How to Buy Your First Home With Less Than 20 Percent Down

If you have been telling yourself you cannot buy a home until you have 20 percent saved, I have good news and a caveat. The good news is that 20 percent is not a rule for most loans. The caveat is that putting less down comes with tradeoffs that are worth understanding before you sign. Let's walk through both.

Where the 20 percent idea comes from

Twenty percent became the default because it can lower your monthly payment and, on many conventional loans, helps you avoid private mortgage insurance. It is a good target if you can reach it. But waiting to hit it can take years, and for many people the better question is, "What can I responsibly afford now?"

Two common low down payment paths

FHA loans. According to NerdWallet's FHA guide, a credit score of 580 or higher can qualify you for a down payment as low as 3.5 percent. Scores from 500 to 579 generally mean 10 percent down. FHA loans include mortgage insurance, and when your down payment is under 10 percent that insurance lasts for the life of the loan. They also have loan limits that vary by county. Terms change, so check current rules with a lender or on HUD's site.

Conventional low down payment loans. Fannie Mae's HomeReady program allows as little as 3 percent down for eligible borrowers. It uses income limits based on the area where the home is located, and it requires a homeownership education course if all of the borrowers who will live in the home are first-time buyers. Ask a lender whether you qualify.

Beyond these, many state and local housing finance agencies offer down payment assistance for first-time buyers. The details differ by location, so search for your state's agency and ask lenders what they work with.

What a smaller down payment does to your payment

Here is an example with real numbers. Freddie Mac's survey put the average 30-year fixed mortgage rate at 7.28 percent on October 1, 2026. Suppose you are buying a $300,000 home.

With 3.5 percent down, your down payment is $10,500 and your loan is $289,500. At 7.28 percent over 30 years, the monthly principal and interest payment is about $1,981.

With 20 percent down, your down payment is $60,000 and your loan is $240,000. The same rate and term give you a monthly principal and interest payment of about $1,642.

The difference is about $339 a month. These are my own calculations from the published rate and are meant as an illustration, not a quote. They also leave out property taxes, homeowner's insurance, and mortgage insurance, all of which will make your real monthly cost higher. The takeaway: putting less down gets you into the home sooner, but you pay for that convenience every month, so make sure the full payment fits your budget.

Do not forget closing costs

The down payment is not the only cash you need at closing. There are also closing costs, which include things like lender fees, appraisal, title charges, and prepaid items. Your Loan Estimate will list the amount you need to bring to closing, so look at that line before you assume that your down payment is the whole number. Some assistance programs and sellers can help with closing costs, but do not count on that unless it is in writing.

How to compare lenders without losing your mind

The Consumer Financial Protection Bureau recommends a simple process: prepare your finances, explore your options with lenders, compare official loan offers, and then prepare for closing. The tool that makes comparison possible is the Loan Estimate, a standard form lenders give you after you apply.

Request estimates from at least two or three lenders within a short window, and put them side by side. Look at the interest rate, the annual percentage rate, the lender fees, the estimated cash to close, and the monthly payment including mortgage insurance. If something does not make sense, ask the lender to explain it in plain language. A good lender will.

Mortgage insurance, explained

Mortgage insurance exists to protect the lender, not you, if a borrower with a small down payment stops paying. It is the price of a lower down payment. On FHA loans, as noted above, it is required and, with less than 10 percent down, generally lasts for the life of the loan, according to NerdWallet's summary. On conventional loans, private mortgage insurance can typically be canceled once you have built enough equity. Under the federal Homeowners Protection Act, lenders generally must let you request cancellation when your loan balance reaches 80 percent of the home's original value and must end it automatically at 78 percent, assuming you are current on payments. Ask your lender how this works for your particular loan, because the rules differ by program.

The practical point: mortgage insurance is a real monthly cost. Ask for it as a separate line in your Loan Estimate and in your budget so it does not surprise you.

Questions to ask any lender

Bring a short list to every conversation. What loan programs do I qualify for, and which would you recommend for my situation and why? What is the interest rate and the annual percentage rate? What are the total lender fees? How much mortgage insurance will I pay, and when can it end? Is there a prepayment penalty? Can I lock my rate, and for how long? What first-time buyer or down payment assistance programs do you work with? You are allowed to ask all of this, and you are allowed to walk away from an answer you do not like.

If you are not ready yet

Maybe the numbers do not work this month, and that is fine. Pick one lever and pull it. Raise your credit score by paying down balances and fixing errors. Add a set amount to the down payment account on every payday, even a small one. Take a homeownership education course, since many programs require one anyway and it will make every conversation with a lender easier. A few months of focused work can change which programs you qualify for and what rate you are offered.

A quick readiness check

Before you apply, run through these. Do you know your credit score and have you checked your reports for errors? Are you carrying credit card balances at high rates, which cost far more than most mortgages? Do you have an emergency fund that you will not touch for the down payment? Does the full monthly payment, not just principal and interest, fit your budget with room to breathe? If you answered no to any of these, you do not need to give up on the goal. You need to give yourself a few more months to fix that item first.

If you want the bigger picture, including how to keep the property for your family once you own it, read our complete guide to buying, building, and keeping real estate. And if you want to see the national numbers behind the ownership gap, we break them down in the homeownership gap in five numbers.

Buying a home is a big step, and you do not have to do it perfectly. You just have to do it with open eyes and a plan.