high-earners with strong reserves.

What each down payment tier actually costs

On a $400,000 home:

• 3% ($12,000): ~$180/mo PMI on conventional. Higher rate. Longest path to 20% equity.
• 5% ($20,000): ~$120/mo PMI. Middle tier — most common first-time buyer choice.
• 10% ($40,000): ~$65/mo PMI. Meaningfully better rate. Faster equity buildup.
• 20% ($80,000): No PMI. Best rate tier. Instant equity cushion.

The monthly difference between 5% and 20% down on $400K is about $2,000–$2,300/mo total payment savings over 30 years — but the opportunity cost of tying up $60,000 in home equity is real if you'd otherwise be investing it.

How to decide the right down payment for you

Put more down if: - You have 6+ months of PITI in reserves after down payment - The PMI premium at your credit tier is high (>$150/mo on $400K) - You want to lower monthly payment for cash-flow reasons

Put less down if: - You'd deplete your emergency fund to hit 20% - You have high-rate debt (>7%) still outstanding - You'd otherwise invest the difference at higher returns - You qualify for down payment assistance in your state

The biggest mistake we see: buyers with 5% down waiting 18 months to save 20%. In most markets, that 18 months of appreciation + rent paid outweighs the PMI savings.