Do I need
20% down?

The short answer: no. The real question is what 20% buys you

Twenty percent down is the number everyone quotes, so most buyers treat it as a gate: no 20%, no house. That is not how it works. You can buy with far less. What 20% actually buys you is three specific things: no private mortgage insurance (PMI) on a conventional loan, a smaller loan, and a lower monthly payment. Those are real benefits — but they are a trade, not a rule, and for many buyers the trade is not worth waiting years to make.

Here is the trade in concrete numbers. Take a $700,000 purchase at a 7.32% rate over 30 years — the same example the mortgage calculator uses:

• 20% down ($140,000): a $560,000 loan, principal and interest of $3,847 a month, no PMI.
• 10% down ($70,000): a $630,000 loan, principal and interest of $4,328 a month, plus PMI of about $262 a month.
• 3% down ($21,000): a $679,000 loan, principal and interest of $4,664 a month, plus PMI of about $283 a month.

The PMI figures use the calculator’s estimate of 0.5% of the loan per year; your actual PMI depends on your credit score, the loan type, and the lender. The point of the table is not the exact dollar — it is the shape of the decision. Less cash upfront means a bigger loan, a higher payment, and PMI on top. More cash upfront means the opposite. Neither side is free.

What PMI really costs — and why it is not forever

PMI is insurance that protects the lender, not you, and it is the price of borrowing more than 80% of the home’s value. On the example above, 10% down costs about $262 a month in PMI until it drops off. That is real money — but the part people miss is that on a conventional loan, PMI ends. As a rule, you can ask your servicer to remove it once you reach 20% equity, and it terminates automatically at 78% of the original value under federal law. Paying down the loan, or the home gaining value, can get you there sooner than the original schedule suggests — ask your servicer what they require, because the process is not automatic at 80%.

The trap is the other loan type. FHA mortgage insurance works differently: for most FHA loans with less than 10% down, the annual insurance lasts the life of the loan and does not drop off when you reach 20% equity. The way out of FHA insurance is generally refinancing into a conventional loan. That single difference changes the math completely, and it is the detail buyers most often learn too late. If you are choosing between a low-down-payment conventional loan and FHA, ask how the insurance ends on each — before you choose, not after you close.

The ways to buy with less

Less than 20% is not one program — it is several, and they fit different buyers:

• Conventional, 3% down. Fannie Mae and Freddie Mac allow as little as 3% down for qualified buyers. This is the usual route for buyers with solid credit who simply do not want to drain their savings.
• FHA, 3.5% down. The Federal Housing Administration allows 3.5% down with a credit score of 580 or higher. Remember the insurance trade above — FHA insurance generally lasts the life of the loan when you put less than 10% down.
• VA, 0% down. Eligible service members and veterans can buy with no down payment and no monthly mortgage insurance through the VA loan program.
• USDA, 0% down. The Department of Agriculture’s program allows no down payment for eligible homes in qualifying rural areas.
• Down payment assistance. Maryland, Virginia, and DC all run programs that can cover part or all of a down payment — sometimes as a grant, sometimes as a deferred loan. The full breakdown, with current program terms, is in the Down Payment Help guide.

Program terms, credit requirements, and income limits change, so treat this list as the map, not the fine print — a lender confirms what you qualify for today.

The honest trade-off: cash now versus cash every month

On the $700,000 example, the buyer who puts 10% down instead of 20% keeps $70,000 in their pocket at closing — and pays about $743 more every month ($481 more principal and interest, plus about $262 in PMI), and roughly $103,000 more in interest over the full 30 years if the loan runs its course. That is the real price of buying sooner with less.

Whether that price is worth paying depends on what the $70,000 does for you. If keeping it means you still have reserves after closing — the emergency fund, the moving costs, the repairs every house eventually needs — that safety is worth real money too. If it means buying now instead of renting for three more years while you save, the rent you did not pay belongs in the math as well. And if the plan is to refinance or to reach 20% equity and drop PMI in a few years, the 30-year interest figure overstates the cost. The wrong reason to wait for 20% is the belief that it is required. The wrong reason to rush with 3% is draining every dollar you have to get in the door. The right answer sits between those two mistakes, and it is personal: it depends on your reserves, your timeline, and how long you plan to stay.

Three traps at this decision

• Emptying your savings to hit 20%. A house with no reserves is a fragile house. Closing with nothing left means the first roof leak or job change becomes a crisis. Keep an emergency fund outside the down payment.
• Forgetting that FHA insurance does not drop off. On a conventional loan, PMI ends. On most FHA loans with less than 10% down, it does not — only a refinance removes it. Compare the two on that basis, not just on the down payment.
• Treating the down payment as the whole upfront cost. Closing costs, prepaid taxes and insurance, and moving expenses all land at the same time. Budget for the full cash-to-close, not just the percentage.

So: do you need 20% down? No. Do you want it? Sometimes — and now you know exactly what it costs to have it, and what it costs not to. Run your own numbers on the mortgage calculator — change the down payment slider and watch the payment and the PMI move — check the Down Payment Help guide for programs that may cover part of it, and tell me your budget and timeline if you want to talk through which version of this trade fits your life.

Figures in this post are estimates for illustration, using a $700,000 purchase at a 7.32% rate over 30 years and the calculator’s PMI estimate of 0.5% of the loan per year. They are not a loan offer, approval, or quote. Program terms and PMI pricing depend on your credit, the lender, and current guidelines — confirm them with a lender before deciding.

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