How much do you actually need for a down payment?

Almost everyone I speak to opens with the same sentence: "We're saving for 20%."

You do not need 20% down to buy a house. You have never needed 20% down to buy a house. The number comes from the threshold at which private mortgage insurance falls away — it is a point at which one cost disappears, not a requirement to get a loan.

What each program actually requires

On a $500,000 house in Frisco, 3% is $15,000 and 20% is $100,000. The difference is not a rounding error — it is several years of saving while prices move.

The real question isn't "how much"

It's what the extra cash buys you, compared with what else it could do.

Putting 20% down avoids mortgage insurance. On that same $500,000 purchase, PMI runs roughly $130–200 a month at 10% down, and it is not permanent on a conventional loan — it comes off automatically once you reach 78% loan-to-value, and you can request removal at 80%.

So the trade is: $85,000 of cash today, against roughly $180 a month for a few years. In a market appreciating even modestly, waiting to accumulate that $85,000 usually costs more in purchase price than the insurance ever would.

Where the money can come from

• Your own savings — seasoned in your account for 60 days, or documented if not
• Gift funds from family, including from overseas. Allowed, routine, and covered in its own guide
• Retirement accounts — many 401(k) plans permit a loan for a primary residence, and some allow hardship withdrawal. Talk to a tax adviser first
• Proceeds from a sale — of another property, or of stock, with the transaction documented

What it cannot be is an unexplained deposit. Any large sum arriving in your account needs a paper trail, which is why moving money around the week before closing causes so much trouble.

What people forget

Down payment is not the only cash you need. Closing costs typically run 2–3% of the price, and prepaids — the first year of insurance and the tax escrow — add more. On a $500,000 purchase with 10% down, the total cash at the table is closer to $69,000 than $50,000.

Model your own numbers with the cash-to-close calculator, and work out what price your income supports with the affordability calculator.

The short answer

If you have 3–5% of the purchase price plus closing costs, you can likely buy. Whether you should depends on your timeline, your rate, and what else that money would be doing — which is a conversation worth having before you keep saving by default.