Picture this: You’re scrolling through home listings on a lazy Sunday afternoon, coffee in hand, dreaming about that perfect place to call your own. You find a cozy three-bedroom with a backyard that’s just right for summer barbecues. The price tag? $350,000. Your brain immediately does the math, 20% down means you’d need $70,000 saved up before you can even think about making an offer.

And just like that, the dream deflates a little.

Here’s the thing, though: that mental math is based on one of the most persistent myths in the entire homebuying world. The idea that you need 20% down to buy a home has been holding back potential homeowners for decades, and it’s time we set the record straight.

Where Did This 20% Rule Even Come From?

Let’s rewind a bit. The 20% down payment standard has roots in traditional lending practices from an era when mortgage options were far more limited. Back then, lenders determined that requiring a fifth of a home’s purchase price upfront was a good way to balance their risk while ensuring borrowers had enough skin in the game to stay committed to their payments.

It made sense at the time. But here’s what happened next: the mortgage industry evolved. Lenders created private mortgage insurance (PMI) specifically to help borrowers who couldn’t afford that hefty 20% down payment. This innovation opened doors for millions of people to become homeowners without needing a small fortune saved up first.

Yet somehow, the 20% myth stuck around like that one song you can’t get out of your head.

The Reality: What Buyers Are Actually Putting Down

If you think everyone out there is saving for years to hit that 20% mark, the numbers tell a very different story.

According to the National Association of Realtors, the median down payment for first-time homebuyers is just 9%. For all buyers combined, it’s around 18%, still under the mythical 20% threshold. That means the majority of people buying homes right now aren’t waiting until they’ve stockpiled a massive down payment.

And here’s where it gets even more interesting: depending on the type of loan you qualify for, your required down payment could be significantly lower than you ever imagined.

Breaking Down Your Low Down Payment Options

One of the best-kept secrets in the mortgage world is just how many programs exist for buyers who don’t have 20% saved. Let’s walk through some of the most popular options:

Conventional Loans: As Low as 3% Down

Contrary to popular belief, conventional loans don’t require 20% down. Many lenders offer conventional mortgage programs with down payments as low as 3% for qualified buyers. Yes, you read that right, three percent.

On a $300,000 home, that’s $9,000 instead of $60,000. That’s a game-changing difference for most families.

FHA Loans: 3.5% Down Payment

FHA loans, backed by the Federal Housing Administration, are a go-to option for first-time buyers and those with less-than-perfect credit. With a credit score of 580 or higher, you can qualify for a down payment of just 3.5%.

These loans also tend to have more flexible qualification requirements, making homeownership accessible to a wider range of buyers.

VA Loans: Zero Down Payment

If you’re an active-duty service member, veteran, or eligible surviving spouse, VA loans are one of the most powerful homebuying tools available. The best part? No down payment required. That’s right, 0% down.

VA loans also come without PMI requirements, which can save you hundreds of dollars every month.

USDA Loans: Another Zero-Down Option

USDA loans are designed for buyers in eligible rural and suburban areas, and they also offer no down payment for qualified applicants. Income limits apply, but if you’re looking to buy outside of major metropolitan areas, this program could be your ticket to homeownership.

But Wait, What About PMI?

Okay, let’s address the elephant in the room. One reason the 20% down payment advice persists is because of private mortgage insurance, or PMI.

When you put down less than 20% on a conventional loan, lenders typically require you to pay PMI. This insurance protects the lender (not you) in case you default on the loan. It usually costs between 0.5% and 1% of your loan amount annually, added to your monthly payment.

Here’s the balanced perspective: PMI isn’t necessarily a bad thing. Yes, it’s an extra cost. But for many buyers, paying PMI for a few years is a worthwhile trade-off that allows them to:

• Buy a home sooner instead of waiting years to save 20%
• Start building equity now rather than continuing to pay rent
• Take advantage of current market conditions before prices potentially rise further

And here’s a key detail many people don’t realize: PMI isn’t forever. Once you’ve built up 20% equity in your home: through payments and/or appreciation: you can request to have PMI removed from your conventional loan.

The Hidden Cost of Waiting

While we’re weighing the pros and cons, let’s talk about opportunity cost. Every year you spend saving for that 20% down payment is a year you’re:

• Paying rent instead of building equity
• Missing out on potential home appreciation
• Delaying the stability and freedom that comes with owning your own place

Home prices have historically trended upward over time. That $350,000 home today might be $375,000 or more in a couple of years. Meanwhile, you could have been building equity and enjoying homeownership instead of chasing a moving target.

Down Payment Assistance: The Resource Most Buyers Don’t Know About

Here’s a statistic that might surprise you: 80% of first-time homebuyers qualify for some form of down payment assistance program. Yet only about 13% actually take advantage of these programs.

That’s a massive disconnect.

Down payment assistance programs exist at the federal, state, and local levels. They can come in the form of:

• Grants (free money that doesn’t need to be repaid)
• Forgivable loans (loans that are forgiven after you live in the home for a certain period)
• Low-interest loans (secondary loans with favorable terms)

These programs can provide thousands of dollars toward your down payment and closing costs. The catch? You have to know they exist and actually apply for them.

So, What’s the Right Down Payment for You?

Here’s the honest truth: there’s no one-size-fits-all answer. The “right” down payment depends on your individual circumstances, including:

• Your current savings and monthly budget
• Your credit score and debt-to-income ratio
• How long you plan to stay in the home
• Your comfort level with monthly payments
• Whether you qualify for special loan programs

For some buyers, putting down 20% makes sense: especially if you want to avoid PMI and secure the lowest possible monthly payment. For others, a 3% or 5% down payment is the smarter move, allowing them to buy sooner and keep cash reserves for emergencies, renovations, or other goals.

The key is working with a mortgage professional who can walk you through all your options and help you find the path that fits your life.

Ready to Explore Your Options?

If the 20% down payment myth has been holding you back from homeownership, consider this your permission slip to dream a little bigger. The mortgage landscape has evolved dramatically, and there are more paths to owning a home than ever before.

The best first step? Get pre-approved. A quick conversation with a loan officer can show you exactly what you qualify for and what your actual down payment options look like.

At NorthStar Home Loans, we’re here to help you navigate the process and find a loan that works for your situation: not some outdated rule of thumb. Reach out to our team anytime to start the conversation.

Your homeownership journey might be closer than you think.