Should You Buy a Home With Less Than 20% Down?

Anne Hale
Sep 9, 2025
2 min read

For decades, the rule of thumb in real estate was to save at least 20% of a home’s purchase price for the down payment. While that’s still an excellent goal, it’s no longer a hard requirement for becoming a homeowner. Many buyers today successfully purchase homes with far less—and sometimes even as little as 3% down. But is it the right choice for you? Let’s break it down.

The Benefits of Putting 20% Down

Lower Monthly Payments: A larger down payment reduces the amount you borrow, which lowers your mortgage payment.
Avoiding PMI: With 20% down, you typically don’t have to pay private mortgage insurance (PMI), which can save hundreds of dollars per month.
More Equity Right Away: You start out with more ownership in your home, giving you a financial cushion if the market shifts.

The Advantages of Buying With Less Than 20% Down

Faster Path to Homeownership: Waiting years to save 20% may cause you to miss out on rising home prices.
More Cash Flexibility: Keeping some of your savings available for emergencies, renovations, or investments can be smarter than tying it all up in your home.
Low Down Payment Programs: FHA, VA, USDA, and some conventional loans allow for down payments as low as 0–5%, especially helpful for first-time buyers.

Things to Watch Out For

PMI Costs: If you put down less than 20%, most lenders require PMI until you reach 20% equity, which increases your monthly expenses.
Higher Interest Rates: In some cases, lower down payments can lead to slightly higher interest rates.
Less Immediate Equity: If home values dip right after you buy, you may owe close to what your home is worth.

Final Thoughts

You don’t need 20% down to buy a home, and for many buyers, waiting to save that much may actually work against them. The best choice depends on your financial situation, local market conditions, and long-term goals. A skilled realtor and mortgage advisor can help you weigh your options and choose the strategy that puts you in the best position.