Down Payment Strategies: How First-Time Buyers Are Actually Getting to 20%

The 20% down payment requirement is not a legal minimum — it is a threshold above which lenders waive private mortgage insurance (PMI). PMI typically costs 0.5–1.5% of the loan amount annually, added to the monthly payment until the borrower reaches 20% equity. On a $400,000 loan, PMI can add $165–$500 per month, which is a real cost but not necessarily a reason to delay buying indefinitely.

Down payment assistance programs (DAPs) are available from state housing finance agencies, local governments, nonprofits, and some employers — and they are dramatically underutilized. The National Council of State Housing Agencies tracks more than 2,400 programs across the country. Many are income-limited and targeted to first-time buyers, but "first-time buyer" is often defined as someone who has not owned a home in the previous three years — broader than most people assume.