Not ready for a sizable down payment?

The 20% down payment is one of the most persistent ideas in home buying, and it keeps a lot of people renting longer than they need to. It’s a benchmark, not a requirement — several programs allow eligible borrowers to buy with considerably less.

That said, less upfront usually means something else somewhere: mortgage insurance, a larger balance, or different loan pricing. Below is a look at the low down payment options that may be available and how to think through what makes sense for your situation.

Low Down Payment Options

FHA Loan

FHA financing may allow eligible borrowers to purchase with a minimum required investment as low as 3.5% of the purchase price, depending on qualifications and applicable FHA guidelines.

FHA loans carry Mortgage Insurance Premium rather than conventional PMI — an upfront premium collected at closing plus an annual premium paid monthly. How long the annual premium remains depends on loan terms and loan-to-value ratio, and on many FHA loans it stays for the life of the loan. That’s an important distinction from conventional financing and worth factoring into any long-term comparison.

USDA Loan

USDA financing may allow eligible borrowers to purchase a qualifying primary residence in a designated area with no required down payment. Despite the name, eligible areas often include communities that don’t feel rural at all — many small towns and outer suburbs fall within program boundaries.

Household income limits apply and work as a ceiling rather than a floor. Property eligibility, occupancy rules, and lender underwriting requirements also apply. USDA loans don’t use traditional monthly PMI; instead the program uses an upfront guarantee fee and an annual fee collected monthly.

VA Loan

VA financing is available to eligible veterans, active-duty service members, certain National Guard and Reserve members, and some surviving spouses. Eligible borrowers may be able to purchase a qualifying home with no required down payment.

VA loans generally do not require monthly private mortgage insurance, though a VA funding fee may apply unless the borrower qualifies for an exemption. Eligibility for the benefit isn’t the same as loan approval — borrowers must still meet lender credit, income, property, and underwriting requirements.

Conventional Options

Conventional financing isn’t limited to 20% down either. Programs with lower down payment requirements may be available to eligible borrowers, with private mortgage insurance applying below certain equity thresholds. The key difference from FHA: conventional PMI can generally be cancelled once applicable equity and payment-history requirements are met.

How Much Should You Put Down?

There’s no universally correct number. More down means a smaller loan balance, a lower principal and interest payment, and — depending on the program — reduced or eliminated mortgage insurance. Less down means keeping more cash available for closing costs, moving, repairs, and whatever the house turns out to need.

The mistake we see most often is buyers draining savings to hit a down payment target and then having nothing left when the water heater fails in month three. Homes generate expenses, particularly in the first year.

Worth thinking through before you decide:

• How much cash you want remaining after closing
• Your estimated monthly payment, including taxes and insurance
• Applicable mortgage insurance premiums or program fees
• Closing costs and prepaid expenses, which are separate from the down payment
• Your broader monthly budget and existing obligations
• Which programs you may be eligible for

What a Lower Down Payment Costs

Putting less down may affect the overall cost of financing in a few ways:

• Mortgage insurance premiums or program fees
• Different loan pricing, since loan-to-value ratio is a factor lenders consider
• A larger balance, and correspondingly higher principal and interest payments

Mortgage insurance rules differ meaningfully by program. Some conventional PMI may be eligible for cancellation once requirements are satisfied; FHA, USDA, and other government-backed programs handle it differently. Review the actual terms of your loan rather than assuming coverage ends automatically at a particular equity level.

Where a Lower Down Payment Helps

The tradeoff can be worth it depending on circumstances:

• Less cash required at closing. You keep more of your savings intact.
• Reserves stay available. Money remains accessible for emergencies, repairs, and moving costs.
• Timing. For some buyers, waiting several more years to accumulate a larger down payment isn’t obviously better — home prices and rent don’t stand still while you save.
• Program flexibility. FHA, USDA, VA, and conventional programs structure down payments differently, which widens the range of what may be available.

A lower down payment isn’t inherently better or worse than a larger one. It’s a tradeoff between upfront cash and ongoing cost.

The Number You’re Comfortable With

What a lender may approve and what fits your life aren’t always the same figure. Qualification is based on program and lender guidelines; your budget should be based on how you actually want to live.

When setting that budget, account for the full picture: mortgage payment, property taxes, homeowners insurance, HOA dues where applicable, utilities, ongoing maintenance, existing debts, savings goals, and normal expenses. Maintenance in particular tends to be underestimated by first-time buyers.

All financing is subject to underwriting, income and asset verification, property requirements, and applicable lender and program guidelines. We’re glad to run through different down payment scenarios with you, show how each affects your estimated payment and upfront costs, and help you determine which programs may be appropriate for your situation.