Ask ten people how much you need to put down on a house and nine will say 20%. That number is not wrong, but it is incomplete.
Where 20% comes from. It is the threshold above which conventional lenders do not require Private Mortgage Insurance (PMI). PMI typically costs 0.5%–2.0% of the loan amount per year, added to your monthly payment. On a $300,000 loan, 1% PMI is $250/month. Avoiding that for the life of the loan is real money.
Actual minimums for common loan types (2026): - Conventional 97: 3% down. PMI until you reach 20% equity, then removable. - FHA: 3.5% down. MIP for the life of the loan (unless refinanced to conventional). - VA (military/vet): 0% down. No monthly mortgage insurance, but one-time funding fee. - USDA (rural): 0% down. Small monthly guarantee fee. - Jumbo (over ~$766k): typically 10–20% required.
The real math of less-than-20%. Buying with 5% down on a $400,000 home gets you into the house 3 years earlier than saving for 20% (at typical saving rates). You pay PMI for 5–8 years until equity hits 20%. Total extra cost: $15k–$25k in PMI. Total foregone: 3 years of rent at $2,000/month = $72k plus 3 years of home appreciation.
Unless your local market is falling, less-than-20% usually wins on total wealth.
When 20% actually matters. (1) You are in a falling or stagnant market and appreciation will not help. (2) You are in a bidding war — all-cash or 20%-down offers win tiebreakers. (3) You have the 20% saved and still have a 6-month emergency fund after closing. If you drain your emergency fund to hit 20%, that is a bad trade even if it avoids PMI.
What you must have. Beyond the down payment itself: 2–5% of purchase price in closing costs, 1% in immediate moving-in expenses, and 6 months of post-closing expenses in reserves. A lender may not require the last one, but it is what separates a successful closing from a house-poor disaster.