Do You Really Need 20% Down to Buy a Home?

For decades, “you need 20% down” has been treated like an unbreakable rule of homebuying. Many people delay buying for years because they think they cannot move forward until they have saved a massive lump sum. In reality, the 20% down payment is not a requirement. It is one option among many, and for a lot of buyers, it is not even the best one.

At 3Z Realty, we spend a lot of time helping clients separate long-standing myths from how the market and lending actually work today. Down payment expectations are one of the biggest areas of confusion.

Where the 20% idea came from

The 20% benchmark became popular because it allows buyers to avoid private mortgage insurance (PMI) on most conventional loans. PMI protects the lender, not the buyer, and it adds a monthly cost. Putting 20% down reduces risk for the bank, so it has long been framed as the “gold standard.”

But “ideal for a lender” is not the same thing as “necessary” or even “financially smart” for every buyer. Modern loan programs are designed around a wide range of down payments, many of them far below 20%.

Common low-down-payment options

Depending on your finances, location, and goals, you may qualify for programs such as:

Conventional loans (3% to 5% down)
Many first-time and repeat buyers qualify for conventional mortgages with as little as 3% to 5% down. These typically include PMI, but PMI is not permanent. Once you reach sufficient equity, it can usually be removed.

FHA loans (3.5% down)
FHA loans are backed by the Federal Housing Administration and are designed to help buyers with lower savings or more modest credit profiles. They allow 3.5% down and are widely used by first-time buyers.

VA loans (0% down)
Eligible veterans and active-duty service members may qualify for zero-down loans with no PMI. These are some of the strongest buyer tools available.

USDA loans (0% down in eligible areas)
Some rural and suburban areas qualify for USDA financing, which can also offer zero-down options for buyers who meet income and location requirements.

The right program depends on your full financial picture, not a single percentage.

The real question is not “How low can I go?”

The more important question is: What down payment strategy supports your overall financial stability?

Putting less than 20% down is not automatically risky. In many cases, it allows buyers to:

• Enter the market sooner instead of waiting years while prices and rents rise
• Preserve emergency savings rather than draining cash into a single asset
• Budget for repairs, furnishings, and moving costs without financial strain
• Keep capital available for investments or business needs

At the same time, lower down payments often mean higher monthly payments and added insurance costs. Those tradeoffs need to be evaluated carefully.

At 3Z Realty, we frame this as a cash-flow and risk-management decision, not a rule to blindly follow.

When 20% down does make sense

There are absolutely situations where 20% down is a strong move. It can:

• Reduce monthly payments
• Eliminate PMI
• Strengthen purchase offers in competitive markets
• Increase long-term equity efficiency

For buyers with high savings, stable income, and ample reserves left after closing, 20% down can provide both comfort and leverage.

The key is that it should be a choice, not a barrier.

The costs most buyers underestimate

Down payment is only one part of the picture. Buyers also need to account for:

• Closing costs
• Inspections and due diligence
• Initial repairs and maintenance
• Moving and setup expenses
• Ongoing ownership reserves

We routinely see buyers who could technically put 20% down, but doing so would leave them financially thin. That is rarely a position of strength.

A smarter way to approach it

Instead of asking, “How fast can I get to 20%?” a healthier question is: “What combination of down payment, monthly payment, and remaining savings puts me in the most stable position six months after I move in?”

That is the framework we use with our clients.

Buying a home is not just a purchase. It is a financial system you will live inside of. The goal is not to hit a headline number. The goal is to protect your flexibility, your cash flow, and your long-term options.

If you are considering buying and are unsure what down payment actually makes sense for you, 3Z Realty helps clients model realistic scenarios, not sales-driven ones. The right answer is specific, and we believe it should always be built around clarity rather than pressure.