If I had to guess the single biggest reason people delay buying their first home for years longer than necessary, it's this: they think they need 20% down. Almost none of my first-time buyers actually put down 20%.
Where the 20% Number Comes From
20% down avoids private mortgage insurance (PMI) on a conventional loan. That's true. But PMI isn't some financial trap, it's a monthly cost, often smaller than people expect, that goes away once you've built enough equity. Waiting years to save an extra 15% while rent and home prices keep climbing usually costs more than the PMI ever would.
What You Actually Need
- FHA loans: as low as 3.5% down
- Conventional loans for first-time buyers: as low as 3% down in many cases
- VA loans: 0% down for eligible service members and spouses
- Down payment assistance programs: can cover some or all of even that smaller number
The Real Math
Say a $450,000 home appreciates a modest 3% a year. Waiting two extra years to hit 20% down could mean that same home costs closer to $477,000 by the time you're ready, more than wiping out the PMI savings you were trying to avoid in the first place.
What You Should Actually Save For
Instead of fixating on 20%, I tell buyers to focus on three things: enough for your minimum down payment, closing costs (typically 2-5% of the purchase price), and a small reserve for after you move in. That's a realistic, achievable number, usually far sooner than people expect.
This is one of the most common misconceptions I clear up in my class, and it's often the moment buyers realize they're closer to ready than they thought.