You Need 20% Down to Buy a House

Myth #1 of 30

A lot of people think you have to put 20% down to buy a house. If that's you, you're in good company. About a third of people who want to buy believe it, according to a Bankrate survey from 2025. And in a Fannie Mae study, only about 1 in 4 people knew you could buy with a lot less.

You believed it because everyone told you. Your parents might have done it. The internet repeats it. But it's keeping a lot of people renting longer than they need to.

What is a down payment?

A down payment is the money you pay up front when you buy a house. The rest of the price is covered by a mortgage, which is a loan from a bank or mortgage company (called a lender) that you pay back each month over many years, usually 30.

So if a house costs $300,000 and you put down $15,000, you borrow the other $285,000.

How much do you really need to put down?

Usually a lot less than 20%. Lenders offer different kinds of mortgages, called loan programs. Each one has its own rules. Here are the most common ones, in plain English:

• VA loan: a home loan backed by the U.S. Department of Veterans Affairs. It's for veterans, active military and some military spouses. You can put 0% down.
• USDA loan: a home loan backed by the U.S. Department of Agriculture. It's for homes in areas the government counts as rural, and for buyers under certain income limits. You can put 0% down. Parts of Warren and Lincoln counties may qualify, so it's worth checking an address.
• Conventional loan: a regular home loan that isn't backed by the government. Some versions let first-time buyers put down as little as 3%.
• FHA loan: a home loan backed by the Federal Housing Administration, a government agency. It's popular with first-time buyers because the rules are easier. You can put down 3.5% if your credit score is 580 or higher. A credit score is a number, usually between 300 and 850, that shows how well you've paid back money you've borrowed in the past.

What do first-time buyers really put down?

The National Association of Realtors tracks this every year. In its 2025 report, the typical first-time buyer put down 10%. Lots of people put down less.

Here's what that looks like on a $300,000 house:

• 20% down is $60,000
• 5% down is $15,000
• 3% down is $9,000

That's the difference between "maybe in ten years" and "maybe next year."

Is there a catch if you put down less than 20%?

Yes, and you should know about it. With most loans, if you put down less than 20%, you'll pay for mortgage insurance. That's an extra monthly charge that protects the lender in case you stop paying. It does not protect you.

The good news: on a conventional loan, this extra charge isn't forever. Once you've paid down enough of the loan, you can ask to have it removed, and it goes away on its own at a certain point.

And while you're paying it, you're building equity. Equity is the part of the house you actually own. It grows as you pay down the loan and as the home goes up in value.

Should you wait until you have 20%?

Sometimes waiting makes sense, like if your budget is really tight. But waiting costs something too. While you save, prices and rent keep going up, and you're not building any equity. The National Association of Realtors estimated that waiting from age 30 to 40 to buy a starter home can cost someone about $150,000 in equity.

The right down payment is the one that gets you into a home you can afford each month, with some savings left over for emergencies.

What should you do next?

Find out your real number. A lender can tell you what you qualify for and show you what your monthly payment would be at 3%, 5% or 10% down. It's free to ask.

Make it personal: get your free workbook

Reading about it is one thing. Knowing your own numbers is another. We made a free workbook for this topic, Your Down Payment Workbook, that walks you through each idea in this post using your own situation. Sign up once and you'll get every workbook in this series as it comes out, right to your inbox.

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Want the full story? Watch my video: Most People Get This Wrong About Down Payments