One of the biggest homebuying myths is that you need 20% for a down payment. Many buyers put off buying a home because they think they need to save a large and daunting sum. The truth is most buyers put down far less. Depending on your loan type, financial situation and goals, your down payment could be as low as 3% — or even zero.
Why the 20% down payment myth persists
The idea that you need a 20% down payment comes from conventional loans. If you put down less than 20%, you typically have to pay private mortgage insurance (PMI). A lot of people assume PMI is a bad thing and should be avoided at all costs. But this is not true. PMI allows buyers to purchase homes sooner rather than waiting to save a full 20%.
Historically, a 20% down payment also reduced risk for lenders. It gave homeowners immediate equity and lower monthly payments. While these undoubtedly are benefits, they are by no means requirements. Many loan programs allow for much smaller down payments, making homeownership more accessible.
Low down payment loan options
Most buyers today use loan programs that require far less than 20%. A conventional loan can require as little as 3% down for qualified buyers. FHA loans require 3.5% down, making them a common choice for first-time buyers. VA and USDA loans offer zero down payment options for eligible buyers, removing a major barrier to homeownership. If you live in Washington state, you may be eligible for zero-down loans through lenders that partner with the Washington State Housing Finance Commission.
Each loan type has different requirements, but the key takeaway is that buyers have options. Putting down less than 20% does not mean you are making a bad financial decision. In many cases, it allows you to start building equity sooner rather than spending years trying to save that large sum.
How down payment size affects your mortgage
Your down payment affects your monthly mortgage payment, loan terms and upfront costs. A larger down payment lowers your loan amount, which can reduce your monthly payment and total interest paid over time. It can also help you avoid PMI, which is typically required when putting down less than 20%.
A smaller down payment means a higher loan amount, which increases your monthly payment. PMI will likely be required, but, in most cases, it can be removed once you reach 20% equity. While a higher monthly payment may seem like a downside, it often makes more sense than waiting years to save more.
Should you wait to save a larger down payment?
Many buyers assume waiting until they have 20% down is the smarter financial move. But in a market where home prices are rising, waiting could actually cost more in the long run. If home prices increase while you are taking time to save, the amount you need for 20% keeps growing. In some cases, buyers who wait end up paying more for the same home.
Since 2012, Seattle home values have on average increased 8% per year. As of March 2025, the median home price is $850,000, which means 20% down = $170,000. Let’s say you can save $60,000/year. It will take you almost three years to save 20%. But now the average house is $1.07 million instead of $850,000. This means you would have paid rent for three years and lost out on over $150,000 in equity!
Interest rates also play a role. If rates rise while you save, your monthly payment could be higher even with a larger down payment. Instead of focusing only on the percentage down, buyers should consider the full picture, including home prices, interest rates and personal financial goals.
How to determine the right down payment for you
There is no one-size-fits-all answer for how much to put down. You need to consider your financial situation, how long you plan to stay in your home and what makes sense for your budget.
If a smaller down payment allows you to buy sooner and start building equity, it may be the right move. If you have the funds for 20% and want to avoid PMI, that also could be a good option. The key is understanding your choices and making an informed decision based on your long-term goals.
The first step is to talk to a high-quality mortgage lender — and remember not all mortgage lenders are created equal.