One of the biggest reasons people delay buying a home isn’t credit, income, or even interest rates. It’s a belief they’ve carried for years: “I can’t buy until I have 20% down.”

That idea has stopped countless capable buyers, especially first-time buyers and self-employed earners—from even starting the conversation. The truth is far less intimidating. While putting 20% down can be helpful in certain situations, it is not a requirement for most buyers today. In many cases, waiting to save that much can actually cost you more in the long run.

Let’s break down where the 20% myth came from, why it still lingers, and what realistic, lower down payment options actually look like in today’s market.

Where the 20% Down Payment Myth Came From

The idea of putting 20% down didn’t come out of nowhere. Traditionally, lenders viewed a 20% down payment as a way to reduce their risk. Buyers who invested more upfront were seen as less likely to default, and lenders rewarded that with better terms.

A 20% down payment can:

• Lower your monthly payment
• Eliminate private mortgage insurance (PMI) on most loans
• Reduce the total interest paid over time

Those benefits are real but they don’t mean 20% is the only smart or responsible path. Housing markets, lending rules, and buyer profiles have changed dramatically. Today’s mortgage options reflect that reality.

What a Down Payment Really Does (and What It Doesn’t)

A down payment is simply the portion of the home’s purchase price you pay upfront. The rest is financed through your mortgage. A larger down payment can reduce your loan size, but it doesn’t automatically make a loan “better” or more affordable for every buyer.

In high-cost areas especially, waiting years to save 20% can mean:

• Paying rising rents with nothing to show for it
• Missing out on appreciation
• Delaying financial stability tied to homeownership

The key isn’t hitting a magic percentage. It’s choosing a structure that fits your financial reality, your timeline, and your long-term plans.

FHA Loans: A Flexible Low Down Payment Option

FHA loans are one of the most common alternatives to the 20% down assumption. Backed by the Federal Housing Administration, these loans allow buyers to put down as little as 3.5%.

FHA loans are often a good fit for:

• First-time homebuyers
• Buyers with limited savings
• Buyers with moderate credit scores
• Self-employed borrowers who need flexibility

Because FHA loans are government-backed, lenders are often more accommodating when it comes to credit history. The tradeoff is mortgage insurance, which is required on FHA loans regardless of down payment amount. That said, for many buyers, the ability to buy sooner outweighs the added monthly cost.

VA Loans: Zero Down for Eligible Veterans

For veterans, active-duty service members, and some surviving spouses, VA loans can be a game changer. These loans offer 100% financing, meaning no down payment is required at all.

Key advantages of VA loans include:

• No down payment
• No private mortgage insurance
• Competitive interest rates
• Flexible credit guidelines

VA loans do include a funding fee, but in many cases it can be rolled into the loan amount. For eligible buyers, this program remains one of the strongest home financing tools available and yet it’s often underutilized.

USDA Loans: Zero Down for Eligible Areas

USDA loans are another option that surprises many buyers. Designed to support homeownership in eligible rural and suburban areas, these loans also allow for zero down payment.

USDA loans typically require:

• The home to be in an eligible location
• Household income within program limits
• The property to be a primary residence

While the term “rural” can be misleading, many suburban areas qualify. These loans include a modest guarantee fee, but for buyers who qualify, they can dramatically lower the upfront cost of buying a home.

Conventional Loans Don’t Always Mean 20% Down

A common misconception is that conventional loans automatically require large down payments. In reality, there are conventional programs that allow for as little as 3% down.

Programs like Fannie Mae’s HomeReady and Freddie Mac’s Home Possible are designed to support low- to moderate-income buyers and first-time homeowners. These programs often allow:

• Reduced down payments
• Flexible sources for funds
• Competitive interest rates

Private mortgage insurance is typically required when putting less than 20% down, but unlike FHA loans, PMI on conventional loans can usually be removed once sufficient equity is reached.

Understanding Private Mortgage Insurance (PMI)

PMI tends to scare buyers more than it should. It’s not a penalty, it’s simply a tool lenders use to offset risk when a buyer puts less than 20% down.

Important things to know about PMI:

• It does not last forever
• It can often be removed once you reach 20% equity
• The cost varies based on credit score and loan type

In many cases, PMI costs less than people expect. When weighed against rising home prices or years of rent payments, PMI is often a temporary and manageable tradeoff.

Down Payment Assistance Programs: An Overlooked Resource

Many buyers don’t realize how many down payment assistance programs exist at the state and local level. These programs can provide:

• Grants
• Deferred-payment loans
• Low-interest assistance loans

Some programs help with the down payment, others assist with closing costs, and some do both. Eligibility varies by location, income, and purchase type, but these programs can significantly reduce the amount of cash needed upfront.

They do require paperwork and guidance, which is why working with an experienced mortgage professional is important. When used correctly, these programs can be the difference between waiting and buying now.

When Waiting for 20% Can Actually Hurt You

Waiting to save a large down payment feels responsible but it’s not always financially optimal.

Delaying a purchase can mean:

• Paying higher prices later
• Losing out on appreciation
• Facing stricter lending rules in the future
• Continuing to rent at increasing costs

For many buyers, especially in competitive markets, buying sooner with a smaller down payment can lead to greater long-term stability, even with mortgage insurance included.

Preparing Yourself for a Smart Purchase

Whether you plan to put 3%, 5%, or 10% down, preparation matters.

Focus on:

• Improving your credit profile
• Keeping debt manageable
• Avoiding large purchases before applying
• Understanding your full monthly budget

A good mortgage strategy isn’t just about getting approved, it’s about setting yourself up to feel comfortable after you move in.

You Have More Options Than You Think

The idea that you must put 20% down to buy a home is outdated. FHA loans, VA loans, USDA loans, modern conventional programs, and down payment assistance options have made homeownership more accessible than ever.

The best path forward isn’t universal. It depends on your income, your savings, your goals, and your timeline. That’s why having a conversation early, before you self-disqualify, is so important.

If you’re buying or refinancing in Los Angeles or Southern California, Shannon Christenot can walk you through realistic options based on your actual financial picture. No pressure. No assumptions. Just clear guidance so you can make informed decisions with confidence.