Do You Need 20% Down?
Data as of Oct 22 2026
Nothing in American mortgage lending requires 20% down. Twenty percent is simply the line where private mortgage insurance stops, and that is the only thing that makes it special. Conventional loans start at 3% down, FHA at 3.5%, and VA and USDA at zero for eligible borrowers. The real question is not whether you can buy with less — it is what the insurance costs while you have less.
Where each loan type starts
| Loan type | Minimum down | Notes |
|---|---|---|
| Conventional | 3% | Standard programmes and low-down variants, some with income limits |
| FHA | 3.5% | 580 credit for 3.5%; 10% down if the score is 500–579 |
| VA | 0% | For eligible veterans and service members; funding fee from 2.15% |
| USDA | 0% | Eligible rural areas, subject to income limits |
What a smaller down payment actually costs: PMI
PMI is priced from your credit score and your loan-to-value ratio, not from the size of the loan. The table below is this site's rate card at a 750 score, which is close to the average for a purchase borrower.
| Down payment | LTV | PMI rate (750 score) | Monthly PMI |
|---|---|---|---|
| 15% | 85% | 0.25% | $71 |
| 10% | 90% | 0.42% | $126 |
| 5% | 95% | 0.68% | $215 |
| 3% | 97% | 0.83% | $268 |
Rates are annual percentages of the loan balance. The monthly column assumes a $400,000 purchase price, so the loan amount falls as the down payment rises. The same house at a 640 score would pay roughly 1.5 to 2 times these figures.
The pattern is the point
Going from 15% down to 3% down raises the annual PMI rate from 0.25% to 0.83% — the monthly cost from $71 to $268 on the same house. That is the price of the missing cash, and it is why the down payment decision is mostly a PMI decision rather than a rate decision.
It is also why 5% down is a popular middle ground: it satisfies most conventional programmes, keeps cash in reserve, and sits well below the 95%-plus band where both the rate adjustment and the PMI get expensive.
What 20% down actually buys you
On a $400,000 home, moving from 10% down to 20% down means finding another $40,000 in cash. In exchange the monthly payment falls by $401: principal and interest of $2,473 plus $126 of PMI becomes $2,198 with no PMI at all. Over the full 30 years it also avoids $58,918 of interest.
Whether that trade is worth it depends on things this page cannot know — whether the cash is earning more than the mortgage costs, how much liquidity you want to keep after closing, and how long you will stay. It is a budget decision, not a rule.
If you have less than 20%
- Remember that PMI ends. It is not a permanent cost: it must terminate automatically at 78% LTV under the Homeowners Protection Act, and it can end sooner with an appraisal or a refinance.
- Price the loan, not just the rate. A lender-paid PMI structure gives a slightly higher rate and no monthly insurance — sometimes better for a short hold, usually worse over 30 years.
- Consider a piggyback loan. An 80% first mortgage plus a 10% second at 10% down avoids PMI entirely, at the cost of a higher rate on the second mortgage. It made sense when PMI was expensive and second-mortgage rates were low; run both.
- Check state down-payment assistance programmes. Many state housing finance agencies offer grants or deferred second mortgages for first-time buyers, and they are routinely overlooked.
- Keep a reserve. The cheapest mortgage is not the one with the smallest balance; it is the one you can keep paying. Closing with no cash left is the riskiest version of a low down payment.
Frequently asked questions
Is 20% down required to buy a house?
No. It is not a legal or programme requirement for conventional, FHA or VA loans. It is the threshold at which private mortgage insurance stops on a conventional loan, which is where the convention comes from.
How much is PMI with 5% down?
About 0.68% of the loan balance a year at a 750 credit score — roughly $215 a month on a $400,000 home. A 640 score at the same down payment would pay materially more.
Is it better to wait and save 20%?
Not automatically. Waiting has its own cost: rent, and whatever prices and rates do in the meantime. Since PMI ends at 78% LTV anyway, the fair comparison is the monthly PMI and rate you pay while below 20% against the cash you keep in reserve — not 20% versus nothing.
Which is better, 10% down or 20% down?
10% down keeps $40,000 more cash on a $400,000 home and costs about $401 a month more. 20% down costs less every month and $58,918 less in interest over 30 years, but leaves you with less liquidity. Run both against your own reserves.
Do investment properties need 20% down?
More, usually. Lenders typically want 15%–25% down on a rental and add a pricing adjustment for it, and PMI rules differ. This site models a primary residence.
Related guides
When private mortgage insurance can come off a conventional loan: the 78% automatic rule, the 80% request, appraisals, and what PMI costs each month.
FHA and conventional mortgages compared on down payment, credit score and mortgage insurance — including when the insurance stops, which is what decides it.
Average homeowners insurance by state for all 50 states and DC, from the highest premiums in Oklahoma, Nebraska and Florida to the lowest in Hawaii.
Freddie MacU.S. Census BureauFannie MaeU.S. Department of Housing and Urban Development (HUD)U.S. Department of Veterans AffairsPrivate mortgage insurersNAICState statutes and departments of revenue