"You Need 20% Down" — And Other Things That Aren't True

If you think you need 20% down to buy a home, you're not alone.

But 20% isn't a universal requirement.

According to the National Association of REALTORS®, the median down payment for first-time buyers was 10% in 2025. And depending on the loan, qualified buyers may be able to purchase with 3%, 3.5%, or even no down payment at all.

At Alliance Lending Services, we've spent more than 20 years helping Utah buyers compare these options and understand what their numbers actually support.

Here are a few of the biggest down-payment myths.

Myth #1: You Need 20% Down

Putting 20% down can have advantages, but many buyers don't need that much.

Common options include:

• Conventional: Some programs allow as little as 3% down

• FHA: As little as 3.5% down for qualified borrowers

• VA: Eligible borrowers can often purchase with no down payment

• USDA: Qualified buyers and properties may also be eligible for no down payment

Alliance works with each of these programs, along with additional low-down-payment options.

On a $500,000 home, the difference is significant:

3% down

$15,000

5% down

$25,000

10% down

$50,000

20% down

$100,000

Run these numbers on your own price

The question isn't whether you can reach 20%. It's which down payment makes the most sense for your finances.

Myth #2: Less Than 20% Is a Bad Idea

A smaller down payment comes with tradeoffs, but that doesn't automatically make it a bad loan.

For example, conventional buyers putting less than 20% down will often pay private mortgage insurance, or PMI. That adds to the monthly payment, but it can also allow you to purchase sooner without waiting years to save another $50,000 or $75,000.

The Consumer Financial Protection Bureau notes that PMI on many conventional loans can eventually be removed once certain equity requirements are met.

That's why Alliance looks beyond one number.

A loan officer can compare the cash required upfront, monthly payment, mortgage insurance, and long-term cost so you can see which structure fits your circumstances.

Myth #3: Your Down Payment Must Come From Savings

Your savings account may not be your only option.

Depending on the loan program, eligible buyers may be able to use:

• Personal savings
• Gift funds
• Grants
• Down-payment assistance programs

The rules vary by program, so it's worth checking before assuming you don't have enough saved.

Sometimes the better question isn't "How long until I save 20%?" It's "What options do I qualify for today?"

Don't Forget About Closing Costs

Your down payment also isn't the same as your total cash needed to close.

The Consumer Financial Protection Bureau says closing costs typically run about 2% to 5% of the purchase price, separate from the down payment.

That can include lender fees, title costs, prepaid taxes, insurance, and other expenses.

A good mortgage plan accounts for both—and leaves you with enough savings after closing to feel comfortable.

So How Much Should You Put Down?

There isn't one right percentage.

A larger down payment can reduce what you borrow and lower your monthly payment. A smaller down payment can help you keep more cash available or buy sooner.

The right answer depends on your:

• Savings
• Credit
• Monthly payment target
• Loan program
• Closing costs
• Financial priorities

That's where having more than one loan option matters.

Alliance Lending Services works across conventional, FHA, VA, USDA, and other mortgage programs to help buyers compare the paths available to them—not force every buyer into the same one.

Start With Your Options, Not the Myth

You may decide that 20% down is right for you.

You may find that 5% makes more sense.

Or you may qualify for a program that requires little or nothing down.

You don't need to figure that out on your own.

An Alliance loan officer can look at your numbers, explain the programs you actually qualify for, and show you what each option means for your upfront costs and monthly payment.

No guesswork. No one-size-fits-all answer. Just a clearer path to the loan that fits your situation.

This content is for educational purposes only and is not a commitment to lend. All figures shown are examples; down payment, mortgage insurance and closing-cost amounts vary by loan program, property and borrower, and every loan is subject to credit approval and program guidelines. Alliance Lending Services, NMLS #304510. Equal Housing Opportunity.