Do I really need 20% down to buy a house?

No. The 20% figure became famous because it lets you avoid private mortgage insurance on a conventional loan, but it is not a requirement. Conventional loans go as low as 3% for first-time buyers, FHA as low as 3.5%, and VA and USDA can require 0% for eligible borrowers. The National Association of Realtors has reported first-time buyer down payments averaging in the high single digits in recent years.

What is private mortgage insurance and when does it go away?

Private mortgage insurance (PMI) is paid by the borrower on a conventional loan when the down payment is below 20%. Federal law requires the lender to automatically cancel PMI when the loan balance reaches 78% of the original property value on the original amortization schedule, and you can request cancellation at 80%. FHA mortgage insurance follows different rules and on most current FHA loans lasts for the life of the loan unless you refinance.

Can my parents give me money for a down payment?

Yes. Conventional, FHA, VA, and USDA loans all allow gift funds from a family member for primary residences. The lender will require a signed gift letter stating the funds are a gift, not a loan, plus documentation of the transfer. The rules around who counts as an acceptable donor vary slightly by program.

Should I use down payment assistance even if I can put more down?

Sometimes. Down payment assistance can preserve emergency reserves and keep money invested, but many programs add restrictions (income caps, resale limits, recapture periods, second-lien interest) that may not fit your plans. The right answer depends on the specific program, your overall financial picture, and how long you plan to keep the home.

What counts as a down payment source besides personal savings?

Most loan programs accept verified personal savings, gift funds from family, proceeds from selling another asset, retirement account loans or withdrawals (with their own tax considerations), down payment assistance grants or second liens, and in limited cases employer assistance. Large recent deposits without a paper trail will be questioned in underwriting.

Down Payment Strategies: How Much You Really Need in 2026

The 20% down payment myth

The idea that you need 20% down to buy a home is one of the most persistent myths in US housing. It comes from a real benefit — putting 20% down on a conventional loan lets you skip private mortgage insurance — but it has become a story about whether you qualify at all, which it isn't.

Most US buyers, especially first-time buyers, put down much less. The National Association of Realtors profile of home buyers and sellers has consistently shown first-time buyer down payments in the high single digits and repeat-buyer down payments in the mid-teens. Conventional, FHA, VA, and USDA programs all support that pattern.

This guide is about what you can actually use as a down payment in 2026, the trade-offs between putting more down and keeping cash in reserve, and how assistance programs and gift funds work in real underwriting files.

Minimum down payments by loan program

The right minimum for your file depends on credit, income, the property, and your savings position. Numbers below are program minimums, not lender overlays — your loan officer may layer additional requirements.

Conventional loans

3% down: Available to many first-time buyers through Fannie Mae HomeReady and Freddie Mac Home Possible, plus Fannie Mae's Conventional 97 and Freddie Mac's HomeOne. Income limits apply on the assistance-focused programs.
5% down: Standard conventional minimum without first-time buyer overlays.
10 to 15% down: Often used to keep PMI manageable while preserving cash.
20%+ down: Avoids private mortgage insurance entirely.
Investment property: Typically 15 to 25% down depending on units and loan program.

See the conventional loan overview for program details.

FHA loans

3.5% down with a 580+ credit score.
10% down with a credit score between 500 and 579.

FHA mortgage insurance includes an upfront premium (financed into the loan) and an annual premium charged monthly. On most current FHA loans, the annual premium lasts for the life of the loan unless you refinance. See the FHA loan overview and the HUD FHA mortgage limits for county loan limits.

VA loans

0% down for eligible veterans, active-duty service members, and certain surviving spouses, up to the lender's effective limit (which often mirrors conforming for full entitlement).

There's no monthly mortgage insurance on VA loans. Instead there's a one-time VA funding fee that varies by service category, down payment, and first or subsequent use. Some borrowers are exempt. See the VA loan overview.

USDA loans

0% down for eligible borrowers in qualifying rural and designated suburban areas, subject to household income limits. Eligibility is confirmed against the USDA eligibility map. See USDA loans.

Jumbo and non-QM

Jumbo loans above the 2026 conforming limit typically require 10 to 25% down, with the strongest pricing at 20%+. See jumbo loans.
Non-QM and bank-statement programs are highly product-specific. Many start at 10 to 15% down for self-employed borrowers; some go lower with stronger reserves. See non-QM loans and our self-employed income guide.

The trade-off: bigger down payment vs. bigger reserves

There's a real cost-benefit decision here, and the right answer depends on your full financial picture — not just the monthly payment.

Arguments for putting more down

Skip PMI on conventional loans at 20%+ down. This can save several hundred dollars a month on larger loans.
Better pricing. Most pricing engines give better rates at lower loan-to-value ratios.
Lower monthly payment. Reduces stress on the budget and DTI.
More equity from day one, which matters if you need to sell or refinance in the first few years.

