How much down payment do I need?

Short answer: the 20% rule is not a rule

You do not need 20% down to buy a house, and most buyers don't put it down. The actual program minimums in 2026 are:

• VA: $0 down for eligible veterans and service members
• USDA: $0 down in eligible areas, under the income cap
• Conventional: 3% down for first-time buyers, 5% for repeat buyers
• FHA: 3.5% down with a 580 or higher credit score (10% between 500 and 579)

On a $350,000 home, that's the difference between $70,000 and $10,500.

What 20% actually does is remove mortgage insurance — the monthly charge that protects the lender when you put down less. That's a real cost worth understanding, but it is a pricing question, not an eligibility one. Waiting five extra years to save 20% while home prices and rents climb is usually the more expensive choice.

What each program requires, and what it costs you monthly

Conventional (Fannie Mae / Freddie Mac) - Minimum: 3% for first-time buyers, 5% otherwise - Mortgage insurance: PMI (private mortgage insurance — an extra monthly fee on conventional loans when you put down less than 20%; it protects the lender, not you, and can usually be removed later), priced by credit score and down payment size - Key advantage: PMI is temporary. It must be removed at your request at 80% loan-to-value and cancels automatically at 78%

FHA - Minimum: 3.5% at 580+, 10% at 500–579 - Mortgage insurance: an upfront premium of 1.75% financed into the loan, plus a monthly premium - Key limitation: on most 3.5%-down FHA loans the monthly premium stays for the life of the loan. The standard exit is refinancing to a conventional loan once you have equity

VA - Minimum: $0 - Mortgage insurance: none. There's a one-time funding fee, waived entirely for veterans with a service-connected disability rating - Best available deal in American lending if you're eligible

USDA - Minimum: $0, in eligible areas and under the income limits - Mortgage insurance: a small upfront guarantee fee plus a low annual fee

The rule of thumb: if you're eligible for VA, use VA. If you have a strong credit score, conventional with 3–5% down usually beats FHA over time because the mortgage insurance goes away. If your credit score or debt load is the constraint, FHA is the more forgiving file.

Our [FHA vs Conventional comparison](/compare/fha-vs-conventional) puts the monthly numbers side by side.

How mortgage insurance actually works

Mortgage insurance is the reason the 20% number exists. It's a premium you pay so the lender is protected if you default — it does nothing for you except make a low down payment possible.

Conventional PMI is priced by your credit score and your loan-to-value ratio (the loan amount divided by the home's value). At 3% down, a 760-score borrower might pay around 0.3% of the loan per year; a 620-score borrower might pay two to three times that. On a $340,000 loan that's roughly $85 versus $200+ a month.

The important part: PMI ends. Under federal law, your servicer must cancel it automatically once your balance reaches 78% of the original value, and you can request removal at 80%. Many servicers will also drop it early based on a new appraisal if your home has appreciated.

FHA MIP (mortgage insurance premium — the FHA version of mortgage insurance — an upfront fee plus a monthly fee added to your payment) works differently. There's a 1.75% upfront premium added to your loan balance, plus an annual premium collected monthly. On a loan with less than 10% down, that monthly premium lasts the entire loan term. With 10% or more down it drops off after 11 years. This is the main reason strong-credit buyers prefer conventional.

The [PMI guide](/guides/pmi-explained) covers removal strategies in detail.

3% vs 5% vs 10% vs 20% — the actual tradeoff

Using a $350,000 purchase as a reference point:

• 3% down ($10,500): lowest cash out of pocket, highest payment, PMI included. Best when getting into the market quickly matters more than the monthly number, or when you need to preserve savings.
• 5% down ($17,500): slightly better PMI pricing and a slightly lower payment. Modest improvement over 3%.
• 10% down ($35,000): noticeably better PMI pricing on conventional. On FHA it's the tier where the monthly premium eventually falls off at 11 years.
• 20% down ($70,000): no mortgage insurance at all, the lowest payment, and the strongest offer in a competitive market.

The pattern: the jump from 3% to 10% improves your payment gradually. The jump to 20% removes an entire line item. Everything in between is incremental.

What that means practically: if you're at 12% and can reach 20% in a few months without emptying your savings, it's often worth waiting. If reaching 20% would take three years, buy sooner with less down and cancel PMI later once you build equity.

Where the money is allowed to come from

Down payment funds have to be sourced and seasoned — the lender must be able to trace where they came from and see that they've been sitting in your account.

Acceptable sources:

• Your own savings and checking, typically documented with two months of statements.
• Gift funds from a family member. Fully allowed on all major programs. It requires a signed gift letter stating the money doesn't need to be repaid, plus a paper trail showing the transfer. Gifts that must be repaid are loans, and a loan changes your debt-to-income ratio.
• Retirement accounts — 401(k) loans and IRA withdrawals both work, though a 401(k) loan creates a monthly payment the lender will count.
• Down payment assistance programs. Every state has them, and many counties and cities do too. They range from forgivable grants to silent second mortgages. See the [down payment assistance guide](/guides/down-payment-assistance-explained).
• Proceeds from selling an asset — a car, stock, or another property — with documentation of the sale and the deposit.

What is not acceptable: cash you deposit without a paper trail, an undisclosed loan from anyone, or a large unexplained deposit. Any deposit that looks unusual for your account will trigger a request for a letter of explanation and supporting documents. This is the single most common source of last-minute closing delays.

When a bigger down payment is genuinely worth it

More down is not automatically better. Cash you hand over at closing is cash you no longer have, and reserves — money left in your accounts after closing — are one of the strongest compensating factors in underwriting.

Put more down when: - It gets you to 20% and eliminates mortgage insurance entirely. - You're competing in a market where sellers weigh financing strength. - Your credit score is low enough that PMI is expensive, and a larger down payment shrinks it meaningfully. - You'd still have three-plus months of housing payments in reserve afterward.

Put less down when: - Reaching 20% would leave you with no emergency fund. An empty savings account with a new house is how good files turn into missed payments. - You're using VA, where there is no mortgage insurance to avoid. - You expect to need cash for immediate repairs, furniture, or moving costs. - Prices in your market are rising faster than you can save.

Common down payment mistakes

• Waiting for 20% while renting. Five years of saving against five years of rising prices and rent usually loses. Run the comparison before you commit to waiting.
• Forgetting closing costs. The down payment is not the only cash you need — closing costs add roughly 2–5% of the purchase price. See [how much cash you actually need](/guides/how-much-cash-do-i-need-to-buy-a-house).
• Moving money around right before applying. Transfers between your own accounts are fine but each one has to be documented. Consolidate into one account two to three months before you apply.
• Taking cash from a relative without a gift letter. Get the letter and the wire receipt at the same time as the money. Retroactive documentation is painful.
• Draining reserves to hit a round number. Underwriters count what's left after closing. Zero reserves weakens a file that a 15% down payment would have carried comfortably.