The 20% down payment is the most persistent myth in home buying, and it keeps people renting for years while they save toward a number that was never a requirement.
It’s also not arbitrary. Understanding what 20% actually buys you tells you whether waiting is worth it.
What 20% actually does
It’s the threshold where conventional loans stop requiring private mortgage insurance. PMI protects the lender, not you, if you default. Put down less and you pay for it monthly.
That’s the whole thing. It’s not a qualification requirement, it’s a PMI threshold.
The real minimums
- Conventional loans: as little as 3% down for qualifying buyers, 5% commonly.
- FHA loans: 3.5% down with a credit score of 580 or above; 10% below that.
- VA loans: often 0% down for eligible service members and veterans, and no monthly mortgage insurance.
- USDA loans: 0% down in eligible rural areas, with income limits.
There are also state and local down payment assistance programs almost everywhere, and a surprising number of buyers never look into them.
What PMI costs, and how it ends
Conventional PMI typically runs somewhere in the range of 0.3% to 1.5% of the loan amount annually, driven mostly by your credit score and down payment size. On a $320,000 loan, that might be $80 to $250 a month.
Critically, it’s temporary. On conventional loans you can generally request cancellation once you reach 20% equity, and it must automatically terminate at 22% equity based on the original schedule. Pay down principal or watch the home appreciate, and it goes away.
FHA is different and this is the important distinction: FHA mortgage insurance usually lasts the life of the loan if you put down less than 10%. The standard escape is refinancing into a conventional loan once you have enough equity. Factor that into an FHA decision rather than discovering it in year six.
The case for buying sooner with less down
Every year you spend saving is a year of rent paid, and in an appreciating market a year of price increases that may outrun your savings rate. If PMI costs $150 a month and prices rise faster than you can save, waiting is the expensive option.
Putting less down also preserves cash. Buying a house with zero dollars left is genuinely risky — the water heater doesn’t care about your equity position.
The case for waiting
Bigger down payment means a smaller loan, a lower payment, no PMI, and sometimes a better interest rate. It also means real equity immediately, so a market dip doesn’t leave you underwater and stuck.
If you’re two years from 20% and prices in your area are flat, waiting is defensible.
The honest framing
Don’t ask “do I have 20%?” Ask whether you can comfortably afford the total monthly payment — principal, interest, taxes, insurance, PMI and HOA — while keeping an emergency fund intact.
That question has almost nothing to do with the 20% number, and it’s the one that actually predicts whether the house works out.