A Loan Officer’s Guide: The Truth About Down Payments

You’re absolutely right — the “20% down” idea is one of the biggest misconceptions in home buying.

Here’s a clear way to explain it:

Conventional loans do not require 20% down.

First-time homebuyers can qualify for a conventional mortgage with as little as 3% down. The only difference is that the loan will include private mortgage insurance (PMI) until you reach roughly 20% equity.

And yes — a buyer can effectively purchase with “0% out-of-pocket.”

Here’s how:

• Buyer puts 3% down (required minimum for many first-time buyer conventional programs).

• Seller provides up to 3% in concessions.

• Those concessions can cover closing costs, prepaid taxes/insurance, and PMI upfront if desired.

This means the buyer’s actual cash to close can be reduced to nearly zero, depending on the scenario and lender guidelines.