How much down payment do you really need?

How much down payment do you really need?

For most buyers in Central Texas, a lot less than 20%. Depending on your loan, you can buy with as little as 3% down on a conventional loan, 3.5% on an FHA loan, or 0% on a VA or USDA loan if you qualify. The 20% number is the single most common myth I hear, and it keeps people renting for years longer than they need to. The real question is not "do I have 20%," it is "which path fits my situation," and that is a much easier question to answer.

I love this part of the job. So many first-time buyers do not think owning a home is even possible, and the moment it clicks that it is, there is nothing better. You are never too early or too late to start. So let me walk you through the real numbers, no pressure, just what is actually true.

Before the numbers, here are the 10 things I want every first-time buyer to know. Tip number three is all about your down payment options:

What each loan actually requires

Your minimum down payment comes down to your loan type, your credit, and your eligibility. Here are the four most common paths for Central Texas buyers.

Down payment minimums reflect current loan-program standards as of 2026. Your rate, PMI, and terms depend on your credit and lender. I will connect you with a local lender I trust to run your real options.

The 20% myth, busted

Where did 20% even come from? It is the point where you skip private mortgage insurance (PMI) on a conventional loan. That is a real benefit, but it is not a requirement to buy, and treating it like one costs people years of equity. A few truths that cut against the myth:

• PMI is not forever. On a conventional loan it comes off once you reach about 20% equity, whether from paying down the loan or from your home gaining value. It is the price of getting in sooner, not a life sentence.
• Repeat buyers get help too. Assistance and low-down-payment loans are not just for first-timers. That is a myth of its own.
• More down is not automatically smarter. Sometimes keeping cash for repairs, furniture, or an emergency fund, or getting into the market a year sooner, beats emptying your savings to hit 20%.
• A bigger down payment does have real upsides: a lower monthly payment, no PMI, and sometimes a stronger offer. The point is not that 20% is bad, it is that it is a choice, not a gate.

The full picture: your real cash to close

The down payment is not the only money you bring. Here is the honest list so nothing surprises you, and the good news is a seller or builder can sometimes cover part of it.

• Earnest money: usually 1% to 2% of your offer, and it is negotiable. This is not an extra cost, it gets credited back to you at closing.
• Option fee: often $100 to $200, and negotiable. It buys your inspection period, usually 7 to 10 days, the window when you can still walk away.
• Closing costs: typically 2% to 5% of the purchase price, covering lender, title, and prepaid items.
• Home inspection: starts around $300 and goes up with the size of the home, and it is worth every penny. Never skip it, even on new construction.
• Appraisal: around $500 to $700, and typically paid upfront.
• Then the move: utilities, movers, and the furniture for those empty rooms.

Help you might not know you qualify for

This is the part buyers are most surprised by. Central Texas has real down payment assistance, and many people who qualify never look into it. These programs can cover part or all of your down payment, sometimes as a grant, sometimes as a second loan that is forgiven after you live in the home a few years.

• TSAHC (Texas State Affordable Housing Corporation) down payment assistance programs.
• My First Texas Home through the Texas Department of Housing and Community Affairs.
• Local city and county programs, such as City of Austin assistance for income-qualified buyers.
• Gift funds: most lenders let you use a monetary gift from family for part or all of your down payment. You will need a signed gift letter and a clear paper trail showing the transfer.

Assistance programs, income limits, and eligibility change over time. Confirm what is currently available for your situation, and I can point you to the right starting place.

So how much should you actually put down?

There is no universal answer, it depends on your savings, your goals, and the loan you use. A few illustrations to make it real (these are examples, not your number):

Want to see how a bigger or smaller down payment changes your monthly payment? Run it through my mortgage calculator and watch the number move. Then start with a budget and a plan that works for you, and build from there. And do not forget tip number one from the video: think beyond the sticker price. Your real monthly cost includes property taxes, insurance, maintenance, and any HOA, and getting pre-approved is the reality check that tells you what you can actually afford. If your community carries a MUD or PID, the MUD and PID guide shows how that changes your tax bill.