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Hole 03 · Front Nine — Get Ready

Savings & Down Payment

You do not need 20% down to buy a home responsibly. This hole covers how down payment size changes your monthly payment, mortgage insurance, and offer strength, plus how much cash reserve to keep on hand after closing. You will end with a savings target, not just a percentage.

8 min read · Free, no signup

Written by Isaac Ortiz · Real Estate Broker · Compass | NWMLS #146754

Primary sources reviewed July 15, 2026

Homebuying fundamentals are taught for learners nationwide. Sections labeled Washington detail use Washington law, programs, practices, or Pacific Northwest examples—check the official resources for your state before acting.

What down payment size actually changes

Down payment size changes your loan amount, cash reserves, and often the mortgage-insurance or pricing terms. Some eligible conventional programs permit 3% down, while FHA's baseline permits 3.5% for qualifying borrowers with a 580 or higher credit score; individual lender standards can be stricter. Twenty percent is one option, not a universal requirement.

  • A lower down payment can mean mortgage insurance or other program fees apply.
  • Higher down payment lowers your loan amount and monthly payment.
  • Cash offers and larger down payments can strengthen a bid.

Mortgage insurance drops off — your reserve cushion doesn't

Conventional mortgage insurance, or PMI, drops automatically once you reach 78% loan-to-value, so it's temporary. What matters more long-term is the reserve cushion you keep after closing — a couple months of payments set aside for the surprises every first year of ownership brings. Don't drain savings just to avoid PMI.

  • PMI is removable; an empty reserve account is not.
  • Plan for two to three months of payments held in reserve.
  • FHA mortgage insurance behaves differently — it often lasts the life of the loan.

Set a savings target, not just a percentage

Your target should cover three things: the down payment itself, closing costs (typically 2-5% of price), and your reserve cushion. Adding those together — not just picking a down payment percentage — gives you the real number to save toward before you start touring homes.

  • Down payment + 2-5% closing costs + reserve = your real target.
  • Run the math at a few price points, not just your dream number.
  • Down payment assistance can lower this target — covered next hole.

Mastery check

Prove it out before you move on.

Caddie

Before you play through — quick read of the green:

3 quick questions. Get all but one right and this hole is marked played. Unlimited retries — there's no penalty for missing one.

Question 1 of 3

Do you need 20% down to buy a home responsibly?

Question 2 of 3

What's the real reason a reserve cushion matters more long-term than avoiding PMI?

Question 3 of 3

Your savings target should cover...

Still stuck? Ask the Caddie.

Hole 2: CreditHole 4: Down-Payment-Assistance Programs