The most expensive myth in homebuying is that you need 20% down. Plenty of people who could own today are still renting because they are saving toward a number they do not actually need to hit.
Where 20% comes from
Twenty percent is the threshold that lets you avoid private mortgage insurance on a conventional loan. It is a real milestone — but it is a preference, not a requirement. Several programs let you buy with far less.
The real minimums
- · **Conventional:** as little as 3% down for many first-time buyers.
- · **FHA:** 3.5% down with qualifying credit.
- · **VA:** 0% down for eligible service members and veterans.
- · **USDA:** 0% down in eligible areas, subject to income limits.
The right program depends on your credit, the property, where it is located, and your service history — not a one-size answer.
The PMI tradeoff
Put less than 20% down on a conventional loan and you will generally pay private mortgage insurance until you reach a set equity threshold, at which point it can usually be removed. PMI is a real monthly cost, but it is also what lets you buy years earlier. The honest question is whether buying sooner — and building equity instead of paying rent — outweighs the temporary insurance cost. For many buyers in an appreciating market, it does; for some it does not. The math is personal.
Down-payment assistance and gift funds
Many first-time buyers qualify for down-payment-assistance programs that provide grants or second loans toward the down payment, with eligibility tied to income and location. Separately, most programs allow gift funds from family — provided the gift is properly documented with a gift letter and a clean paper trail. The rules on who can gift and how it is sourced vary by program, so confirm before the money moves.
Run the actual numbers
It is tempting to compare a smaller down payment only by the monthly payment, but factor in PMI, the loan amount, and how long you plan to stay. Rates, products, and program terms here are illustrative and subject to change; this is not a commitment to lend, and not every applicant will qualify.
The Alliance take
We would rather show you that you can buy now with 3% to 5% down — and let you decide — than watch you spend three more years chasing 20% while prices and rents move. Sometimes waiting is right. But it should be a choice you make with real numbers, not a myth.
Curious where you stand? Start a pre-approval and we will lay out every program you qualify for.