How Much to Put Down on a House: 3%, 10%, or 20%?

The advice to put 20% down on a house has been around for decades — but for many buyers today, it's not the right move, or even possible. The real question isn't 'how much can I put down?' but 'how much should I put down given my specific situation?'

The Case for 20% Down

• No PMI: You avoid Private Mortgage Insurance, which typically costs 0.5–1.5% of the loan per year.
• Lower monthly payment: A larger down payment means a smaller loan and lower interest charges over time.
• Better interest rate: Lenders sometimes offer slightly better rates to borrowers with more equity.
• More competitive offer: In hot markets, sellers may prefer buyers with larger down payments (fewer financing contingencies).
• Immediate equity buffer: Less risk of going underwater if home values drop.

The Case Against Waiting for 20%

While saving, you're paying rent instead of building equity. If home prices rise 5–7% per year, a $400,000 home becomes $420,000–$428,000 in 12 months — your additional savings may be outpaced by price appreciation. The opportunity cost of waiting can exceed the cost of PMI.

Low Down Payment Options

• FHA loans: As low as 3.5% down with a 580+ credit score. MIP (mortgage insurance) is required for the life of the loan in most cases.
• Conventional 97: 3% down for first-time buyers or income-qualified buyers. PMI required until 20% equity.
• VA loans: 0% down for eligible veterans and active-duty military. No PMI.
• USDA loans: 0% down for homes in eligible rural areas. Income limits apply.
• HomeReady / Home Possible: 3% down, designed for low-to-moderate income buyers.

The PMI Math

On a $350,000 loan, PMI at 0.8% costs about $233/month. Once you reach 20% equity (through payments and appreciation), you can request cancellation. At 22% equity, lenders must cancel it automatically. The total PMI cost depends on how fast you build equity — often 5–9 years.

What's Right for You?

• Put 20% down if: You have the savings, won't deplete your emergency fund, and plan to stay 7+ years.
• Put 10% down if: You want to reduce PMI costs while keeping some liquidity.
• Put 3–5% down if: You're in a rising market, have a stable income, and want to start building equity now.
• Never: Clean out your emergency fund for a down payment. Keep 3–6 months of expenses liquid after closing.