Pay 20 Percent Down? Maybe Not.

It’s an old wives’ tale that buyers need to put down at least 20 percent in order to purchase a home. In fact, there are several loan programs that allow you to put down just a fraction of that – as little as 3 percent of the sales price (zero in some cases!) – and still get the home of your dreams.

Let’s take a look at the lowest down payment you can pay with each loan type:

• FHA loans, 3.5 percent down – FHA loans are the easiest loans to get, with looser credit restrictions than other options.
• VA loans, 0 percent down – For military members, veterans and their families, VA loans offer low down payments and low interest rates.
• USDA loans, 0 percent down – These loans are reserved for first-time buyers and buyers in more rural areas. They’re offered by the U.S. Department of Agriculture.
• Conventional loans, 3 percent down – Ideal for borrowers with stellar credit, conventional loans can go as low as 3 percent down (though at least 5 percent is recommended.)

Some caveats: If you pay less than 20 percent down on either FHA and Conventional loans, you’ll most likely be required to get private mortgage insurance, which covers your lender in case you default. PMI ups your monthly payment a bit, but once you own at least 90 percent of the home, you can request that your lender cancel it. It takes a few years, but it will bring your payment down significantly when they do.

You should also keep in mind your down payment isn’t the only upfront payment you’ll need to make when you purchase a home. There are also closing costs and other fees, and depending on the value of the home you’re buying, those could equate to thousands and thousands more out of your pocket. You don’t want to put too much down and be strapped for cash when it comes to these other costs, so be careful about spending your entire rainy day fund on a down payment.

In the end, it’s best to use a down payment calculator to determine how much you should put down. These tools let you calculate your monthly payments based on the home price and the percent you’re willing to put down. Play with the numbers until you get to a monthly payment you’re comfortable with – one your household income will cover, while still affording you plenty of additional funds for utilities, transportation, food and all the other expenses that come with life. The magic number varies for every buyer, so work with your family members, your lender and your real estate agent to find a down payment that works for you.