For decades, one of the biggest myths in homebuying has been that you need a 20% down payment to purchase a house. While this might have been common advice once upon a time, the reality is that today’s buyers have far more options—and thankfully, most of them don’t involve draining your entire life savings.
Where Did the 20% Myth Come From?
The idea of putting 20% down comes from traditional lending practices and the desire to avoid private mortgage insurance (PMI). While avoiding PMI can be beneficial, the reality is that saving 20% can take years, delaying homeownership and potentially costing buyers more in the long run as home prices and interest rates fluctuate.
Reality Check: Low Down Payment Options Exist
Buyers today have access to a variety of loan programs that allow much lower down payments:
- VA Loans: Available to eligible veterans and active-duty service members, these require 0% down and often come with better terms than conventional loans.
- FHA Loans: With a down payment as low as 3.5%, these loans are great for first-time buyers or those with lower credit scores.
- Conventional Loans: Some conventional loans allow as little as 3% down, making them a viable alternative to FHA loans for buyers.
Why Less Down Might Be a Smart Move
Instead of waiting years to save 20%, buyers can enter the market sooner, start building equity, and take advantage of home appreciation. If waiting means renting for longer, you might actually spend more on rent than you would on PMI.
Bottom Line
If you’ve been holding off on buying a home because you think you need 20% down, it’s time to rethink your strategy. There are plenty of options available—you just need the right guidance to find the best fit. Let’s chat about what works for you!
