Down Payment Calculator · filed Oct 9, 2026

Is 20% down necessary?

No. This is the most expensive sentence in personal finance: “you need 20% down to buy a house.” Twenty percent is the line that skips private mortgage insurance — it was never the minimum to buy. Conventional loans start at 3% down for first-time buyers, FHA at 3.5% with a 580+ score, and the typical first-time buyer actually puts down around 8%.

The myth survives because it sounds like discipline. Here is the arithmetic it hides.

What less than 20% actually costs: the PMI schedule

Put down less than 20% on a conventional loan and you pay private mortgage insurance until the loan balance crosses 78% of the price. On a $400,000 home at 7% on a 30-year loan:

PMI is a planning estimate by loan-to-value band (roughly 0.32%–0.90% of the loan per year); your lender quotes by credit score. Totals are monthly PMI times months until the 78% drop.

The wait math, worked honestly

The gap between the 3.5% check and the 20% check on $400,000 is $66,000. At $1,500 a month saved — aggressive for most renters — closing that gap takes 44 months. That is nearly four years of waiting.

What does the wait cost? If rent is $2,000 a month, 44 months of renting costs $88,000 in rent paid — more than the entire down-payment gap. Meanwhile the buyer who moved in at 3.5% down paid roughly $42,846 in PMI over 12 years and started building equity from month one. In a rising market the waiter also faces a higher price at the end of the 44 months.

When 20% is actually the right answer

• You already have it (or close), with reserves left over. Skipping PMI and the higher payment is pure savings.
• You are buying in a flat or falling market, where waiting costs little in price growth.
• Your credit score prices PMI punitively — insurance quotes move with score, and a weak score can make the carrying charge genuinely ugly.

When it isn’t

• Your rent is high relative to the mortgage payment — every month of waiting is a month of rent that buys nothing.
• You can reach 10% down comfortably: PMI drops to about $156 a month and falls off in month 115, the cheapest insurance schedule on the board.
• You plan to stay long enough for appreciation and paydown to carry you to 20% equity anyway.

The honest version of the rule: 20% down is the cheapest way to buy a house you can already afford. It is a terrible reason to wait four years for a house you could buy now. Run both sides in the Down Payment Calculator — the cash-to-close and the monthly cost — before you decide.