Short answer
Four things decide whether you can buy and what it costs: how much you are allowed to borrow, how little you are allowed to put down, what the mortgage insurance costs and how long you are stuck with it, and what the rate does to the payment. The one that catches people is the third. On a conventional loan federal law forces mortgage insurance off your bill at 78% of the original value. On an FHA loan with less than 10% down it runs for the life of the loan, and the only way off is to refinance out of it. That single difference is worth more than most of the negotiating advice written about buying a house.
The numbers that decide it
- The median existing home sold for $429,100 in August 2026 (NAR series via FRED). That is the national midpoint, not a price you will see in any particular market.
- First-time buyers typically put down 10%, not 20%. Repeat buyers put down a median of 23%, because they are rolling equity from a previous house into the next one (NAR, 2025 Profile of Home Buyers and Sellers).
- First-time buyers are 21% of the market, the lowest share since the survey began in 1981, and their median age is 40, the highest ever recorded (NAR).
- The 2026 conforming loan limit is $832,750 for a one-unit property, and $1,249,125 in high-cost areas. That is an increase of $26,250, tracking a 3.26% rise in house prices between the third quarters of 2024 and 2025 (FHFA).
- FHA limits for 2026 run from a floor of $541,287 to a ceiling of $1,249,125, for case numbers assigned on or after 1 January 2026 (HUD).
- Conventional mortgage insurance must be cancelled automatically at 78% loan-to-value, and you can request it at 80% (CFPB).
- FHA mortgage insurance above 90% loan-to-value runs for the loan term, up to 30 years. At or below 90%, it runs 11 years (HUD Mortgagee Letter 2013-04).
- Median net worth is $396,200 for homeowners against $10,400 for renters (Federal Reserve, 2022 Survey of Consumer Finances). That gap is real and it is also not a return: it reflects who buys, when they bought, and forced saving, not a rate of return you can count on.
What each loan program actually requires
Most of the confusion about buying a house comes from comparing programs on the down payment alone. The down payment is the smallest of the four differences. Here is the whole comparison in one place.
| Program | Minimum down | 2026 limit, one unit | Mortgage insurance, and how it ends |
|---|---|---|---|
| Conventional | 3% on some first-time programs, otherwise 5% | $832,750, or $1,249,125 in high-cost areas (FHFA) | PMI, cancellable on request at 80% LTV and automatically at 78% (CFPB) |
| FHA | As low as 3.5% (HUD) | $541,287 floor to $1,249,125 ceiling (HUD) | MIP for the loan term above 90% LTV; 11 years at or below (HUD) |
| VA | None required (VA) | No limit with full entitlement | None. A one-time funding fee instead: 2.15% first use under 5% down, 1.25% at 10% or more (VA) |
| USDA | None required | No stated limit; income and area eligibility apply | Upfront and annual guarantee fees for the life of the loan |
Read the last column first. It is the one that decides what the loan costs over the years you actually hold it, and it is the one that almost never appears in a side-by-side comparison of rates.
The mortgage insurance trap
If you put 3.5% down on an FHA loan, your loan-to-value is 96.5%, which is above 90%, so the annual mortgage insurance premium is collected until the end of the mortgage term or for the first 30 years, whichever comes first (HUD). Paying the balance down to 80% does not stop it. Nothing stops it except paying the loan off or refinancing into a conventional loan, and refinancing means accepting whatever rate exists on the day you do it.
A conventional loan behaves in the opposite way, because Congress legislated it. Your servicer must terminate PMI automatically on the date the principal balance is scheduled to reach 78% of the original value, provided you are current. You can also ask for cancellation at 80%, in writing, with a good payment history, no junior liens, and evidence the property has not fallen in value. Either way, PMI must end at the midpoint of the amortisation schedule regardless of your loan-to-value, which on a 30-year loan means after 15 years (CFPB).
So the comparison that matters is not 3.5% down against 5% down. It is whether the insurance ends on a schedule set by law or persists until you refinance. For a buyer who can reach 10% down, FHA at exactly 90% loan-to-value cuts the premium period from 30 years to 11. For a buyer who can reach a conventional loan at all, the insurance has a legislated end date. For an eligible veteran, the VA loan has no mortgage insurance at any point, only a one-time funding fee that is waived entirely for borrowers receiving compensation for a service-connected disability, for surviving spouses receiving Dependency and Indemnity Compensation, and for Purple Heart recipients on active duty (VA).
What a rate difference is actually worth
Rate comparisons are usually made with invented numbers. Here is the arithmetic, run on a $300,000 loan over 30 years, so you can see the real shape of it.
| Rate | Principal and interest | Total interest over 30 years | Against 6% |
|---|---|---|---|
| 5.5% | $1,703.37 | $313,212 | -$95/mo |
| 6.0% | $1,798.65 | $347,515 | — |
| 6.5% | $1,896.20 | $382,633 | +$98/mo |
| 7.0% | $1,995.91 | $418,527 | +$197/mo |
| 7.5% | $2,097.64 | $455,152 | +$299/mo |
| 8.0% | $2,201.29 | $492,466 | +$403/mo |
Two points fall out of that table. A two-point spread between 6% and 8% is $402.64 a month and about $144,951 across the full term, which is a great deal of money but not the six-figure-per-quarter-point number that gets quoted. And the total interest column is the one worth staring at: at 6% you repay more in interest than you borrowed, and at 8% you repay well over one and a half times the loan. That is a property of long amortisation, not of any particular rate.
The practical consequence is that shopping lenders is worth real money and takes an afternoon, while trying to time the market is not something anyone reliably does. A rate you can refinance out of later is a smaller commitment than a house you cannot afford.