Arguments for keeping cash in reserve

Emergency fund. A house failing inspection or an unexpected job change in the first year is much harder if all liquid cash went into the down payment.
Closing costs and repairs. Closing costs typically run 2 to 5% of the loan amount. Move-in repairs, appliances, and furnishings add more.
Investment opportunity cost. Capital tied up in equity isn't available for retirement accounts, market investments, or business needs.
Time-in-home risk. If you sell within a few years, the additional equity you locked up converted relatively little to interest savings.

Run both scenarios in the mortgage calculator and the affordability calculator before committing.

Gift funds: what actually works

Gift funds are routine in residential mortgage underwriting. Conventional, FHA, VA, and USDA all allow gifts from a family member for a primary residence (and in some cases a second home). The specifics vary, but the pattern is consistent.

What lenders require

Gift letter signed by the donor with the donor's name, relationship to you, the dollar amount, the property address, and a statement that the funds are a gift and not expected to be repaid.
Source of funds documentation — typically the donor's bank statement showing the funds available and the wire or check that moved them.
Receipt documentation — your bank statement showing the deposit, ideally matching the wire or check.

Common gotchas

Avoid cash. Anything that can't be wire-traced is hard to use.
Avoid commingling. Sending gift funds to a joint account that also receives the donor's normal income complicates the paper trail.
Avoid surprise deposits. If your bank statements show a large unexplained credit, the underwriter will ask about it.

Down payment assistance (DPA) programs

There are hundreds of DPA programs in the US — federal, state, county, city, and employer-sponsored. They generally fall into four shapes:

Grants. Free money, sometimes with income or first-time buyer requirements.
Forgivable second-lien loans. A second mortgage that's forgiven after a residency period (often 5 to 10 years).
Deferred or amortizing second liens. A second mortgage at a low or zero interest rate, repaid on sale, refinance, or a normal payment schedule.
Matched-savings programs. Often run by state housing agencies or nonprofits.

State housing finance agencies are the most consistent starting point. A national directory is maintained by the National Council of State Housing Agencies. Many states also publish their own programs — for example, CalHFA, TSAHC, and SONYMA.

Practical evaluation

When a DPA program is on the table, ask:

Income and purchase-price limits — does your scenario qualify?
Is the funding a grant, forgivable, or repayable?
Is there a recapture period or resale restriction?
Does it sit as a second lien? At what rate and term?
Does it require homebuyer education? (Most do.)
Is your loan officer and lender approved to originate this DPA program? Not all are.

How much house each down payment buys

A simple way to frame the math: at any given price point, the down payment percentage drives the loan amount, which drives the monthly payment.

Hypothetical illustration on a $400,000 home, ignoring closing costs, taxes, insurance, and mortgage insurance:

3% down: $12,000 down, $388,000 loan
3.5% down (FHA): $14,000 down, $386,000 loan
5% down: $20,000 down, $380,000 loan
10% down: $40,000 down, $360,000 loan
20% down: $80,000 down, $320,000 loan

The monthly principal-and-interest difference between 3% and 20% on this scenario is meaningful — but so is the $68,000 difference in cash out the door. Use the mortgage calculator to test these against current rate assumptions, and verify county conforming limits with the conforming limit lookup.

Acceptable down payment sources

Most loan programs accept the following, with documentation:

Personal checking and savings
Investment account proceeds (with sale receipts)
Retirement account loans or withdrawals (tax consequences and program-specific rules apply)
Gift funds from a family member with proper letter and paper trail
Proceeds from the sale of another property
Down payment assistance grants or second liens
Employer assistance, where offered
Tax refunds, with deposit documentation
Lawful inheritance or settlement proceeds

What raises flags: cash deposits, undocumented business income transfers, and "deposits from friends" that turn out to be informal loans.

PMI: how it works and how to remove it

Private mortgage insurance on conventional loans is charged when the down payment is below 20%. It is typically 0.2% to 1.5% of the loan amount per year, paid monthly. Pricing depends on credit score, loan-to-value ratio, and loan term.

PMI is not permanent. Under the Homeowners Protection Act:

Automatic termination when the loan balance reaches 78% of the original property value on the original amortization schedule.
Borrower-requested cancellation at 80% loan-to-value, generally requiring on-time payment history and sometimes a new appraisal.
At the midpoint of the amortization as a final automatic cutoff.

If your home has appreciated, a new appraisal may let you cancel PMI earlier than the amortization schedule alone would allow.

FHA mortgage insurance is governed by separate, less flexible rules. On most current FHA loans, the only way out is to refinance into a conventional loan after building enough equity.

Where MLO Finder fits

MLO Finder is a directory of mortgage loan officers, not a lender or financial advisor. We do not originate loans, manage assistance programs, or hold funds. We help you find licensed loan officers who work with the down payment scenario you actually have, and verify their licensing through NMLS Consumer Access before you share personal information.

Ready to compare officers? Search the directory, browse by program on the loan-types index, or use the NMLS lookup tool to validate any officer's license is current.