Find your ideal down payment — balance affordability, PMI costs, and savings timeline
Buy now, or wait for 20%?
$42,999
better off buying now at 5% down, measured at the point you’d otherwise have reached 20%
Wait until
3.3 yrs
Price by then
$440,333
Rent paid meanwhile
$85,800
Equity if you buy now
$75,206
Payment now
$2,513
Payment if you wait
$2,227
Waiting for 20% means chasing a target that grows with the price — it rises $8,067 while you save toward it. Waiting does win you a smaller payment, and no MI. What it costs to get there is $85,800 of rent and the $55,206 of equity you’d have built instead.
Low down payment
Higher down payment
PMI comes off at 20% equity on a conventional loan, but not on FHA. Today’s rates →
Altgage Inc. NMLS #2447252 | 100 Cambridge St, Floor 14, Boston, MA 0211420% down is a rule of thumb, not a rule. Conventional loans go as low as 3% (Fannie's HomeReady), FHA allows 3.5%, VA and USDA allow 0%. Putting more down lowers your monthly payment and ditches PMI sooner — but cash trapped in your home equity isn't earning a return. The right number depends on your alternatives.
At 20%+ down, conventional loans skip PMI entirely. Below 20%, you pay monthly PMI until your loan-to-value hits 78% (automatic) or 80% (request). The PMI math is what makes 20% the bright line — it's not magic, it's just the threshold lenders use.
When the cash earns more elsewhere. If you can get 8% in an index fund and your mortgage rate is 6.5%, the spread (1.5%) compounds for you over the life of the loan. If your alternative is to be cash-poor with no emergency fund, definitely put less down — illiquidity is more expensive than PMI.
When your DTI doesn't qualify for the loan you want, more down lowers the loan amount and brings DTI into range. When PMI rates are punitive (low credit + low down combines into expensive PMI). When you're psychologically averse to debt and the difference in returns isn't worth the stress.
Your own savings (seasoned 60+ days). Gift funds from family (need a gift letter; can't be a loan in disguise). Retirement account loans (counts against DTI). Sale of stock or another asset (need paper trail). Down payment assistance programs vary by state and often layer on top of FHA. Document the source before house-hunting.
Down payment assistance is more available than most buyers assume, and it isn’t only for first-time buyers — many programs define “first-time” as not having owned in three years, which brings a lot of people back into eligibility.
Assistance generally comes in four shapes. Grants don’t have to be repaid. Forgivable second loans are written off after you’ve lived in the home for a set period, commonly five to ten years. Deferred seconds are repaid when you sell or refinance, with no monthly payment in the meantime. And repayable seconds are a straightforward second mortgage at a below-market rate.
Programs run at state, county and city level, and are usually administered by a state housing finance agency. In the states we lend in, that means TDHCA and TSAHC in Texas, Florida Housing, CalHFA in California, CHFA in Colorado, MassHousing in Massachusetts and Georgia Dream in Georgia. Most layer on top of an FHA or conventional loan rather than replacing it.
Two things to know before you plan around one. Programs have income limits and purchase-price caps that vary by county, and many require a homebuyer education course that takes a few hours. Funding also runs out — some programs are first-come and pause mid-year. Check availability early rather than assuming it will be there at offer time.
Not every lender is approved for every program. Ask before you’re under contract.
As little as 0% with a VA or USDA loan if you’re eligible, 3.5% with FHA, and 3–5% with a conventional loan. Twenty percent is the threshold that avoids PMI on a conventional loan, but it’s a threshold, not a requirement.
No. Twenty percent avoids private mortgage insurance on a conventional loan, which is where the rule of thumb comes from, but every major loan program permits less. Waiting to reach 20% in a rising market often costs more in rent and forgone equity than the PMI would have.
Down payment assistance is a grant or second loan from a state, county or city program that covers part of your down payment and sometimes closing costs. It comes as grants, forgivable loans, deferred loans, or low-rate repayable seconds, and usually layers on top of an FHA or conventional first mortgage.
Most programs set an income limit and a purchase-price cap that vary by county, and many require a homebuyer education course. “First-time buyer” is commonly defined as not having owned a home in the past three years, so previous homeowners are frequently eligible. Not every lender is approved for every program, so ask before going under contract.
Your own seasoned savings, gift funds from family with a documented gift letter, proceeds from selling an asset with a paper trail, a loan against a retirement account (which counts against your debt-to-income), or a down payment assistance program. Lenders verify the source, so document it before you start house-hunting rather than after.
More down means a lower payment and no PMI at 20%, but the cash becomes illiquid. If you could earn more on that money elsewhere, or if putting it down would leave you without an emergency fund, less down is usually the better trade — illiquidity is more expensive than PMI when something goes wrong.
The calculator above answers it for your savings rate, and it also shows the part people miss: in a rising market the target moves while you save. A 20% target on a home appreciating 3% a year grows by roughly $8,000 annually on a $400,000 house, which is why the smaller-down-payment path sometimes gets you there sooner.