Closing costs, and the document that pins them down
National averages for closing costs are close to useless, because the largest components are set by where you buy: transfer taxes, recording fees, title practice and prepaid property tax all vary by state and county. Rather than quote an average, use the document designed to answer this exact question for your loan.
The Loan Estimate is a standardised form that breaks your costs into three groups: origination charges from the lender, services you cannot shop for, and services you can (CFPB). Those groups exist so that you can do the comparison that matters. Take two or three Loan Estimates and set the origination charges side by side, because those are the lender's own price and the part that competition actually moves. The services you cannot shop for will be similar between lenders. The services you can shop for, mainly title-related, are where a second phone call sometimes pays for itself.
The prepaid items on the form are not fees at all. Property tax and homeowner's insurance collected at closing are your money going into an escrow account to pay bills that are coming anyway. Treating them as a cost of closing overstates what buying the house actually costs you.
What it costs once you own it
The mortgage payment is the part of homeownership you can predict. The rest is the part that decides whether the purchase was sound.
Property tax is the largest recurring cost after the loan and varies by more than a factor of five across states, so the only number worth using is the effective rate for the specific county you are buying in, applied to the assessed value rather than the purchase price. Homeowner's insurance has risen sharply in coastal and wildfire-exposed markets, and a quote obtained before you are under contract is worth more than a rule of thumb. Maintenance has no reliable national figure, and the various percentage-of-value rules in circulation are convention rather than research; what is true is that the cost is lumpy, arrives without warning, and lands on systems with known lifespans, so the useful planning move is to find out the age of the roof, the heating and cooling system and the water heater during the inspection, and to save against whichever is closest to the end of its life.
If you put less than 20% down, add the mortgage insurance from the table above, and mark the date it can come off. On a conventional loan that date is knowable in advance from the amortisation schedule, and a written cancellation request at 80% is one of the highest-return half-hours available to a homeowner (CFPB).
The mistakes that cost the most
Buying at the top of the pre-approval. A pre-approval states what a lender is willing to risk, computed from your gross income and your current debts. It does not know your childcare costs, your retirement contributions or your commute. Treat it as a ceiling that exists for the lender's benefit, not a target.
Choosing FHA on the down payment alone. Above 90% loan-to-value the insurance lasts the term of the loan (HUD). If you are close to 10% down, finding the rest changes the premium period from 30 years to 11.
Not shopping the loan. The rate table above shows what half a point is worth. Comparing origination charges across two or three Loan Estimates is the single cheapest way to move that number (CFPB).
Forgetting to cancel PMI. Automatic termination happens at 78%, but the earlier cancellation at 80% only happens if you ask, in writing (CFPB).
Assuming 20% down is required. It is not, and it never has been for the programs above. What 20% buys is the absence of mortgage insurance on a conventional loan, which is a real saving to weigh against spending years accumulating it (NAR).
Treating the net worth gap as a rate of return. Homeowners do hold far more wealth than renters (Federal Reserve), but a house is illiquid, carries costs the figure does not net out, and concentrates your balance sheet in one asset in one place.
Go deeper
Each of these takes one decision from the page above and works it properly.
- How much down payment do you need, which is the question underneath most of this page.
- Rent versus buy, the comparison worth running before any of the rest applies.
- 15-year against 30-year, where the total interest column above changes shape entirely.
- The home purchase decision engine, for your own numbers rather than a national median.
- The net worth calculator, to see where a down payment sits against everything else you hold.
Common questions
Do I need 20% down? No. Conventional loans go to 3% on some first-time programs and 5% otherwise, FHA to 3.5%, and VA and USDA require nothing down. First-time buyers put down a median of 10% (NAR). What 20% buys on a conventional loan is the absence of mortgage insurance from the start.
How much house can I afford? The lender answers a different question than you should. It tests your gross income against your debts and arrives at a maximum. Your own test should start from what is left after retirement contributions, childcare, insurance and the maintenance reserve, and should assume the property tax and insurance quotes for the specific house rather than a percentage.
Is FHA or conventional better? It depends almost entirely on how long the mortgage insurance lasts and whether you can reach 10% down. Above 90% loan-to-value FHA insurance runs for the loan term (HUD), while conventional PMI must end at 78% by law (CFPB). Compare those two facts before comparing the rates.
What if the house costs more than the conforming limit? Above $832,750 for one unit, or $1,249,125 in a high-cost area, you are in jumbo territory, where the pricing and the underwriting are set by the lender rather than by Fannie Mae and Freddie Mac (FHFA).
Can I still get a VA loan if I used one before? Yes. The funding fee rises to 3.3% for a subsequent use with less than 5% down, but falls back to 1.5% at 5% down and 1.25% at 10%, and is waived entirely for the exempt categories (VA).
Sources
Every figure on this page links to the body that publishes it. Where no agency publishes a figure, this page says so instead of estimating one, which is why there is no national closing-cost average and no maintenance percentage here.
- Median existing-home price: Median Sales Price of Existing Homes, FRED.
- Buyer down payments, ages and market share: 2025 Profile of Home Buyers and Sellers highlights and NAR's top ten takeaways.
- Conforming loan limits: FHFA conforming loan limit values for 2026.
- FHA loan limits, minimum down payment and premium duration: HUD 2026 FHA loan limits, HUD on FHA loans and HUD Mortgagee Letter 2013-04.
- VA purchase loans and funding fee: VA purchase loan and VA funding fee and closing costs.
- Mortgage insurance cancellation and the Loan Estimate: CFPB on removing PMI and CFPB on the Loan Estimate.
- Homeowner and renter net worth: Changes in U.S. Family Finances from 2019 to 2022.