How much down payment do I need for a house?

The full picture

The twenty-percent rule keeps more people renting than any other piece of received wisdom in housing.

On the cost of that insurance, be sceptical of the ranges you will read. No federal source publishes a private mortgage insurance cost range — the half-a-percent-to-two-percent figure that appears everywhere has no source of record. Get the actual number from the actual lender on the actual loan.

What is documented is when it ends. You may request cancellation at 80 percent of the original value, the servicer must terminate automatically at 78 percent, and there is a backstop at the amortisation midpoint regardless. “Original value” means the lower of purchase price or original appraisal — not today’s value, which is why a rising market does not remove it on its own.

FHA is the exception that catches people: none of those cancellation rules apply to it. Above 90 percent loan-to-value at origination, the annual premium runs for the life of the loan, and refinancing out is the usual escape.

What the down payment changes besides the payment

On a conventional loan, private mortgage insurance is temporary by law. The servicer must terminate it automatically on the date the principal balance is scheduled to reach 78 percent of the original value, provided you are current, and you may request cancellation at 80 percent (CFPB). That makes a 5 percent down payment a timing decision rather than a permanent surcharge.

FHA works differently. Under the mortgagee letter that set the current structure, an FHA loan above 90 percent loan-to-value is charged the annual premium until the end of the mortgage term, and one at or below 90 percent for the first 11 years (HUD Mortgagee Letter 2013-04). A borrower who expects to stay a long time should price that difference over the whole hold, because on FHA it does not simply fall away as equity builds.

VA-backed purchase loans sit outside both rules: no down payment and no monthly mortgage insurance, but most borrowers pay a one-time funding fee, with exemptions for certain veterans and survivors (VA).

One more thing the down payment does not cover: closing costs, prepaid items and escrow funding are separate money due at the table, and earnest money is separate again (CFPB). Budgeting the down payment alone is the most common way buyers arrive short.

Common questions

How much down payment do I need for a house?

Less than the traditional 20 percent in almost every program. Conventional loans start near 3 percent for qualified buyers, FHA loans at 3.5 percent, and VA loans allow nothing down for eligible borrowers. What 20 percent buys is not approval but the avoidance of mortgage insurance on a conventional loan. So the real question is not how long it takes to reach a round number. It is what monthly payment you can carry, because a smaller down payment raises the loan, the payment, and usually the rate.

When does private mortgage insurance stop?

On a conventional loan it is not permanent. The servicer must end it automatically once the balance is scheduled to reach 78 percent of the original value and you are current on payments, and you can ask for cancellation at 80 percent. FHA mortgage insurance follows a different rule that depends on how much you put down, and for the smallest down payments the only exit is to refinance into a different loan. That difference is worth pricing before you choose a programme, not after.

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