When it comes to down payments, first-time homebuyers have a lot of questions.
How long does it take to save for a down payment? How much do you need to put down? Do you have to make a 20% down payment on a house?
Over my decade of reporting on mortgages, that last question has always sparked a fire within me. A lot of people believe they need to put 20% down when they buy a home, but that’s not true. Often, I don’t even think it’s a good idea.
The experts at Berkshire Hathaway Home Services agree with me.
“The idea that you need 20% down to buy a home is one of the biggest misconceptions around the homebuying process,” reads a recent Berkshire Hathaway article. “And the data debunks the myth.”
It’s true. According to data from the National Association of Realtors (NAR), the typical down payment by first-time homebuyers is only 10% — just half of what many people think they need to have saved.
The 20% down payment myth
“Unless it’s stated by your lender, you typically don’t have to have a 20% down payment,” writes Berkshire Hathaway. “There are even some loan options designed to help you get into a home with a much smaller upfront cost.”
If you’re getting a conforming conventional loan, what many think of as a “regular mortgage,” lenders accept down payments as low as 3%. Especially from first-time homebuyers.
Related: Real estate experts spot crucial signal for homebuyers
FHA loans, which are insured by the Federal Housing Administration, are often good options for first-time buyers. They have more lenient credit score and debt-to-income ratio (DTI) requirements than conforming loans. These only require a 3.5% down payment.
VA loans, insured by the U.S. Department of Veterans Affairs, don’t require any down payment. These mortgage loans are available to eligible active-duty service members, veterans, National Guard and Reserve members, and their family members.
You may qualify for a 0%-down USDA loan, insured by the U.S. Department of Agriculture. These are for people buying in select rural areas whose income falls under a certain threshold.A 20% down payment is only required for certain types of mortgage loans. For example, many lenders ask for a larger down payment for jumbo loans, or ones that exceed the conforming conventional loan limit. This may apply to you if you live in an expensive housing market and need to borrow a large amount to get a house.
Still, it’s not guaranteed that a mortgage lender will require 20% for a jumbo loan. They might ask for just 10% of 15%. But as a general rule, you’ll need more money down for a jumbo loan than for other types.
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The 20% down payment and private mortgage insurance
You may not need a 20% down payment to qualify for a mortgage, but you do need it to accomplish a specific goal: avoiding private mortgage insurance (PMI).
Some people, such as the author Dave Ramsey, believe this means you truly need to put 20% down, because otherwise you’ll lose money paying for PMI.
(Fun fact: Even Ramsey has admitted that 5% to 10% down is acceptable for first-time homebuyers. I’d argue that putting down less is just fine, but I’m glad he’s added a little wiggle room to his assessments.)
More on mortgages and home affordability:
- Freddie Mac reveals shifting mortgage rate trends
- How April Fed meeting impacts mortgage rates, housing market
- NAR reveals problem with housing market, affordability
So, what is PMI? Homeowners insurance protects the buyer should something happen to the house, such as theft or a tornado. Private mortgage insurance, on the other hand, protects the lender should you default on monthly payments.
Lenders charge people with less than 20% down PMI because the less you put down, the riskier the loan is for the company.
The cost of PMI varies depending on several factors, but Freddie Mac estimates that Americans typically pay $30-$70 per month for every $100,000 borrowed. So, if you took out a mortgage for $500,000, you could expect to pay roughly $150-$350 monthly toward PMI.
You could actually lose wealth by saving for a 20% down payment
Saving for a 20% down payment is painted as the financially responsible choice. You’d avoid PMI, have more equity in your home from the get-go, and take on lower monthly mortgage payments.
But when we look at the bigger picture, a 20% down payment rarely saves people money. In fact, it can result in homebuyers losing out.
- Home value trends depend on the year and the local market, but they tend to increase overall. According to March 2026 data from Redfin, annual housing prices had risen by 1.1%. They were up 2.5% last March and 5.2% in 2024.
- A U.S. Mortgage Insurers report found that, according to median 2024 incomes and sales prices, it would take the average American household 26 years to save for a 20% down payment plus closing costs.
- Because houses gain value over time, that’s roughly 26 years of losing out on equity you would build in a home.
- Still worried about PMI? The good news is that you aren’t stuck with it forever. With a conforming loan, the Consumer Financial Protection Bureau (CFPB) verifies that you can request that your mortgage lender cancel your PMI once you reach 20% equity. Even if they deny your request, they’re legally obligated to cancel it once you have 22% equity in the house.
