Home Loan Down Payment Options: 0%, 3%, 5%, 10%, 20%

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The single most stubborn myth in U.S. home buying is that you need 20% down. Median first-time buyer down payment in 2026 is 8%. Repeat buyers average 17%. Roughly a quarter of all purchase loans close with less than 5% down, and the products to do that legitimately — without payday-style terms — have never been better.

We mapped every mainstream down payment option (0% to 20%+), priced each one against a $420,000 purchase, and modeled month-one cost, year-five cost, and lifetime cost so you can see exactly where saving more pays off and where it doesn’t. The right answer is rarely “save 20% first” — it’s usually “find the cheapest path that gets you in the door without payment shock.”

How We Calculated

We used a $420,000 purchase price (median U.S. home), 740 FICO, 2026 rate sheets from five major lenders, and standard 2026 PMI/MIP pricing. All monthly costs assume principal, interest, mortgage insurance, $5,500/year property tax, and $1,800/year homeowners insurance.

Down Payment Options at a Glance

Down %	Cash Down	Loan Type	Loan Amount	Mortgage Insurance	Best For
0%	$0	VA / USDA	$420,000	None / 0.35% annual	Veterans, eligible rural buyers
1%	$4,200	Rocket ONE+	$415,800	PMI included via grant	First-time buyers under 80% AMI
3%	$12,600	Conventional 97, HomeReady	$407,400	PMI ~$200/mo	Strong credit, low cash
3.5%	$14,700	FHA	$405,300 + UFMIP	MIP for life of loan	580–680 FICO buyers
5%	$21,000	Conventional	$399,000	PMI ~$148/mo	Moderate-credit buyers
10%	$42,000	Conventional	$378,000	PMI ~$97/mo	Buyers with savings
15%	$63,000	Conventional	$357,000	PMI ~$54/mo	Pre-PMI threshold
20%	$84,000	Conventional	$336,000	None	Lowest payment

1. 0% Down — VA and USDA

If you’re a veteran, active-duty service member, surviving spouse, or buying in a USDA-eligible area with qualifying income, you can finance the full purchase price. VA loans charge a one-time funding fee (1.25%–3.30%, often financed); USDA loans charge a 1% upfront guarantee fee plus 0.35% annual.

2. 1% Down — Lender-Specific Programs

Several major lenders launched 1%-down programs in 2023–2024 and they remain live in 2026. Rocket Mortgage’s ONE+ has the broadest national footprint: qualifying buyers (income at or below 80% AMI) put down 1% and Rocket contributes a 2% grant, making it functionally a 3%-down conventional loan with PMI built in.

3. 3% Down — Conventional 97 and Income-Targeted Programs

Three options:

• Conventional 97 — Fannie Mae, first-time buyers, no income cap
• HomeReady — Fannie Mae, income at or below 80% AMI, reduced PMI
• Home Possible — Freddie Mac, income at or below 80% AMI, reduced PMI

All three are conforming loans with PMI that cancels at 78%–80% LTV. HomeReady and Home Possible price PMI noticeably cheaper than standard 3%-down conventional.

4. 3.5% Down — FHA

FHA’s headline 3.5% down is available with FICO 580+. The catch is lifetime MIP unless you put down 10%+ initially. The standard exit is to refinance into conventional once your equity hits 20% and credit clears 680. Read more in FHA Loan Requirements 2026.

5. 5% Down — The Standard Conventional

Five percent down on a conventional loan is the sweet spot for most buyers above 700 FICO. PMI is meaningfully cheaper than at 3% down, you avoid FHA’s lifetime MIP, and the cash gap to 20% is something you can chip away at over time with extra principal payments.

6. 10% Down — Cuts PMI Roughly in Half

Going from 5% to 10% down on a $420,000 purchase saves about $51/month in PMI and reduces the time to 80% LTV by roughly 18 months. ROI on the extra $21,000: meaningful but not transformative.

7. 15% Down — The PMI Cliff

PMI factors compress dramatically below 85% LTV. At 15% down, conventional PMI on a 740-FICO borrower drops to roughly $54/month — about a third of the cost at 5% down. Some borrowers split the difference here: 15% down + a 5% second mortgage piggyback to avoid PMI entirely (an “80/15/5”).

