Rosie Cima, Nerdwallet
Especially in today’s housing market, cutting down payments for homes together is a challenge. But one lasting financial myth is to make it more difficult than necessary.
According to Nerdwallet’s 2025 Home Buyer Report, 62% of Americans say they need a 20% down payment to buy a home.
But that’s not the case. And this misconception could unnecessarily stop them, as 33% of non-home owners say that they don’t have enough money for their down payments is preventing them from buying a home at this time. there is.
There are many reasons why you might want to cut your purchase price by more than 20% when purchasing a home. But you don’t have to, and there are many options available for low-down payment mortgages. If you’re one of the 15% of Americans who say the survey says they plan to buy a house next year, you can pay to know about them.
Amazingly lasting myth
This myth predominates across the majority of age groups and educational levels. Research shows that even 60% of homeowners think they need a 20% down payment. This is surprising as a survey conducted by the National Association of Realtors shows that all home buyers have a median down payment of less than 20%.
This myth has been with us for a long time – Neldwallet first asked in 2017 – and over the past decades the house has become much more expensive. The down payment of 20% of average home sales in the 1990s was approximately 80% of median household income per year. However, for the past few years, the same 20% down payment will require more than 100% of income. According to the National Association of Realtors, it’s no surprise that the recent median down payments are 18% for all buyers and 9% for first-time buyers.
Loans with lower loans usually require special insurance
You don’t need a 20% down payment to buy a home, but a few extra steps are required for a small number of down payments. Lenders who issue traditional mortgages typically require private mortgage insurance (PMI) if their down payment is less than 20%.
PMI protects lenders by offsetting the additional risks they take when lenders accept less down payments. If you stop paying your loan, this insurance can pay a portion of what you still owe to the lender. That said, if you’re the default on your mortgage, this insurance won’t protect you at all. Defaults will damage your credit and put you at risk of foreclosure.
PMIs are usually paid as part of your monthly mortgage payment. With a traditional mortgage, the lender can request that you cancel when you reach 20% stake at home.
How low can you go?
The minimum down payment that a lender actually needs depends on the type of mortgage you are getting. For example, qualified buyers with potential Fannie Mae HomeReady and Freddie Mac Home offer traditional mortgages with a down payment of 3%.
FHA loans backed by the Federal Housing Administration can make payments as low as 3.5%. USDA loans for people living in rural areas, VA loans for veterans, and other loans do not need to cut down on your money (also known as a 0% down payment). However, in addition to mortgage insurance, these low-down payment mortgages can have other upfront fees.
Down payment assistance programs (often financing or loans from government agencies) can also help you cover up the upfront costs of homeownership.
If you can afford them, the bigger down payment is still good
That said, there are many benefits to a massive decline. The more money you spend, the less you borrow. This means that you can easily repay less or in a short period of time. A down payment calculator can help explain this.
A larger down payment may allow you to earn a lower interest rate. Also, putting more money means quickly owning more share of the home’s capital. A mortgage is a debt, but the fairness you actually have at home is an asset.
For many reasons, a larger down payment is better, but you don’t need to buy a home. And with a lower down payment, you can save more money on your hands. Once you become a homeowner, it is especially important to set aside money for unexpected expenses.
