How much down payment do you really need?

The 20% down payment is the most expensive piece of folk wisdom in real estate. On a $450,000 house it is $90,000 — and the median first-time buyer in this country puts down closer to 8%. What 20% actually buys you is the absence of mortgage insurance. Whether that is worth waiting three more years for is a math problem, not a moral one.

The options, on a $450,000 purchase

• 3% down ($13,500): conventional Home Possible / HomeReady, or a MassHousing loan with down-payment assistance. Mortgage insurance of roughly $150–250 a month until you reach 20% equity.
• 3.5% down ($15,750): FHA. Easier credit, but FHA mortgage insurance stays for the life of the loan unless you refinance.
• 5% down ($22,500): standard conventional. Slightly better rate and cheaper mortgage insurance than 3%.
• 10% down ($45,000): mortgage insurance drops by roughly half, and you have a cushion if values dip.
• 20% down ($90,000): no mortgage insurance, best rate, and a monthly payment about $300–400 lower than the 5% version.

What down payment money is really for

Every dollar of down payment does two things: it lowers the principal you pay interest on for 30 years, and it moves you toward the 20% line where mortgage insurance disappears. That is why a Down Payment Jar is split into milestones — 1%, 3%, 5%, 10% of the price — rather than one giant number. Hitting 5% instead of 3% is an achievable gift target for a family, and it changes the monthly payment for three decades.

The thing to avoid is draining every account to reach a round number. Lenders want to see reserves — a few months of payments left in the bank after closing — and so should you. Month-one repairs are not optional.