You don’t need 20% down to buy a house. Conventional loans allow as little as 3% down, FHA loans 3.5% with a credit score of 580 or higher, and VA and USDA loans can require nothing down. On the September 2026 national median existing-home price of $417,500 reported by the National Association of Realtors, that’s $12,525 at 3%, $14,613 at 3.5%, $41,750 at 10% and $83,500 at 20%.
The right target depends on the monthly payment you can carry, how long you’re willing to wait, and how much you’ll pay for mortgage insurance in the meantime. You also need cash for closing costs and a cushion after you move in, which many first-time buyers forget to plan for. This guide compares the common down payment levels with real payment math, shows how long each takes to save, and covers the safest places to keep the money while it grows.
How much down payment you need by loan type
- Conventional, 3% down: available through Fannie Mae’s HomeReady and standard 97% loan-to-value loans and Freddie Mac’s Home Possible and HomeOne. Some of these have income limits or require at least one buyer to be a first-time buyer, meaning no ownership in the past three years.
- Conventional, 5% to 19% down: the most common choice for buyers who don’t qualify for the 3% programs. Private mortgage insurance (PMI) applies below 20%.
- FHA, 3.5% down: requires a credit score of at least 580 under HUD rules (10% down for scores from 500 to 579), though many lenders set their own minimum near 620. FHA charges a 1.75% upfront mortgage insurance premium, usually rolled into the loan, plus an annual premium of 0.55% for most borrowers.
- VA, 0% down: for eligible service members, veterans and some surviving spouses. There is no monthly mortgage insurance, but a one-time funding fee applies (2.15% of the loan on first use with less than 5% down) unless you’re exempt.
- USDA, 0% down: for homes in eligible rural and some suburban areas, with household income limits. It charges a 1% upfront guarantee fee and 0.35% a year.
- 20% down: avoids PMI on a conventional loan and gives you a lower loan balance and payment from day one.
3%, 3.5%, 10% or 20%: what each costs per month
The table uses the $417,500 median price and Freddie Mac’s 30-year fixed average of 7.24% from late October 2026. Mortgage insurance figures are estimates, since PMI pricing depends heavily on your credit score. Property taxes and homeowners insurance aren’t included and often add several hundred dollars a month.
| Down payment | Cash for down payment | Loan amount | Principal and interest | Est. mortgage insurance per month |
|---|---|---|---|---|
| 3% conventional | $12,525 | $404,975 | $2,760 | About $250 to $400 (PMI) |
| 3.5% FHA | $14,613 | $409,938 (includes upfront MIP) | $2,794 | About $188 (0.55% annual MIP) |
| 10% conventional | $41,750 | $375,750 | $2,561 | About $125 to $250 (PMI) |
| 20% conventional | $83,500 | $334,000 | $2,276 | None |
Going from 3% to 20% down cuts the monthly payment by roughly $730 to $880 once PMI is included. But saving the extra $71,000 could take years, and home prices and rents keep moving while you wait. Neither choice is automatically right.
PMI on a conventional loan isn’t permanent. Under the federal Homeowners Protection Act, you can ask the lender to cancel it once your balance reaches 80% of the home’s original value, and it must end automatically at 78% if you’re current on payments. FHA mortgage insurance works differently: with less than 10% down it stays for the life of the loan, and with 10% or more down it lasts 11 years. Many FHA borrowers refinance into a conventional loan later to drop it.
Don’t forget closing costs and reserves
Closing costs usually run about 2% to 5% of the loan amount, covering lender fees, appraisal, title insurance, recording fees and prepaid taxes and insurance. On a $400,000 loan that’s $8,000 to $20,000. A seller may agree to pay part of it, and some down payment assistance programs cover it, but plan to bring it yourself unless you have a written agreement.
After closing, keep a separate emergency cushion. New owners pay for repairs that a landlord used to handle, and the first year often brings a surprise or two. Some lenders also require reserves, typically one to several months of mortgage payments left in your accounts after closing, especially with smaller down payments or lower credit scores.
Example: Alex and Sam plan to buy at about $350,000 with a conventional loan and 5% down. Their cash target is $17,500 for the down payment, about $10,000 for closing costs (roughly 3%), and $8,000 they’ll keep as reserves and moving money, for a total of $35,500. They have $9,000 saved. At $1,100 a month they would reach the goal in about 24 months. If they qualify for a 3% program and get the seller to cover $5,000 of closing costs, the target drops to about $23,500 and they could buy in about 13 months.
How long it takes to save
Divide your total cash target by the number of months until you want to buy. This shows how big a monthly deposit each timeline needs, using the median price with $12,000 set aside for closing costs and no interest earned.
- 3% down plus closing ($24,525): $1,022 a month for 2 years, $681 for 3 years, $409 for 5 years.
- 10% down plus closing ($53,750): $2,240 a month for 2 years, $1,493 for 3 years, $896 for 5 years.
Interest at roughly 4% in a high-yield account shortens these timelines a little, by a month or two on a three-year plan. The bigger levers are the amount you save each month and the price range you shop in. A home priced $50,000 lower cuts a 10% down payment by $5,000.
