Down payment: Simple Essential Guide (2026)

Down payment is the focus of this guide. You don’t need 20% down to buy a house, and the first step is to find out what number you actually need. On a $400,000 home, 3.5% down is $14,000 and 20% down is $80,000, a gap of $66,000.

The National Association of Realtors 2025 buyer profile reports a median down payment of 10% for first-time buyers, 23% for repeat buyers and 19% for all buyers. HUD says an FHA down payment can be as low as 3.5% of the purchase price. Those are the real reference points, and in my view they’re a better starting target than an assumed 20%.

How Long Saving Takes

Do the Math for Your Own Goal

You can calculate your own by dividing your target by what you can save each month. As an assumed example, a 10% down payment on a $400,000 home is $40,000; saving $1,000 a month would take 40 months, or about 3.3 years, before interest.

How Different Targets Compare

With the same assumed $1,000 a month, 3.5% down ($14,000) takes 14 months, and 20% down ($80,000) takes 80 months. The target is the biggest lever.

The Trade-Off With Putting Less Down

What PMI Involves

Putting down less than 20% commonly means paying private mortgage insurance. The CFPB’s compliance bulletin on PMI describes when it ends. You can request cancellation in writing when the balance is scheduled to reach 80% of the original value (with a good payment history and other conditions), and it terminates automatically when the balance is scheduled to reach 78% of the original value, if you’re current.

PMI prices vary. As an assumed example only, if PMI cost 0.5% of a $300,000 loan per year, that would be $1,500 a year, or $125 a month. Get the actual figure from a lender’s estimate.

Weighing Waiting Against Buying Sooner

Waiting to avoid PMI has its own cost if prices rise, and also benefits if they fall or stay flat. As an assumed example, a 3% annual rise on a $350,000 home is $10,500 a year, so two more years of saving could add roughly $21,000 or more to the price. That’s an illustration with an assumed rate, not a forecast. In my view, it’s worth running the numbers for your own market before deciding.

Down Payment by Percentage and Price (Assumed Prices)

The table shows the down payment in dollars at four percentages for three assumed home prices. In parentheses is how many months it takes to save that amount at an assumed $1,000 a month, rounded up and before interest. The 3.5% row is the FHA minimum HUD describes, 10% is the NAR median for first-time buyers cited above, and 20% is the traditional benchmark.

Down payment	$300,000 home	$400,000 home	$500,000 home
3.5%	$10,500 (11 mo)	$14,000 (15 mo)	$17,500 (18 mo)
5%	$15,000 (15 mo)	$20,000 (20 mo)	$25,000 (25 mo)
10%	$30,000 (30 mo)	$40,000 (40 mo)	$50,000 (50 mo)
20%	$60,000 (60 mo)	$80,000 (80 mo)	$100,000 (100 mo)

Reading across a row shows what price does, and reading down a column shows what percentage does. For a $400,000 home, moving from 20% to 10% shortens the saving period by 40 months in this assumed example. I think that is the kind of trade-off worth pricing out with a lender, not guessing at.

A Worked Look at the PMI Thresholds

The CFPB bulletin cited above ties PMI cancellation to 80% of the original value and automatic termination to 78%. As an assumed example, take a $400,000 purchase with 3.5% down. The loan is $386,000. Eighty percent of the original value is $320,000 and 78% is $312,000. That means the balance needs to be paid down by $66,000 to reach the 80% point and $74,000 to reach the 78% point, either on the scheduled payments or sooner with extra payments. How long that takes depends on the interest rate and the loan term, and your loan documents show the actual schedule.

That gives you a concrete target to plan around: a date or a balance at which the insurance cost goes away, which is a more useful frame than treating PMI as a permanent cost.

Getting Started With Real Numbers

The CFPB’s home-buying pages suggest starting early, exploring loan choices and meeting with lenders, then getting official loan offers, comparing your options and choosing the one that is right for you (CFPB: Buying a house).

HUD’s page says an FHA lender or a HUD-approved housing counselor, reachable at (800) 569-4287, can answer questions about FHA credit qualifying, which the page describes as easy but doesn’t give score thresholds for (HUD: Loans).

Based on those two sources, my suggestion for the first conversation is to ask for the minimum down payment, the monthly cost with and without mortgage insurance, and the cash needed at closing, then compare at least a couple of offers.

Building Your Actual Savings Plan

Step 1: Get a Real Number From a Lender

To me, talking to a lender early is the quickest way to see what down payment fits your income, credit and debts.

Step 2: Open a Separate Savings Account

A separate account keeps the money apart from your daily spending. Compare the current APY on any account you consider, and make sure it’s insured.

Step 3: Automate the Transfer

My suggestion is a transfer that moves on payday, so you aren’t deciding each month.

Step 4: Direct Windfalls to the Fund

Using an assumed example: a $70,000 goal at $2,500 a month takes 28 months. Adding a $5,000 windfall leaves $65,000, which takes 26 months, two months sooner.

Step 5: Calculate Your Timeline

Divide your goal by your monthly contribution to get a month count. A concrete countdown is easier to track than an open-ended goal.

The Biggest Lever: Your Biggest Expense

For many households, housing is the largest expense, which is why I’d look at it first. As an assumed example, saving $500 a month on rent for 18 months adds $9,000 to a down payment fund.

Don’t Forget Costs Beyond the Down Payment

Budget for closing costs, moving expenses and an immediate reserve for furniture or repairs. Your lender’s loan estimate will list the actual closing-cost figures. NAR’s profile also says high rents and student loan debt make saving harder for first-time buyers, and that 59% of first-time buyers used savings, 26% used financial assets such as 401(k)s, IRAs or stocks, and 22% received gifts or loans from relatives or friends.

Matching a Strategy to Your Situation

“I assumed I needed 20%.” → Look at lower down payment programs. HUD says FHA can be as low as 3.5%.
“I have steady income but slow savings.” → Automate a payday transfer.
“Housing is my biggest expense.” → Price out a lower-cost option for a set period.
“I’m deciding between waiting for 20% and buying sooner with PMI.” → Run both numbers for your own market.
“I just got a bonus.” → Calculate how much sooner it gets you to your goal.

Your Down Payment Target: Questions Answered

Do I need 20% down? No. NAR’s median for first-time buyers was 10%, and HUD says FHA can be as low as 3.5%.

Is PMI a waste? That depends on your numbers. The CFPB bulletin describes how it can end.

Does a windfall move the timeline? In the example above, a $5,000 windfall saved two months.

Where I’d Start This Week

Get a lender’s estimate of what you’d need, open a separate account, and set an automatic transfer.

This article offers general information and my own opinions, not financial, tax, or legal advice. The figures in worked examples are assumed. Laws, tax rules, and products change and can differ by location, so check current official sources and talk to a qualified professional about your own situation.

Sources:

The 20% Down Payment Myth That’s Costing Buyers Years