How much do I need for a house down payment?
Last updated August 2026
Short answer
The 20% myth delays purchases by years for buyers who could have qualified sooner, and it obscures the two costs that actually decide affordability.
What each loan type asks for
Conventional loans start around 3% for qualifying buyers, with private mortgage insurance until sufficient equity accumulates.
FHA loans start at 3.5% with their own mortgage insurance premium, which lasts longer than conventional PMI in many cases.
VA loans for eligible service members and veterans, and USDA loans in designated rural areas, can require no down payment at all.
What 20% actually buys
Avoidance of private mortgage insurance on a conventional loan, which is a monthly cost that buys the lender protection rather than you.
A smaller loan, and therefore lower monthly payments and less interest over the life of the mortgage.
Frequently a better rate, since lenders price risk into the interest they charge.
Closing costs are separate
Lender origination fees, appraisal, title insurance, recording fees, and prepaid property tax and insurance.
They commonly total a few percent of the purchase price and are due at closing alongside the down payment.
A buyer who saves exactly the down payment and nothing else discovers this at the worst possible moment, which is why the target should include them.
Try it in Walnut
Walnut connects to your brokerage and reads what you hold, which is how you check that money needed within a few years is not sitting in equities.
Where to keep the money
Cash or cash equivalents for any purchase within a few years: a savings account, a money market fund or short Treasury bills.
Equities are the wrong home for a deposit with a date attached, because a 20% fall in the wrong quarter cancels the purchase.
The foregone return is the price of certainty, and on a horizon this short it is a price worth paying.
Retirement money as a source
Roth IRA contributions can be withdrawn at any time without tax or penalty, which makes them the least damaging retirement source.
IRAs allow up to $10,000 lifetime toward a first home as an exception to the 10% additional tax, though income tax still applies to a traditional IRA withdrawal.
Both permanently reduce contribution room you cannot get back, which is a genuine cost rather than a technicality.
What to have left afterwards
An emergency fund, because a house generates unplanned expenses immediately and a lender will approve you without one.
Money for the first round of costs: appliances, repairs, and whatever the inspection flagged but did not stop the sale.
Buying at the top of what you are approved for, with nothing behind it, is how the first year becomes credit card debt.
Sources
Loan types, mortgage insurance and closing cost expectations are published by the Consumer Financial Protection Bureau at Owning a Home. The first-home IRA exception is in IRS Publication 590-B. Walnut is informational and is not an investment adviser. This guide is educational and not personalized financial advice.
FAQ
How much do I need for a down payment?
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Less than most people think. Conventional loans go as low as 3% for qualifying buyers and FHA loans to 3.5%. Twenty percent is not a requirement; it is the level at which private mortgage insurance is generally avoided.
Why is 20% the number everyone quotes?
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Because at 20% equity a conventional lender generally does not require private mortgage insurance. Below it, PMI is an additional monthly cost until enough equity accumulates, which is a real expense rather than a rule.
What are closing costs?
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Lender fees, appraisal, title insurance, recording fees, prepaid taxes and insurance. They typically run a few percent of the purchase price and are due at closing, on top of the down payment.
Should I put down less and invest the difference?
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It depends on the mortgage rate against your expected return, and on how you would actually behave. A low fixed rate makes the argument stronger; a high one makes paying down debt the better guaranteed return.
Can I use retirement money?
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A Roth IRA allows contributions to be withdrawn at any time without tax or penalty, and IRAs allow up to $10,000 lifetime toward a first home as an exception to the additional tax. Both cost you retirement room you cannot replace.
Where should the down payment be held?
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In cash or cash equivalents if the purchase is within a few years. A savings account, money market fund or short Treasury bills. A deposit invested in equities can fall 20% in the months before you need it.
What about VA and USDA loans?
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Both can require no down payment at all for eligible buyers. VA loans are for qualifying service members and veterans; USDA loans apply in designated rural areas with income limits.
How much should I have left afterwards?
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Enough for an emergency fund plus immediate costs. Buying a house with nothing left is how a boiler failure becomes credit card debt in the first year, and lenders will not stop you doing it.
Do down payment assistance programmes exist?
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Yes, run by states, counties and cities, frequently for first-time buyers within income limits. They take the form of grants, forgivable loans or second mortgages, and lenders in the area usually know which ones apply. They are underused because buyers assume they will not qualify.
Can I remove PMI later?
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Usually yes on a conventional loan. It generally terminates automatically once the balance reaches a set share of the original value, and it can often be cancelled earlier on request once you have enough equity. FHA mortgage insurance frequently lasts the life of the loan instead.