Once you have a sense of how much home fits comfortably into your budget, the next question is usually about cash:
How much money do I actually need before I can buy a home?
For many first-time buyers, this is where the process can start to feel overwhelming. They have heard they need a 20% down payment, so they assume buying is years away.
The good news is that 20% isn't the only option.
For some buyers, putting 20% down is the right choice. It can lower the monthly payment and may eliminate private mortgage insurance. But many buyers purchase a home with less money down, and sometimes keeping more savings after closing is the better financial decision.
The goal isn't simply to put down the largest amount possible. It's to buy comfortably while still having savings left after closing.
Your Down Payment Is Only One Part of the Picture
Your down payment is the portion of the purchase price that you pay upfront. The rest is generally financed through your mortgage.
The amount you need depends on the loan program, your qualifications, the price of the home, and the financial plan that makes the most sense for you.
A conventional loan may allow qualified buyers to put down as little as 3%, although many buyers put down 5% or more. A 20% down payment is often discussed because it can eliminate private mortgage insurance, but it isn't a universal requirement.
FHA loans can allow qualified buyers to put down as little as 3.5%. They are often helpful for buyers who need more flexibility with their down payment or credit profile.
Eligible veterans, service members, and surviving spouses may be able to use a VA loan with no down payment, depending on their eligibility, entitlement, lender requirements, and the property's appraised value. USDA loans may also offer no-down-payment options for eligible buyers and properties in qualifying areas.
Each program has its own rules, costs, and requirements. The important thing isn't to memorize every loan program. It's to understand that you may have more options than you think.
A Larger Down Payment Is Not Always Better
A larger down payment can reduce the amount you borrow, lower your monthly payment, and in some cases eliminate mortgage insurance.
But there's another side to the decision.
If putting 20% down leaves you with almost nothing in savings, you may be creating unnecessary financial stress. Homeownership comes with moving costs, maintenance, repairs, furniture, utility deposits, and the things you discover you need after you get the keys.
A buyer who puts less down but still has a healthy emergency fund may be in a stronger position than a buyer who puts every available dollar into the purchase.
There isn't one right answer for everyone. The right down payment is the one that helps you buy responsibly without leaving you unprepared for the realities of owning a home.
Don't Forget the Other Upfront Costs
The down payment gets most of the attention, but it is not the only money you may need before closing.
Earnest money is a deposit you provide after your offer is accepted. It shows the seller that you intend to move forward under the terms of the agreement. If the transaction closes, it's generally credited toward the amount you owe at closing. It isn't simply an extra fee, but it can be at risk if a buyer doesn't follow the contract terms and deadlines.
You'll also have closing costs. These may include lender charges, title and escrow services, prepaid property taxes and insurance, and other costs connected to the purchase. The exact amount depends on the loan, property, timing, and negotiated terms.
Depending on the situation, you may also need money for inspections, an appraisal, moving expenses, immediate repairs, or cash reserves. Some loan programs require reserves in certain situations, and even when they aren't required, having savings left after closing is usually a wise goal.
That's why it's important to look at your complete cash-to-close estimate instead of focusing only on the down payment.
You May Have Help Available
Some buyers may qualify for down-payment assistance, closing-cost assistance, grants, or loan programs designed to reduce the upfront cash needed to buy.
These programs can be valuable, but they aren't all the same. Some have income limits, location requirements, homebuyer education requirements, repayment terms, or restrictions on the type of property you can buy.
Assistance can make homeownership more accessible, but it should still fit your full financial plan. A good lender can help you understand which programs may be available and how they affect your payment, closing costs, and long-term obligations.
A Down Payment Planning Check
Before you start touring homes, take a few minutes to write down:
☐ The amount currently available for a down payment
☐ The amount you want to keep in emergency savings
☐ An estimated amount for closing costs
☐ Potential inspection, appraisal, moving, and immediate repair costs
☐ Whether you may qualify for a low-down-payment or assistance program
☐ A monthly payment that still leaves room for the rest of your life
This doesn't need to be perfect. The purpose is to replace assumptions with a starting plan.
Buying Tip from Derek
One thing I've learned is that many buyers wait longer than they need to because they're focused on one number.
They've heard they need 20% down, so they never explore their options.
Sometimes a quick conversation with a trusted lender changes their timeline completely. Other times, it confirms that waiting and building more savings is the right move.
Either result is useful.
The point isn't to buy before you're ready. It's to understand what's actually possible before deciding that homeownership is out of reach.
Good decisions come from good information, not assumptions.
What's Next?
Now that you understand how down payments, closing costs, and savings fit together, the next question is one many buyers worry about:
What credit score do you need to buy a home?
In the next article, we will explain how credit affects your loan options, why there is no single magic number, and what you can do now to strengthen your buying position, even if your credit is not perfect.
A Note from Derek
Every buyer's financial situation is different, and there isn't a one-size-fits-all answer when it comes to a down payment.
The Portland Metro Buyer's Academy is meant to give you honest, straightforward information without pressuring you to make a decision before you're ready.
If you'd like to talk through your options or simply find out where you stand, I'm always happy to have that conversation. Whether you're planning to buy in a few months or a few years, I'd be glad to help you build a plan that fits your goals.