One of the most persistent myths in real estate is that you must put 20 percent down to buy a house. That belief has discouraged countless would-be buyers from even exploring the market. But the reality is much different.
According to data from the National Association of Realtors, the median down payment for first-time homebuyers is about 10 percent, and many buyers purchase homes with even smaller down payments through specialized loan programs.
In other words, while a 20 percent down payment can offer advantages, it is far from a requirement. Today’s mortgage market offers several pathways to homeownership with much smaller upfront cash requirements.
Understanding how these options work can help you determine whether buying a home sooner may be possible.
Why Down Payments Exist in the First Place
Before diving into specific programs, it helps to understand why lenders require down payments.
A down payment represents the buyer’s financial stake in the property. The larger the down payment, the more equity the borrower begins with and the less risk the lender assumes.
Historically, lenders have preferred 20 percent down because it created a significant cushion against falling home values or borrower default.
But modern lending programs have expanded access to homeownership. Many loans now allow smaller down payments while still protecting lenders through mortgage insurance or government guarantees.
As a result, buyers today often have far more flexibility than previous generations did. That doesn’t make 20 percent a bad idea, it just means it’s not the hard line it once was.
The Most Common Ways to Buy a House With Less Than 20% Down
Several mortgage programs allow buyers to purchase homes with low down payments. Some are conventional loans offered through private lenders, while others are backed by government agencies.
Here are the most common options.
1. Conventional Loans With 3% to 5% Down
Conventional mortgages are the most widely used home loans in the United States.
Some conventional loan programs allow qualified buyers to put down as little as 3 percent of the home’s purchase price.
For example, if you were buying a $350,000 home:
- 3% down equals $10,500
- 5% down equals $17,500
These programs typically require stronger credit scores and stable income, but they are popular among buyers who want lower upfront costs.
One advantage of conventional loans is that private mortgage insurance (PMI) can often be removed once the homeowner reaches about 20 percent equity, reducing long-term costs.
2. FHA Loans With 3.5% Down
Loans insured by the Federal Housing Administration (FHA) are among the most widely used low-down-payment options.
FHA loans allow buyers to purchase homes with a minimum down payment of 3.5 percent, provided they meet certain credit and financial requirements.
Using that same $350,000 home example:
- 3.5% down equals $12,250
FHA loans are designed to help buyers who may not qualify for conventional mortgages. They allow lower credit scores and flexible financial guidelines.
However, FHA loans also include mortgage insurance premiums, often called MIP. These premiums include both an upfront cost and an annual premium included in the monthly payment.
In many cases, if the down payment is less than 10 percent, borrowers will pay this insurance for the life of the loan unless they refinance.
3. VA Loans With Zero Down
For eligible military service members, veterans, and some surviving spouses, VA loans can allow home purchases with no down payment at all.
These loans are backed by the U.S. Department of Veterans Affairs and are designed to help service members access homeownership.
One major benefit is that VA loans typically do not require traditional mortgage insurance, which can reduce monthly costs compared with some other low-down-payment options.
Private lenders issue the loans, but the federal guarantee allows them to offer more flexible qualification standards.
4. USDA Loans With Zero Down
Another option for buyers in certain areas is the USDA loan, backed by the U.S. Department of Agriculture.
These loans can allow 100 percent financing, meaning no down payment is required for qualified borrowers.
USDA loans are generally intended for homes located in eligible rural or suburban areas and are often targeted toward low- to moderate-income buyers.
Eligibility rules vary based on location and household income, but for buyers who qualify, they can provide a powerful path to homeownership.
5. Down Payment Assistance Programs
Many states and local governments offer down payment assistance programs to help buyers cover upfront costs.
These programs may provide:
- grants that do not need to be repaid
- forgivable loans
- low-interest second mortgages
Down payment assistance programs are frequently used alongside FHA or conventional loans to reduce the amount buyers must bring to closing.
Availability varies widely by state and city, so buyers often need to research programs offered through their local housing agencies.
6. Gift Funds From Family
Many mortgage programs allow buyers to use gift funds from family members to help cover the down payment.
For example, FHA rules allow down payment funds to come from gifts, grants, or assistance programs rather than solely from the buyer’s own savings.
Lenders typically require documentation showing that the funds are a true gift rather than a loan that must be repaid.
7. Piggyback Loans
Another, less common strategy is the piggyback mortgage, sometimes structured as an 80-10-10 loan.
In this scenario:
- the primary mortgage covers 80 percent of the purchase price
- a second loan covers 10 percent
- the buyer contributes 10 percent down
The goal is often to avoid private mortgage insurance on the main loan. However, this approach adds complexity and may involve higher interest rates on the secondary loan. Speak with more than one professional about this practice, and understand all consequences carefully before following this route.
Understanding Mortgage Insurance
If you put less than 20 percent down, your lender will usually require some form of mortgage insurance.
Mortgage insurance protects the lender, not the borrower, if the loan goes into default.
Two main types exist.
Private mortgage insurance (PMI)
Used on conventional loans with smaller down payments.
Mortgage insurance premiums (MIP)
Used for FHA loans.
FHA loans require both an upfront insurance premium and annual premiums that are included in the monthly payment.
Because of these costs, buyers often weigh whether to put more money down or accept mortgage insurance in exchange for buying sooner.
Example Down Payment Scenarios
Consider a home priced at $350,000.
Here is how different down payment levels compare.
| Down Payment | Cash Needed | Loan Amount |
| 3% | $10,500 | $339,500 |
| 5% | $17,500 | $332,500 |
| 10% | $35,000 | $315,000 |
| 20% | $70,000 | $280,000 |
The difference between a 3 percent down payment and a traditional 20 percent down payment can be tens of thousands of dollars.
For many buyers, especially first-time homeowners, saving that larger amount may take many additional years.
Buying with a smaller down payment may allow buyers to enter the market sooner and begin building equity earlier. But understand you will probably carry some form of mortgage insurance, and be paying a larger loan amount when you pay less up front.
Pros and Cons of Buying With Less Than 20% Down
Low-down-payment loans offer advantages, but they also come with tradeoffs.
Potential Advantages
Lower upfront savings requirement
Ability to buy a home sooner
Opportunity to keep emergency savings intact
Access to government-backed loan programs
Possible Drawbacks
Mortgage insurance may increase monthly payments
Smaller initial equity in the home
Higher total borrowing costs over time
For some buyers, the ability to buy sooner outweighs the added monthly costs. For others, waiting and saving for a larger down payment may feel more comfortable.
Tips for Getting Approved With a Low Down Payment
If you plan to buy with less than 20 percent down, strengthening your mortgage application can improve your chances of approval.
Focus on areas such as:
Improving your credit score
Reducing existing debt
Maintaining stable income
Saving enough for closing costs and reserves
Researching assistance programs
Lenders evaluate several factors beyond just the down payment when determining eligibility.
Comparing Mortgage Options Before You Choose
Because so many programs exist, comparing multiple mortgage options is essential.
Different lenders may offer different:
- interest rates
- loan programs
- down payment requirements
- mortgage insurance structures
Starting with your current bank or credit union can be helpful, but many buyers also explore offers from multiple lenders before selecting a loan.
Speaking with more than one lender can help you understand what options may be available for your situation.
The Bottom Line
Putting 20 percent down can still offer advantages, but it is no longer the only path to homeownership.
Many buyers successfully purchase homes with much smaller down payments using conventional loans, FHA financing, VA programs, or USDA loans.
The key is understanding how each option works and choosing a mortgage structure that fits your financial goals.
For many households, buying a home with less than 20 percent down can be a realistic and practical way to enter the housing market.
