Do You Need to Put 20% Down on a House? Our Experts Answer.

Key takeaways
1. 20% down is not required. You do not need a 20% down payment to buy a house; many loan options allow for much less.
2. Access low-down-payment loans. FHA, VA, and USDA loans, among others, offer programs with down payments as low as 0% for qualified buyers.
3. Understand the trade-offs. A down payment of less than 20% will likely require Private Mortgage Insurance (PMI), an additional monthly cost that a larger down payment can avoid.

For many aspiring homeowners, saving for a 20% down payment feels like an impossible goal. This is an age-old rule of thumb, but is it still a requirement in today’s housing market? The simple answer is no, you do not have to put 20% down on a house.

While a 20% down payment has its benefits, many buyers successfully purchased with a down payment much less. The median down payment for first-time homebuyers is often in the single digits, according to the National Association of Realtors. So, if you’ve been wondering, “Do you need to put 20 percent down to buy a house?” it’s time to let go of that myth.

In a recent episode of Real (Estate) Talk by Redfin, our experts Joe Rath and Courtney King discussed several loan options with zero-down or low-down payments. They shared insights on how these programs can make homeownership more accessible.

How Can I Buy a House with No Down Payment? | Redfin #realestate

20% vs. smaller house down payments

The biggest advantage of a lower down payment is that it makes homeownership more accessible, allowing you to enter the market sooner. Instead of spending years saving up, you can start building equity in a home and stop paying rent. There are several loan options available that make this possible:

• Conventional loans: Many conventional loans now require a minimum down payment of 3% to 5%. While you will have to pay for private mortgage insurance (PMI), this can be a worthwhile trade-off to get into a home sooner.
• FHA loans: Backed by the Federal Housing Administration, FHA loans are a popular choice for first-time buyers and those with lower credit scores. They require a down payment of just 3.5% for those with a credit score of 580 or higher.
• VA and USDA loans: For those who qualify, these government-backed loans can be a game-changer. VA loans (for veterans and service members) and USDA loans (for homes in eligible rural areas) may not require any down payment at all.

Understanding Private Mortgage Insurance (PMI)

If you put down less than 20% on a conventional loan, you will almost certainly be required to pay for PMI. This is a monthly premium that protects the lender in case you default on your loan. While it’s an added cost, it’s not a permanent one. Once you build up 20% equity in your home, you can request to have PMI removed, and it will automatically be canceled once you reach 22% equity.

The benefits of a 20% down payment

So, with all these low-down-payment options, why is the 20% rule so persistent? Because it comes with some very real financial advantages:

• No PMI: This is the most significant benefit. By putting 20% down, you avoid the extra monthly cost of private mortgage insurance, which can save you a substantial amount of money over time.
• Lower monthly payments: The larger your down payment, the less money you need to borrow. A smaller loan amount means lower monthly mortgage payments.
• Lower interest rates: A larger down payment signals to lenders that you are a lower-risk borrower. This can help you qualify for a better interest rate, which will save you thousands of dollars over the life of the loan.
• Instant equity: You start with more equity in your home from day one, giving you a greater financial cushion against market fluctuations.

Minimum down payment requirements

Depending on the mortgage loan you plan to apply for, the minimum down payment will vary. Let’s look at the minimum down payment requirements. 

Frequently asked questions: Down payment on a house

If you’re wondering how much of a down payment to make, plenty of other prospective homebuyers are too. That’s why Redfin Real Estate broke down some of the most commonly asked questions.

Can you buy a house with no money down?

Yes, it’s possible! Certain loan programs, like VA loans (for eligible veterans and service members) and USDA loans (for properties in eligible rural areas), allow you to purchase a home with 0% down. Some credit unions and specific lender programs may also offer low or no-down-payment options.

When do you pay the down payment on a house?

Your down payment is typically paid at the closing of your home purchase. Any earnest money you provide when making your offer will usually be credited towards this total at closing. You’ll work with the title or escrow company to finalize the payment via wire transfer or cashier’s check on closing day.

Do you need a down payment when refinancing?

No, you generally do not need a down payment when refinancing a mortgage. You’re not buying a new home; you’re replacing your existing loan. Lenders will instead assess your home equity and creditworthiness. However, you will still typically need to cover closing costs associated with the refinance, though sometimes these can be rolled into the new loan.

What is the standard down payment on a house?

When it comes to a down payment, there’s no single “right” amount. The ideal percentage for you depends entirely on your financial situation and homeownership goals. While aiming for a 20% down payment is a smart move if you can manage it, it’s not a requirement to buy a house. You have a variety of options, and a conversation with a trusted lender can help you find the best path forward.

If you’re ready to explore your options, Redfin can be your trusted guide.

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