Jeni VanOrnum | Real Estate Insights & Education

The 20% down payment myth stops many first-time buyers from even starting their search. Let’s clear up the confusion.

The 20% Myth

While 20% down eliminates private mortgage insurance (PMI) on conventional loans, it’s not required for most loans.

Actual Down Payment Requirements

Conventional Loans: 3% minimum FHA Loans: 3.5% minimum (with 580+ credit score) VA Loans: 0% (for eligible veterans) USDA Loans: 0% (for eligible rural properties)

The PMI Trade-Off

Putting down less than 20% typically requires PMI, which costs 0.5-1% of the loan amount annually. However, getting into a home sooner might be worth this cost.

Calculating Your Down Payment

On a $300,000 home:

• 3% down = $9,000
• 5% down = $15,000
• 10% down = $30,000
• 20% down = $60,000

Pros of Smaller Down Payments

• Enter homeownership sooner
• Keep savings for emergencies
• Invest funds elsewhere
• Take advantage of appreciation

Pros of Larger Down Payments

• Lower monthly payments
• Avoid or reduce PMI
• More equity immediately
• Stronger negotiating position
• Better interest rates

Sources for Down Payment

• Personal savings
• Gift funds from family
• Down payment assistance programs
• IRA withdrawal (up to $10,000 penalty-free for first-time buyers)
• Employer assistance programs

Consider Your Total Financial Picture

Don’t drain your emergency fund for a larger down payment. Maintain 3-6 months of expenses in savings.

Let’s Create Your Plan

I’ll help you understand how different down payment amounts affect your monthly budget and connect you with lenders offering various programs.