Updated July 2026 · 10-minute read · Reviewed by a CFP® practitioner
The old rule was to save 20% for a down payment. But that's no longer necessary, and for many buyers, it's not even the smartest move. This shows how much you actually need to save, depending on your loan type, and whether you should aim for 20% or less.
| Loan Type | Minimum Down Payment | PMI Required? | Best For |
|---|---|---|---|
| Conventional | 3% (first-time buyers) 5% (repeat buyers) |
Yes, if <20% | Borrowers with 620+ credit |
| FHA | 3.5% (580+ credit) 10% (500-579 credit) |
Yes (lifetime if <10%) | Borrowers with 500+ credit |
| VA | 0% (no down payment) | No | Eligible veterans/military |
| USDA | 0% (no down payment) | Yes (but lower than conventional) | Rural/suburban buyers |
| Jumbo | 10-20% | Usually no | High-value home buyers |
The 20% rule exists because it helps you avoid private mortgage insurance (PMI). But putting down 20% isn't always the best financial move. This shows how to decide.
Let's compare buying a $400,000 home with 3% down vs 20% down:
Bottom line: If you plan to stay in the home for 9+ years, putting down 20% saves you money. If you'll sell sooner, the 3% down payment may be better, especially if you invest the difference.
Don't just save "as much as you can." Calculate exactly how much you need based on your target home price and loan type.
Example: If you want to buy a $350,000 home with a 5% down payment, you need $17,500. Add $8,000 for closing costs = $25,500 total.
Set up automatic transfers from your checking account to a high-yield savings account every payday. If you can save $500/month, you'll have $6,000/year.
Most loan programs allow gift funds from family members for your down payment. You'll need a gift letter stating the money doesn't need to be repaid.
Your down payment is just one part of the cash you'll need at closing. Don't forget about:
Example: On a $400,000 loan, expect $8,000-$20,000 in closing costs.
Don't deplete your emergency fund for your down payment. Homeownership comes with unexpected expenses (repairs, maintenance, property tax increases). Keep 3-6 months of living expenses in a separate savings account.
Depending on how far you're moving and how much stuff you have, moving can cost anywhere from $500 (DIY with friends) to $5,000+ (professional movers for a large home).
Most new homeowners spend money on repairs, painting, new appliances, or furniture in the first year. Budget at least 1-2% of the home's value for immediate upgrades.
| Monthly Savings | Time to Save $25,000 | Time to Save $80,000 |
|---|---|---|
| $500/month | 50 months (4.2 years) | 160 months (13.3 years) |
| $1,000/month | 25 months (2.1 years) | 80 months (6.7 years) |
| $1,500/month | 17 months (1.4 years) | 53 months (4.4 years) |
| $2,000/month | 13 months (1.1 years) | 40 months (3.3 years) |
Yes, but it's usually not a good idea. You can withdraw from your 401(k) penalty-free if you're a first-time homebuyer (up to $10,000 from an IRA), but you'll pay income taxes on the withdrawal. You can also take a 401(k) loan (up to 50% of your balance or $50,000, whichever is less), but you'll need to repay it within 5 years, and if you leave your job, the loan becomes due immediately.
Yes. Most loan programs (conventional, FHA, VA, USDA) allow gift funds from family members, employers, or charitable organizations. You'll need a gift letter stating the money doesn't need to be repaid, and you'll need to document the source of the funds (bank statements showing the transfer).
It depends on the interest rate. If your debt has a high interest rate (credit cards at 20%+), pay it off first, the interest savings will outweigh any investment returns. If your debt has a low interest rate (student loans at 4-6%, car loans at 5-7%), focus on saving for your down payment while making minimum payments.
It depends on your loan type. For a conventional loan with 5% down, you need $15,000. For an FHA loan with 3.5% down, you need $10,500. For a VA or USDA loan, you need $0. Add $6,000-$15,000 for closing costs, plus $10,000-$20,000 for emergency fund and moving costs. Total: $26,000-$50,000.
No. Lenders don't allow you to borrow money for your down payment (except for 401(k) loans, which are technically borrowing from yourself). Your down payment must come from your savings, gift funds, or down payment assistance programs. If you take out a personal loan or credit card cash advance, the lender will count it as debt and it will hurt your debt-to-income ratio.
The amount you need to save for a down payment depends on your loan type: 0% for VA/USDA, 3.5% for FHA, 3-5% for conventional. You don't need 20% unless you want to avoid PMI, and even then, it's not always the best financial move.
Don't forget to budget for closing costs (2-5% of loan amount), an emergency fund (3-6 months of expenses), and moving/repair costs. Use our affordability calculator to estimate your total cash needed.
See how much you need to save based on your target home price and loan type.
Open the Affordability Calculator →