8. 20% Down — No PMI, Lowest Payment

Twenty percent down eliminates mortgage insurance entirely on a conventional loan. On a $420,000 purchase, that’s $84,000 cash. The opportunity cost is the issue: $84,000 invested in a diversified index portfolio at a 7% long-run return would grow substantially, while saving roughly $150/month in PMI on the mortgage. Whether that’s the right trade depends on your timeline and risk tolerance.

Cost Comparison After 5 Years — $420,000 Purchase

Down %	Cash Out (Down + PMI 5 yrs)	Loan Balance Year 5	Equity Year 5
0% (VA)	$0	$390,000	~$30,000 + appreciation
3%	$12,600 + $12,000 PMI	$384,000	~$36,000 + appreciation
5%	$21,000 + $8,900 PMI	$377,000	~$43,000 + appreciation
10%	$42,000 + $5,800 PMI	$357,000	~$63,000 + appreciation
20%	$84,000 + $0 PMI	$317,000	~$103,000 + appreciation

How to Choose Your Down Payment

1. Check VA / USDA eligibility first. Free 0%-down financing beats every alternative.
2. Don’t drain your emergency fund. Keep at least 3 months of expenses in cash after closing — closing costs, moving, and first-year homeowner surprises will eat through anything you stretched on.
3. Compare PMI vs MIP. At 720+ FICO, conventional PMI (cancellable) usually beats FHA MIP (lifetime) over the holding period.
4. Consider the time-to-buy trade-off. Saving for 20% can take 4+ years. Buying with 5% now and refinancing PMI off later often produces more wealth than waiting.
5. Run the opportunity cost. If you’d otherwise invest the difference, putting less down can win on a 30-year horizon — but only if you actually invest the difference.

Recommended Offers

💡 Editor’s pick — 0% down for veterans: Veterans United — VA specialist, lowest VA rates we tested.

💡 Editor’s pick — 1% down conventional: Rocket Mortgage — ONE+ program with 2% lender grant.

💡 Editor’s pick — 3% down for first-time buyers: New American Funding — HomeReady and Home Possible expertise.

FAQ — Home Loan Down Payment Options

Q: Do I really need 20% down to buy a home? A: No. Median first-time buyer down payment in 2026 is 8%. Most buyers put down 3%–10%.

Q: What’s the lowest down payment for a home loan? A: 0% on VA loans (eligible veterans) and USDA loans (eligible properties and incomes). 1% on Rocket Mortgage’s ONE+ for income-qualifying buyers.

Q: Can I use gift funds for the down payment? A: Yes. FHA, VA, USDA, and conventional primary-residence loans all permit 100% gifted down payments from family. A signed gift letter and bank-statement paper trail are required.

Q: Is it better to put 5% or 20% down? A: It depends on your goals. 20% down lowers your monthly payment and eliminates PMI. 5% down preserves cash for emergencies, investing, or improvements. Run the lifetime cost both ways with a lender.

Q: How is PMI calculated? A: PMI is priced based on credit score and LTV. On a $400,000 loan at 740 FICO, expect roughly $107/month at 5% down, $73/month at 10% down, and $40/month at 15% down.

Q: Can I avoid PMI without putting 20% down? A: Three ways: (1) VA loan — no PMI ever; (2) lender-paid PMI baked into a slightly higher rate; (3) piggyback financing (80/10/10 or 80/15/5) using a HELOC or second mortgage.

Related Reading on Mortgage24U

• First-Time Home Buyer Loans 2026
• FHA Loan Requirements 2026
• VA Home Loan Guide 2026
• Conventional Home Loan Guide 2026
• Home Loan Closing Costs Explained

Final Verdict

The “right” down payment is the lowest amount that lets you keep a healthy emergency fund and avoid lifetime mortgage insurance. For most buyers in 2026, that’s 5%–10% down on a conventional loan, paired with a plan to chip away at principal so PMI cancels in year 6 to 10. Veterans should go 0% VA. USDA-eligible buyers should go 0% USDA. Saving for 20% before buying is a fine choice — but not a financially necessary one.

This article is for informational purposes only and is not financial advice. Rates and lender terms are accurate as of publication and subject to change. Mortgage24U may receive compensation for some placements; rankings are independent.