The 20% myth
Twenty percent down became the rule of thumb because it lets you skip mortgage insurance on a conventional loan. It isn't a requirement to buy. Conventional loans can go as low as 3% down for some buyers, FHA loans allow 3.5%, and VA loans allow 0% down for eligible veterans and service members.
What putting less down costs
On a conventional loan with less than 20% down, you'll usually pay PMI until you reach 20% equity. FHA loans have their own mortgage insurance with different rules. A smaller down payment also means a larger loan, so your principal and interest go up too.
A side-by-side example
Hypothetical example. APR may differ; example only. Rates change daily. On a $400,000 home with 10% down, a $360,000 loan at 6.75% on a 30-year fixed loan is about $2,335 a month in principal and interest, plus PMI of around $120. With 20% down, a $320,000 loan at the same rate is about $2,076, with no PMI.
Example details: $360,000 30-year fixed at 6.750% (7.051% APR): 360 monthly payments of $2,334.95, plus $120.00 a month of mortgage insurance for the first 112 payments; $320,000 30-year fixed at 6.750% (6.778% APR): 360 monthly payments of $2,075.51. Purchase price $400,000 with a $40,000 (10%) down payment. Principal, interest and mortgage insurance only; taxes and insurance not included, so the actual payment will be higher. Unless noted, APR assumes ZERO Closing Costs, no discount points and 15 days of prepaid interest. Hypothetical example prepared November 4, 2026, not a current CapCenter rate offer; subject to credit approval.
PMI cost depends on your credit score and down payment, so your number could be higher or lower.
The cost of waiting
Hypothetical example. Saving another $40,000 to reach 20% on a $400,000 home might take years. If prices rose 3% in a year, the same home would cost $412,000, which could offset some of the PMI you hoped to avoid. Prices can also fall or stay flat, so this works both ways.
How PMI goes away
On a conventional loan, you can usually ask to cancel PMI once your balance reaches 80% of the home's original value, and it typically ends on its own at 78%, if you're current on payments. Extra principal payments get you there sooner. If your home gains value, refinancing to a conventional loan with at least 20% equity is another way to drop it.
Middle options
- Put 10% or 15% down for a lower PMI cost
- Ask about paying single-premium PMI upfront
- Look into down payment assistance programs in your area
- Use a gift from family, documented with a gift letter
When 20% down makes sense
- You'll still have solid savings left after closing
- You want the lowest possible monthly payment
- You're buying a second home or an investment property, where programs may require more down
- You'd rather not pay mortgage insurance at all
