Do You Need 20% Down to Buy a House? Let’s Kill That Myth.

I think it's time we kill something: the myth that you need 20% down to buy a home. I hear this one all the time, especially from first-time home buyers who assume homeownership is years away because they haven't saved tens of thousands of dollars for a down payment. Twenty percent can certainly be a useful amount to put down, but it is absolutely not a universal requirement for buying a home. So, how much do you actually need?

Some Home Buyers Can Put 0% Down

Depending on your situation and the property you're buying, your minimum down payment could actually be zero. Eligible veterans and service members may qualify for a VA loan with no down payment, while USDA loans can also offer 0% down financing for eligible buyers purchasing qualifying properties in eligible rural areas. That doesn't mean everyone qualifies for either program, but it does mean that "you need 20% down" falls apart pretty quickly.

FHA Loans Can Start at 3.5% Down

If VA or USDA financing isn't an option, an FHA loan may be. FHA loans can have a minimum down payment of 3.5%, depending on your qualifications. On a $400,000 home, 20% would be $80,000, while a 3.5% down payment would be $14,000. That's a pretty significant difference, especially for a first-time buyer who has a solid income but hasn't had years to build up a giant pile of cash.

Conventional Loans Don't Necessarily Require 20% Either

Conventional financing doesn't automatically mean 20% down either. Some conventional loan programs allow qualified buyers to put down as little as 3%. There are tradeoffs to putting less money down, and the lowest possible down payment isn't automatically the best financial choice for every buyer. Your interest rate, mortgage insurance, monthly payment, cash reserves, credit, and other factors all matter, which is why this is a conversation to have with a good lender rather than choosing a percentage because someone once told you that's what you're "supposed" to do. The point is that 20% is one option, not the entry fee for homeownership.

Don't Forget About Closing Costs

Your down payment also isn't the only cash you'll potentially need to buy a house. There are closing costs to consider, which can add another 1% to 5% of the home's value depending on the transaction. But even that number isn't necessarily the amount you personally need to have sitting in your bank account. Depending on the market, loan program, property, and terms of your offer, there may be opportunities to negotiate seller contributions toward allowable closing costs.

This is also why planning ahead matters. Instead of deciding, "I have $30,000, therefore I can put $30,000 down," we need to look at the entire transaction and decide how that money can work best for you. Putting every dollar you have into your down payment isn't necessarily a great plan if it leaves you with nothing for closing costs, moving expenses, repairs, or an emergency fund after you get the keys.

Oregon Buyers May Have Down Payment Assistance Options Too

And we haven't even gotten to home buyer assistance programs. There are programs available in Oregon and in the Portland area that may help eligible buyers with down payments, closing costs, or both. Eligibility varies, and these programs can have requirements around income, location, property type, home buyer education, or the financing you use.

They're not free money available to every buyer, but they're absolutely worth investigating before deciding that you can't afford to buy. This is one of the reasons I don't want someone to spend three years sitting on the sidelines because they think they need to save 20%. You might. You might not. Find out what your actual options are first.

So, How Much Do You Actually Need to Buy a House?

There isn't one percentage that applies to everyone. Depending on the buyer and loan program, your minimum down payment might be 0%, 3%, 3.5%, 5%, 10%, 20%, or something else entirely. You'll also need to consider closing costs and how much money you want to keep in reserves after closing.

If you're thinking about buying a home in Oregon, don't let the down payment be the end of the conversation before the conversation even starts. Talk to a lender, talk to your real estate agent, look at the programs you may qualify for, and figure out what actually works for your finances. The idea that everyone needs 20% down? That myth has got to go.