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01Guide · 4 min read

Ask ten people how much you need to buy a house and eight will say "20% down." It is the most repeated — and most expensive — piece of folk wisdom in real estate, because it keeps people renting for years longer than they need to.

Where the 20% number comes from

Putting 20% down lets you skip private mortgage insurance (PMI) on a conventional loan. That is it. It was never a minimum — it is the threshold where one line item on your payment goes away. Somewhere along the way "no PMI at 20%" became "you need 20%," and a generation of buyers waited.

What the real minimums look like

Conventional loans allow as little as 3% down for qualified first-time buyers. FHA is 3.5%. VA and USDA are $0 down for eligible buyers. On a $350,000 home, 3% is $10,500 — a very different savings goal than $70,000.

What PMI actually costs

Mortgage insurance is a monthly cost, but it is usually smaller than people fear, and on a conventional loan it goes away once you reach 20% equity through payments and appreciation. The question is not "can I avoid PMI?" — it is "does paying a bit of PMI now beat renting for three more years while I save?" For most buyers, the math says buy.

The honest trade-off

Less down means a bigger loan, a higher payment, and PMI until you reach 20% equity. More down means a lower payment but less cash left over for moving, furniture, and the emergency fund every new homeowner needs. There is no universally right answer — there is only the right answer for your numbers, which is a ten-minute conversation.

Jordan · Loan Officer
we have about $15k saved. is that even enough to try?
Very possibly, yes. On a lot of homes that covers 3% down plus a chunk of closing costs — and assistance programs may cover more. Let me run your real numbers before you decide anything.

Quick answers

Is it bad to put less than 20% down on a house?

No. Putting less than 20% down means you will pay mortgage insurance for a period, but it is the normal path for most first-time buyers. The trade-off is a slightly higher payment versus years of additional renting while you save.

What is the minimum down payment for a first-time buyer?

As low as 3% on a conventional loan, 3.5% on FHA, and $0 on VA or USDA loans for eligible buyers. Down payment assistance from Minnesota Housing or WHEDA can cover some or all of it for eligible households.

When does PMI go away?

On a conventional loan you can request PMI removal at 20% equity, and it terminates automatically at 22%. FHA mortgage insurance typically lasts the life of the loan, which is why many FHA buyers refinance into conventional later.

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