Where the 20% myth comes from
20% down eliminates private mortgage insurance on a conventional loan — that's the entire origin of the rule. It was never a minimum. Waiting years to save 20% while home prices and rents rise is, for many buyers, the more expensive choice.
Actual minimums, by program
Down payment minimums for qualified buyers:
- Conventional: as little as 3% for qualified first-time buyers; 5% widely available
- FHA: 3.5% — and gift funds can cover all of it
- VA: 0% for eligible Veterans, service members, and surviving spouses
- USDA: 0% for eligible properties and household incomes
- Down-payment assistance: state programs (like Minnesota Housing) can cover some or all of the down payment for eligible buyers
Where the money can come from
Savings is only one source. Documented gift funds from family are allowed on most programs. Down-payment assistance programs provide seconds that are deferred, forgivable, or repaid monthly. Retirement accounts sometimes allow loans or withdrawals for a first home (weigh this carefully — we'll talk it through). Seller concessions can't fund your down payment, but they can cover closing costs, which frees your cash for the down payment.
The PMI trade-off, honestly
Putting less than 20% down on a conventional loan means paying PMI — a monthly premium that protects the lender. It sounds bad; it's often fine. PMI on a conventional loan cancels once you build sufficient equity, and the cost of PMI is frequently smaller than the cost of waiting (rising prices, rent paid in the meantime).
The right comparison isn't "PMI vs. no PMI." It's "buying now with PMI vs. buying later without it" — total cost, both paths. That's a calculation we run with clients every week.
Quick answers
Can my parents give me the down payment?
On most programs, yes — documented gift funds from family are standard. There's a simple gift letter, and the transfer needs a paper trail. We'll give you the exact steps so it's clean.
Is down-payment assistance worth it?
Often, yes — but the structure matters. Some assistance is forgivable, some is deferred, some carries a payment. We'll show you the true cost of any program next to the alternative of waiting and saving.