Down Payment Myths Louisville Buyers Believe

By Tim Hollinden, Broker Associate | The Hollinden Team at eXp Realty

Quick Answer

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No, 20% down is not a universal requirement to buy a home. Several loan programs allow qualified buyers to purchase with significantly less, and the right amount for you depends on your financing, your budget, and what you are trying to accomplish.

What You'll Learn

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• Why the 20% down payment rule does not apply to most buyers
• Why the real question is not the smallest down payment you can make, but the right one
• Whether a smaller down payment actually makes you a weaker buyer
• Where your down payment money is actually allowed to come from
• Whether waiting to save more is really the safer choice
• Who down payment assistance programs are actually for

Tim's Take

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I talk to a lot of buyers who have ruled themselves out before we have even had a real conversation, and it is almost always because of something they heard once and never checked. The 20% down payment rule is the biggest one, but it is far from the only one. I would rather replace what you have heard with what is actually true, because a myth should not be the thing standing between you and a house that would otherwise work for you.

Myth: I Need 20% Down to Buy a House

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This is the one I hear the most, and it is simply not accurate for most buyers. Depending on the loan program and borrower qualifications, conventional financing may be available with down payments around 3%, FHA financing around 3.5%, and eligible VA and USDA borrowers may have zero-down options. Program requirements can change, which is why the actual options available to you should be confirmed with a lender rather than assumed from a rule you heard secondhand.

The Better Question: How Much Should You Put Down?

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Knowing that 20% is not required is only half the picture. The minimum a loan program allows and the amount that actually makes sense for you are not necessarily the same number. Putting more down can reduce your monthly payment and your financing costs — but putting every available dollar into the house can leave you without enough cash left over after closing for the reserves you will want on hand for repairs, emergencies, or simply breathing room. I want buyers looking at the whole financial picture — the resulting payment, what is left in savings, and what that money still needs to do for you — not simply trying to hit 20%, or trying to put down as little as possible just because a program allows it. That whole financial picture is exactly what I walk through in my guide on how much house you can really afford, where I connect the down payment, the monthly payment, and your reserves into one decision.

Myth: Putting Down Less Than 20% Means I'm Making a Bad Financial Decision

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A smaller down payment usually means private mortgage insurance (PMI) on a conventional loan, or a mortgage insurance premium on an FHA loan. That is a real cost, but it is not automatically a bad decision — it is a trade-off worth weighing against your actual situation. On many conventional loans, PMI may eventually be removed once certain equity and loan requirements are met; a lender can walk you through the specifics for your loan. For a lot of buyers, getting into a home sooner is worth that additional cost, especially compared to the alternative of waiting and continuing to rent or outgrow their current space in the meantime. For others, it genuinely is not, and that is a fair call too. The point is not that a smaller down payment is always right — it is that it is not automatically wrong. Remember that your down payment is only one piece of the total cash you will need at closing — understanding the full picture of closing costs for buyers is just as important for your budget.

Myth: My Down Payment Has to Come Entirely From My Own Savings

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Many loan programs allow gift funds from family members to count toward a down payment, typically with some documentation to confirm it is a gift and not a loan. There are also down payment assistance programs, and some employers offer homebuying assistance as a benefit. If you assume your only option is what you have personally saved, you may be ruling out resources that are actually available to you. A lender can tell you exactly what is allowed for the specific loan program you are considering.

Myth: If I Can't Hit 20%, I Should Just Wait and Keep Saving

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This deserves the same evidence-based comparison I would apply to any timing decision. Compare what buying with a smaller down payment would actually cost today — including mortgage insurance and the resulting monthly payment — with what waiting would mean for your savings timeline, your housing costs in the meantime, and your reserves after closing either way. Future home prices and rates are unknown, so they should not be treated as the reason to buy now or the reason to wait. The comparison that actually helps is the one built on numbers you can know today, not a guess about tomorrow's market. For a deeper dive on this timing question, see my guide on whether to buy now or wait for rates to drop.

Myth: Down Payment Assistance Is Only for Buyers Who Can't Otherwise Afford a Home

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Down payment assistance programs are frequently assumed to be need-based safety nets, but eligibility for many programs is broader than people expect, and can include first-time buyers across a range of income levels. Whether you would qualify for a specific program depends on the program's own criteria, which is worth checking rather than assuming you do not qualify.

Frequently Asked Questions

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Bottom Line

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The 20% down payment rule is not the fact people treat it as — but the goal was never to find the smallest number a program allows, either. The goal is choosing the down payment that leaves the entire purchase financially comfortable: a payment you can manage, and enough left over to handle what comes after closing. I would rather you make this decision based on what is actually true for your situation than a number you heard once and never checked.

If you are not sure what actually applies to you, I would be happy to point you toward a conversation that can give you real answers — no pressure, no obligation. Call 502-429-3866.

— Tim