How Much Down Payment Do You Really Need?

Last updated August 24, 2026

"You need 20% down" is the most expensive myth in housing. You don't — and knowing the real minimums, plus what 20% actually buys you, can get you in the door years sooner.

The real minimums

Twenty percent is not a requirement; it's a threshold that lets you skip mortgage insurance. The actual floors are much lower:

Conventional: as little as 3% down for many buyers.
FHA: 3.5% down with a qualifying credit score.
VA and USDA: 0% down for those who qualify.

See loan types compared for who fits which.

What more money down actually buys

Below 20% on a conventional loan you'll pay PMI until you reach 20% equity. Putting more down also lowers your loan-to-value, which can earn a better rate, and it shrinks the loan itself. So a bigger down payment is a genuine trade-off — less interest and no PMI versus tying up cash — not a rule handed down from on high.

Gift funds are allowed

Family can help. Most loan programs let a relative gift some or all of your down payment, provided it's a true gift — not a loan — documented with a donor letter and a clear paper trail showing where the money came from and that it landed in your account. Lenders verify this carefully, so plan the transfer early rather than days before closing.

Don't drain your cushion

Lenders like to see reserves left over after you close, and life is easier with them too. A slightly smaller down payment that keeps a few months of expenses in the bank often beats an all-in payment that leaves you cash-poor the day you get the keys.

Don't argue 3% vs. 20% in the abstract — run both. Weigh the PMI cost and slightly higher rate at 3% against the opportunity cost of parking cash to reach 20%. Sometimes buying sooner wins; sometimes waiting to hit 20% does. The calculator makes the difference concrete.

By L.W. Martin, Founder — 20 years in the mortgage business, including 15 running his own brokerage. About → · Updated August 2026.