The short answer
You likely need less than you think. While "20% down" is the number most people have heard, many loan programs allow 3–5% down, and government-backed options can go lower. The real decision isn't just "how much can I save" — it's weighing a smaller down payment plus PMI against waiting longer to reach 20% and skip it.
- 20% down is not required for most loan types — 3–5% down is common on conventional loans, with other minimums for government-backed programs.
- Under 20% down usually means paying PMI until you build enough equity, typically removable around 20%.
- Do the timeline math: divide your target amount by a realistic monthly savings rate to see how long it will actually take.
- Save for closing costs and reserves, too — not just the down payment itself.
- Keep the money liquid and low-risk (savings account, short-term CDs) since you'll need it on a defined timeline.
How much you actually need
Down payment minimums vary by loan type:
| Loan type | Typical minimum down payment | Notes |
|---|---|---|
| Conventional | As low as 3–5% for qualifying borrowers | PMI usually required below 20% down |
| FHA (government-backed) | Around 3.5% with qualifying credit | Requires ongoing mortgage insurance regardless of down payment size |
| VA (for eligible veterans/service members) | Can be 0% down | Backed by the Department of Veterans Affairs |
| USDA (eligible rural/suburban areas) | Can be 0% down | Income and location eligibility rules apply |
Note
These are general categories, not quotes — actual minimums, rates, and mortgage insurance rules depend on the lender, your credit profile, and current program rules. Always confirm specifics with a lender.
20% down vs. paying PMI: the real trade-off
Putting down less than 20% isn't a mistake — it's a trade-off with real costs on both sides:
Putting down 20%+
- Avoids PMI entirely
- Usually means a smaller loan and smaller monthly payment
- Takes longer to save, delaying the purchase
Putting down less than 20% (paying PMI)
- Lets you buy sooner, which matters if home prices or rents are rising in your market
- Adds an ongoing monthly cost until you hit roughly 20% equity
- Often makes sense if the alternative is years of rent increases while saving for the full 20%
Key point
There's no universally "right" answer — it depends on your local rent-vs-buy math, how fast you can realistically save, and how you weigh buying sooner against paying less over time. Run the numbers for your specific market rather than defaulting to a rule of thumb.
Step 1: Set your real target number
- Pick a realistic home price range for your market and household size.
- Choose a down payment percentage you're comfortable with (e.g., 5%, 10%, 20%).
- Add closing costs — a 2025 Urban Institute analysis found they commonly range from roughly 1.5% of the loan amount on larger mortgages to around 4.5% on smaller ones, covering lender fees, title insurance, taxes, and more.
- Add a post-move cash reserve — many buyers keep an additional cushion for immediate repairs, furnishing, or the first months of new, often higher, housing costs.
Example on a $350,000 home, 10% down:
- Down payment: $35,000
- Est. closing costs (3%): $10,500
- Target before reserves: $45,500
Example on a $350,000 home, 20% down:
- Down payment: $70,000
- Est. closing costs (3%): $10,500
- Target before reserves: $80,500
These are illustrative estimates only — actual costs vary by lender, location, and program.
Step 2: Do the timeline math
Once you have a target number, the plan is simple division:
Months needed = Target amount ÷ Monthly savings amount
- Saving $45,500 at $750/month ≈ 61 months (about 5 years)
- Saving $45,500 at $1,500/month ≈ 30 months (about 2.5 years)
- Saving $45,500 at $2,500/month ≈ 18 months
Seeing the real number tends to clarify decisions fast — whether to adjust the target home price, increase the monthly savings amount, extend the timeline, or reconsider the down payment percentage.
Tip
Run the math with a couple of different down payment percentages side by side. Sometimes 10% down with a shorter timeline and a PMI cost beats waiting years for 20% down, especially in a market where rents or home prices are climbing faster than your savings rate.
Step 3: Where to keep the money
Because a house down payment usually has a defined, relatively near-term timeline, most guidance treats it like an emergency fund rather than a long-term investment:
- High-yield savings account — liquid, low-risk, easy to automate transfers into.
- Short-term CDs (certificates of deposit) — can work for a portion of the funds if the purchase timeline is fairly firm and won't change.
- Not the stock market, in most common guidance — a market downturn right before you need the cash could shrink your down payment at the worst possible time.
Step 4: Automate and accelerate
- Set up a dedicated account separate from everyday spending, so the down payment fund isn't accidentally spent.
- Automate a fixed transfer each payday — consistency usually beats sporadic large deposits.
- Direct windfalls toward it — tax refunds, bonuses, and gifts can meaningfully shorten the timeline.
- Revisit your budget for temporary cuts specifically earmarked for the down payment period, rather than permanent lifestyle changes.
Mistakes to avoid
Watch out
The most common mistake is saving only for the down payment percentage and getting surprised by closing costs and moving expenses at the finish line — build those into the target from day one.
- Ignoring PMI removal steps. PMI isn't necessarily permanent — ask the lender about the process and threshold for removing it once you have equity.
- Investing the down payment fund for extra growth on a timeline too short to safely absorb a market drop.
- Forgetting gift-fund rules if family is contributing — most programs require documentation (a gift letter) rather than an undocumented transfer.
- Not shopping down payment assistance programs — many state and local programs exist for qualifying first-time or lower-income buyers and are worth checking before assuming the full amount must come from personal savings.
FAQ
Do I really need 20% down to buy a house?
No. Many conventional loans allow down payments as low as 3–5%, and government-backed loan programs (FHA, VA, USDA) have their own minimums. 20% avoids PMI but is not a strict requirement for most loan types.
What is PMI and when does it go away?
Private mortgage insurance (PMI) is an added monthly cost on conventional loans with less than 20% down, protecting the lender if you default. It can typically be removed once you reach roughly 20% equity, subject to lender rules.
Where should down payment savings be kept?
Most guidance points to low-risk, liquid places like a high-yield savings account or short-term CDs, since the money may be needed within a defined timeframe and shouldn't be exposed to market swings.
Are there costs beyond the down payment I should save for?
Yes — a 2025 Urban Institute analysis found closing costs commonly fall somewhere between about 1.5% and 4.5% of the loan amount depending on loan size, plus moving costs and a cash reserve for the first months of homeownership.
Can gift money count toward a down payment?
Many loan programs allow gifted funds toward a down payment, typically with a signed gift letter and documentation trail required by the lender.
Related reading
How big should your emergency fund be?
The standard rule is 3–6 months of essential expenses, but the right number depends on how stable your income and job actually are.
High-yield savings vs investing: where should your money go?
The choice usually comes down to time horizon and risk, not which one is "better" — here is how to think about splitting money between the two.
How to make a budget that actually works
A budget only works if it matches your real income, splits fixed from variable costs, and runs on autopilot. Here's the step-by-step process.
PiggySize is a planning tool, not a financial advisor. This article is educational — projections and examples are estimates, not financial, tax, or investment advice.