Do I Really Need a 20 Percent Down Payment on a Home?

Apr 29, 2019 2 min read

You’ve finally found it – the perfect home! Your search is finally over and soon you’ll be a homeowner. Buying a house is an exciting time and getting your ducks in a row – including coming up with a down payment – is an important part of the home buying process. One common thought is to have 20 percent for your down payment, but is that strategy right for you? Learn about what options a 20 percent down payment offers and what works best for you when figuring out how much to put down on a house.    

Loan Options

There are different types of mortgages that offer you options when it comes to the amount you’ll need up front.

Conventional loan with private mortgage insurance (PMI)

A conventional loan means the loan is not included in a specific government program. These types of loans generally have you include PMI if you have less than a 20 percent down payment. Typically, the PMI amount can be added to your monthly mortgage payment.

Federal Housing Administration (FHA) loan

A FHA loan is generally available with a down payment of 3.5 percent or more. It’s typically a good option for home buyers who want to make a smaller down payment, but if you have a high credit score or have the ability to put more down than 3.5 percent, a conventional loan with a PMI might be a more cost-effective option for you.

Zero down payment loan programs

If you’re a veteran, you may qualify for a special program offering zero down payments for veterans. There may be other programs available you could qualify for as well such as state/local programs for lower income borrowers.

Before you choose your mortgage/loan type, be sure to do your research and compare your options.

How Much Can You Afford?

Deciding how much you can afford to spend on your new home also determines how much you may need up front for a down payment. The bigger the price tag of your house, the bigger the down payment. Ask yourself a few questions: How much can I comfortably afford each month for my mortgage? There are additional monthly expenses that come with home ownership – taxes, electricity, water, garbage, etc. To get an idea of how much you may be able to afford check out our easy-to-use calculator.

When determining how much to put down on a house, think about upfront home costs – moving expenses, repairs, etc. Before you empty your savings account for the down payment, be sure you’ll still have funds for an emergency or unexpected expense. You’ll also want to factor in closing costs.

Advantages vs Disadvantages of Putting 20% Down

Deciding how much to put down on a house is a personal decision and varies based on many factors.


  • The more you put down initially, the less you’ll need to borrow and you may benefit from a lower loan rate. This strategy reduces your monthly payment and lowers how much you’ll pay in interest.
  • If you can put down 20% you won’t have to pay a PMI which lowers your monthly payment.
  • A larger down payment means you have more equity in your home. This can help protect you if home prices go down.


  • If you haven’t built up your savings yet, it may take a number of years before you’ll have 20 percent for a down payment.
  • Putting too much down can put your rainy day fund at risk if your free money is tied up in your home.

Buying a home is a big decision and comes with many choices from deciding how much you can afford to picking the right home for you. Your local Farm Bureau agent can help you explore your options when it comes to protecting your new home. Contact an agent today to get a quote and find a coverage option that best fits your needs.



Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.