Down Payments & Assistance
One of the biggest myths in real estate is that you need 20% down. In reality, many buyers put down far less. Here's what to know.
In this guide
How much do you need?
Down payment minimums depend on the loan: 0% for VA (eligible borrowers), 3.5% for FHA, and as little as 3% for some conventional programs. Putting down 20% on a conventional loan lets you skip PMI.
More vs. less down
A larger down payment lowers your monthly payment and total interest and can improve your rate. A smaller down payment lets you buy sooner and keep cash in reserve. Neither is universally “right.”
Assistance programs
Many states and cities offer down payment assistance, grants, or favorable loans for first-time and moderate-income buyers. Start with HUD's resources and your state housing finance agency, and ask a HUD-approved housing counselor.
Where the money can come from
A down payment doesn't have to come entirely from your own savings. Depending on the loan, several sources are commonly allowed:
- Your savings — the most straightforward source; expect to document where larger deposits came from.
- Gift funds — many programs let family members contribute, usually with a simple gift letter confirming the money doesn't have to be repaid.
- Assistance programs — grants or second loans that help cover the down payment or closing costs for eligible buyers.
- Retirement accounts — some plans allow a withdrawal or loan for a first home; weigh the long-term trade-off carefully.
How PMI works — and how it goes away
If you put down less than 20% on a conventional loan, you'll usually pay private mortgage insurance (PMI), which protects the lender if the loan isn't repaid. The key thing to know is that conventional PMI is not permanent: you can typically request cancellation once your balance reaches about 80% of the original value, and lenders generally remove it automatically near 78%. Extra principal payments or a rising home value can get you there sooner.
Don't forget closing costs
Your down payment isn't the only cash you'll need. Closing costs — the fees to finalize the loan and purchase — typically run another 2–5% of the loan amount and are separate from the down payment. Budget for both, and keep a cushion left over for moving, repairs, and emergencies rather than draining every dollar into the purchase.
A simple plan to save
Breaking the goal into steps makes it far less daunting:
- Pick a target price range and estimate the down payment and closing costs for the loan types you're considering.
- Open a separate account so the money isn't spent by accident, and automate a monthly transfer.
- Look into assistance programs early — some require a homebuyer education class you can start now.
- Keep an emergency cushion in place so a surprise doesn't derail your timeline.
Common down-payment myths
- Myth: you must put down 20%. Many buyers put down far less; 20% simply lets you skip PMI on a conventional loan.
- Myth: a bigger down payment is always smarter. It lowers your payment, but draining your reserves can leave you exposed.
- Myth: assistance programs are only for very low incomes. Many serve moderate-income and first-time buyers too.
- Myth: gift money isn't allowed. Documented gifts are commonly permitted for the down payment.