Do I have to put 20% down on a house?

No. 20% is not a legal requirement and is not required by most loan products. Conventional loans allow as little as 3–5% down (with PMI). FHA loans require 3.5% minimum. VA loans and USDA loans allow 0% down for qualifying borrowers. The 20% threshold eliminates the need for private mortgage insurance (PMI), which is worth eliminating if you can reach it reasonably.

What is PMI and how much does it cost?

Private mortgage insurance (PMI) is required on conventional loans when the down payment is less than 20%. It protects the lender — not you — if you default. PMI typically costs 0.5–1.5% of the loan amount annually, or roughly $100–$200/month on a $250,000 loan. It is automatically removed once you reach 20% equity in your home (at your original purchase price), or you can request it earlier with a new appraisal showing 20% equity.

Is it worth waiting longer to save 20%?

In most markets, no. Waiting 3–5 extra years to accumulate 20% often costs more in missed appreciation than the PMI would have cost. Additionally, if home prices rise faster than you can save, 20% down becomes a moving target. The exception is if you are close to 20% and are in a stable or declining-price market — then a short additional wait may be worth it.

What is the minimum I should put down?

At minimum, enough to avoid being upside-down (owing more than the home is worth) in most market scenarios. For most buyers, 5–10% down is a reasonable starting point that maintains some equity buffer. Buying with 3–3.5% down leaves very little room before negative equity — any market price decline could leave you underwater, which is problematic if you need to sell.

Should I drain savings to hit 20%?

No. Buying with 20% down and $0 in savings is riskier than buying with 10% down and a healthy emergency fund. The first year of homeownership regularly produces unexpected costs. A home purchase that depletes savings leaves no buffer for these events.

Should I Put 20% Down on a House?

What 20% Down Actually Gets You

Putting 20% down on a home purchase:

Eliminates PMI — avoids an extra 0.5–1.5% annual cost
Reduces your monthly payment — you are borrowing less
Reduces total interest paid — smaller loan, less interest over time
May improve your rate — lenders offer marginally better rates with more skin in the game
Creates immediate equity buffer — protection against minor price declines

These are real benefits. The question is whether achieving 20% justifies the tradeoffs — particularly the time cost.

The PMI Cost Calculation

PMI on a $350,000 home with 10% down ($315,000 loan):

PMI rate: ~0.7% of loan amount annually
Annual PMI: ~$2,205
Monthly PMI: ~$184

PMI is removed when you reach 20% equity based on original purchase price. On a standard 30-year mortgage, that typically happens around year 9–11 through normal amortization. You can request cancellation earlier with a new appraisal showing the home’s current value has appreciated to where you have 20% equity (LTV of 80%).

Total PMI cost under standard amortization: ~$2,000/year × ~10 years = ~$20,000

This sounds large — but compared to the alternative of waiting several more years to save the additional down payment, the math often still favors buying sooner with PMI.

The Wait-vs-Buy Comparison

Scenario: You have $35,000 saved. A home costs $350,000.

$35,000 = 10% down — you can buy now with PMI
$70,000 = 20% down — you need $35,000 more; at $12,000/year savings rate, that is ~3 more years

What happens in 3 years of waiting in a flat/modest market:

PMI avoided: ~$6,000 (3 years of $2,000/year)
Estimated home price appreciation (3% annually for 3 years): ~$32,000
Net position of waiting: you paid $35,000 extra to buy and avoided $6,000 in PMI = -$29,000 vs. buying now

In an appreciating market, delaying to avoid PMI usually costs more than the PMI itself.

Where waiting makes sense: Markets that are flat or declining, or buyers who are only 12–18 months away from 20% and can save aggressively.

Down Payment Options by Loan Type

Loan Type	Minimum Down Payment	PMI Equivalent	Notes
Conventional	3–5%	PMI required under 20%	Best rates with 20% down
FHA	3.5%	MIP for life (loan)	MIP does not auto-cancel on recent loans unless you refinance
VA	0%	None	Veterans/military; excellent terms
USDA	0%	Annual fees apply	Rural areas only; income limits

Note on FHA MIP: FHA mortgage insurance premium (MIP) behaves differently from conventional PMI. For FHA loans with less than 10% down, MIP lasts for the life of the loan — it does not terminate automatically when you reach 20% equity. This is a meaningful cost difference vs. conventional PMI.

The Post-Purchase Reserve Rule

An often-cited guideline: After closing, you should have at least 3–6 months of living expenses remaining.

This means the down payment choice is constrained by:

How much cash you have available
Minus closing costs (2–3% of purchase price)
Minus post-purchase emergency reserve

Example:

Total savings: $80,000
Home price: $350,000
Closing costs: ~$8,750 (2.5%)
Post-close reserve target: ~$15,000 (4 months at $3,500 essential expenses)
Available for down payment: $80,000 − $8,750 − $15,000 = $56,250 (16% down)

At 16% down, you would pay PMI for approximately 2–4 years until hitting 20% equity. That is a manageable cost for a financially sound purchase.