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Mortgage & Financing • August 28, 2026

How Much Down Payment Do You Really Need for a House? FHA, Conventional, VA, and USDA Compared

by Reginald Butler, Jr.

Let me start with the sentence that has kept more families out of homeownership than any interest rate ever has:

“I need 20% down.”

You don’t. You never did. And the belief that you do has cost people in our community years of equity they’ll never get back.

Here’s what the programs actually require in 2026, what each one really costs, and what’s available right here in Prince George’s County and D.C. to close the gap.

What buyers are actually putting down

Let’s kill the myth with data. According to the National Association of REALTORS®, first-time buyers are putting down somewhere around 8% to 10% on average — other 2026 surveys put first-timers near 8%, roughly $33,600 on a $420,000 home. Repeat buyers average around 19% to 23%, and that’s because they’re rolling equity from the last house, not because they saved it in cash.

 

So the typical first-time buyer in America is putting down single digits. Not twenty percent. Single digits.

The four loan programs, side by side

Minimum Down Credit Floor (typical) Mortgage Insurance 2026 Loan Limit
FHA 3.5% (580+) / 10% (500–579) 580 1.75% upfront + 0.15%–0.75% annual $541,287 floor / $1,249,125 high-cost
Conventional 3% (HomeReady/Home Possible) / 5% standard ~620 PMI, cancellable $832,750 baseline / up to $1,249,125 high-cost
VA 0% Lender-set None (funding fee instead) No limit with full entitlement
USDA 0% ~640 typical Guarantee fee No set limit; income + area limits apply

Now the details that matter.

FHA — the flexible one

3.5% down with a 580 credit score. Below that, from 500 to 579, you’re looking at 10% down. FHA is the most forgiving program on credit history, debt-to-income, and past credit events, and that flexibility is why it remains the workhorse for first-time buyers in our market.

The cost of that flexibility is mortgage insurance. FHA charges 1.75% upfront (usually financed into the loan) plus an annual premium between 0.15% and 0.75%, depending on loan size and loan-to-value.

Here’s the part people don’t find out until later, so hear it now: if you put down less than 10% on an FHA loan, the mortgage insurance lasts the entire life of the loan. The only exit is a refinance. Put down 10% or more, and it drops off after 11 years. That single detail is worth a real conversation with your lender before you choose FHA over conventional.

For 2026, the FHA floor is $541,287 in most counties, with a ceiling of $1,249,125 in high-cost areas — and our D.C. metro counties sit at the high end.

Conventional — the one with an off-ramp

Standard conventional loans typically start at 5% down, but the first-time-buyer programs — HomeReady from Fannie Mae and Home Possible from Freddie Mac — go down to 3%. Yes, three percent. Lower than FHA.

The big structural advantage is PMI is cancellable. You can request removal once you hit 20% equity, and it terminates automatically when the loan balance reaches 78% of the original value. On an FHA loan with minimum down, that insurance never leaves. On a conventional loan, it’s temporary. Over a 30-year hold, that difference is real money.

The trade-off is that conventional underwriting is stricter on credit and debt-to-income. Generally you want a 620-plus score, and PMI pricing improves sharply as your score climbs.

The 2026 conforming baseline is $832,750, with high-cost areas — including D.C. and the surrounding metro — going up to $1,249,125.

VA — the best loan in America, if you’ve earned it

Zero down. No monthly mortgage insurance. No loan limit with full entitlement. There is nothing else like it on the market, and given how many veterans and active-duty families we serve across Prince George’s County, this is the program I most hate seeing go unused.

The cost is the funding fee, which runs from 0.5% to 3.3% depending on your situation. First-time VA users with no money down pay 2.15%; subsequent users with no money down pay 3.3%. Putting some money down lowers the fee.

And the piece a lot of people don’t know: if you receive VA disability compensation at any rating of 10% or higher, the funding fee is waived entirely. Zero down, no mortgage insurance, no funding fee. That is as close to free entry as this market offers.

One more 2026 development worth knowing — the VA made its buyer-broker fee rule permanent in April 2026, so VA borrowers can now pay their own agent as a legitimate closing cost, matching what conventional and FHA buyers have always been able to do. That gap is finally closed.

USDA — zero down, if the map cooperates

USDA guaranteed loans offer 100% financing with no down payment for low- and moderate-income buyers in eligible areas. There’s no set loan limit, but there are income limits and geographic eligibility requirements, and “rural” is defined more generously than most people assume.

Worth checking in the outer reaches of Southern Maryland and parts of Charles and Calvert counties. Always run the address through the eligibility map before you fall in love with a house — the boundaries are specific and they get redrawn.

The programs that close the gap — and these are the big ones

This is the section I’d tattoo on a billboard if I could.

Prince George’s County “Pathway to Purchase” provides up to $50,000 toward down payment and closing costs for first-time buyers, structured as a zero-interest deferred loan. In Fiscal Year 2026 the county awarded more than $1.2 million to 33 homebuyers — up sharply from the prior year. Read that again: thirty-three families. The money is there and it is under-claimed.

Maryland Mortgage Program offers 1st Time Advantage DPA at 3%, 4%, or 5% of your first mortgage for down payment and closing costs, and HomeStart with assistance up to 6% of the loan amount for buyers at or above 50% of area median income.

And critically — these can stack. Pathway to Purchase is designed to be combined with a Maryland Mortgage Program loan.

Washington, D.C. HPAP — the Home Purchase Assistance Program — offers up to $202,000 in assistance for first-time buyers, plus $4,000 toward closing costs, with the amount scaled to household size and income. That is not a typo, and it is one of the most generous municipal programs in the country.

If you take one thing from this article, take this: the assistance is real, it is substantial, and most of it goes unclaimed every single year because people never ask.

Should you put down more than the minimum?

Sometimes. A larger down payment lowers your monthly payment, reduces or eliminates mortgage insurance, and can improve your offer’s strength in a competitive situation.

But be careful about draining yourself to get there. You still need closing costs — typically 2% to 5% of the purchase price — plus moving costs, and a genuine reserve fund. A buyer who puts 20% down and has $800 left in the bank when the water heater goes is in a worse position than a buyer who put 5% down and kept six months of expenses.

And remember what a down payment does and doesn’t do. It doesn’t change the price of the house. It changes your monthly payment and your insurance cost. Waiting five years to save an extra 15% while prices and rents climb is very often a losing trade — you’re paying today’s rent to chase yesterday’s down payment.

What to do this week

Get pre-approved with a lender who actually knows the assistance programs — not every lender does, and the ones who don’t will quietly steer you toward the loan that’s easiest for them. Ask specifically about HomeReady, Home Possible, Pathway to Purchase, the Maryland Mortgage Program, and HPAP by name. If you’re a veteran, ask about your funding fee exemption. Then check the FHA-versus-conventional mortgage insurance question against how long you actually plan to own the house.

 

That’s a one-hour conversation that regularly saves people tens of thousands of dollars.

You may be closer than you think. Most people are. Let’s find out — when are you free this week or next?

This article is general information and is not lending, legal, or tax advice. Program terms, limits, and eligibility change and vary by lender and by borrower. Figures cited are current as of August 2026. Confirm details with a licensed loan officer and the administering agency.

Reginald “Reggie” Butler Jr. Broker/Owner, CENTURY 21 ENVISION 240-232-7005 | 240-938-1244 reggiebutler333@gmail.com

Sources

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