The 20% Myth
Many people believe you need 20% down to buy a home. That's simply not true. While 20% down avoids private mortgage insurance (PMI), most first-time buyers put down far less. The national average is around 6%, and many programs allow 3-3.5% or even zero down.
What About Mortgage Insurance?
With less than 20% down, you'll pay mortgage insurance—typically 0.5-1% of the loan annually. On a $150,000 loan, that's $62-125/month. It's not wasted money; it's what makes low down payments possible. For conventional loans, PMI drops off when you reach 20% equity. FHA loans require insurance for the life of the loan.
Where Does the Money Come From?
Down payments can come from savings, gifts from family, down payment assistance programs, retirement account withdrawals (with penalties in some cases), or sale of assets. Lenders will ask for documentation—typically 2-3 months of bank statements. "Mattress money" without a paper trail can cause problems.