Example: Riley wants to buy a $320,000 townhouse in three years with 10% down. Her target is $32,000 for the down payment plus about $9,600 (3%) for closing costs, or $41,600. She already has $6,000. Without interest she’d need about $989 a month. With her savings in a high-yield account at around 4% APY, about $912 a month gets her there, because the interest adds up to roughly $2,800 over three years. If rates fall, she’ll check her progress every six months and raise the deposit if needed.
A step-by-step plan to save the down payment
- Get a realistic price range. Use a mortgage calculator with today’s rates, taxes and insurance for your area, and aim for a total housing payment you could pay while still saving and covering other bills.
- Choose your loan type and down payment percentage, then add closing costs (use 3% to 4% of the price as a planning estimate) and reserves to get one cash target.
- Pick a target date and divide to find the monthly amount. If it’s out of reach, change the date, the price range or the down payment level.
- Open a dedicated high-yield savings account and automate the monthly transfer for the day after payday.
- Find extra money: tax refunds, bonuses, side income, and costs you can trim for a year or two. Some couples bank one entire paycheck and live on the other.
- Check your state housing finance agency for down payment assistance before you decide you need to save the full amount.
- Keep your credit clean while you save. Pay every bill on time, keep card balances low, and avoid opening new accounts in the months before you apply.
- Get preapproved about 60 to 90 days before you start shopping, so you know exactly what you qualify for.
Where to keep down payment savings
If you plan to buy within about five years, keep the money somewhere it can’t lose value. A stock market drop of 20% or 30% in the year you want to buy could set your plans back years.
- High-yield savings account: FDIC insured up to $250,000 per depositor per bank per ownership category. The best online accounts paid about 4% APY in late 2026, but rates can change any time.
- CDs: lock a rate for a set term. Line up maturity dates with your purchase date, or use a no-penalty CD, since early withdrawal penalties can wipe out months of interest.
- Treasury bills: backed by the U.S. government, with terms from 4 to 52 weeks and interest exempt from state income tax, which helps in high-tax states.
- Money market funds: at a brokerage, not FDIC insured, but designed to hold a stable value.
Retirement accounts should be a last resort. You can withdraw your own Roth IRA contributions (not earnings) at any time without tax or penalty. First-time buyers can also take up to $10,000 in their lifetime from an IRA without the 10% early withdrawal penalty, though income tax still applies to traditional IRA money. A 401(k) loan avoids taxes but must usually be repaid quickly if you leave your job, and it reduces your retirement growth.
Gifts and documentation lenders will ask for
Most loan programs allow some or all of the down payment to come from a gift from a family member. The lender will want a signed gift letter stating that the money doesn’t need to be repaid, plus a record of the transfer. Some conventional loans require you to put in some of your own money depending on the property type and down payment.
Lenders typically review your last two months of bank statements. Any large deposit that isn’t from your paycheck will need an explanation and paper trail. Moving cash around just before applying, or depositing cash you kept at home, creates delays. Keep the down payment in one or two accounts and avoid unexplained transfers in the months before you apply.
Common questions
Is it better to put 20% down or keep cash?
Putting 20% down removes PMI and lowers your payment, but it isn’t worth draining every dollar you have. Many buyers put down 10% to 15% and keep an emergency fund, since an empty bank account is a bigger risk than a PMI payment you can remove later.
How much is PMI on a conventional loan?
PMI often falls somewhere around 0.5% to 1.5% of the loan amount per year, depending mainly on your credit score and down payment. On a $400,000 loan, that’s roughly $165 to $500 a month. Ask your lender for quotes at several down payment levels to see your actual price.
Can I use a personal loan for a down payment?
Generally no. Most mortgage programs don’t allow borrowed money for the down payment unless it comes from an approved assistance program or is secured by your own assets, such as a 401(k) loan. A new personal loan would also raise your debt-to-income ratio.
Do I need a down payment for a VA or USDA loan?
Not usually. Both allow 100% financing for eligible buyers, though you still need cash for closing costs unless the seller or lender covers them. VA loans have a funding fee and USDA loans have guarantee fees, which are often added to the loan.
How much should first-time buyers save in total?
A practical target is your down payment plus 3% to 4% of the price for closing costs, plus a few months of expenses as a cushion. On a $350,000 home with 3% down, that’s about $10,500 for the down payment, $10,500 to $14,000 for closing and a separate emergency fund.
Before you start saving for a house
- Decide your price range from the monthly payment you can comfortably afford, not the maximum a lender approves.
- Pick a down payment level and add closing costs and reserves to get one number.
- Open a separate FDIC-insured account and automate deposits.
- Look up assistance programs in your state through HUD’s homebuying resources.
- Keep large deposits documented and your credit steady in the year before you buy.
- Compare loan estimates from at least three lenders. The CFPB’s Buying a House tools explain how to read them line by line.
Editorial note: This article is general information, not financial advice. Prices, rates and loan rules were checked as of November 2026; confirm current terms with your lender, HUD and your state housing finance agency before making decisions.