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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

What down payment size actually changes

Down payment size changes three things: your loan amount, whether mortgage insurance applies, and how strong your offer looks to a seller. Conventional loans go as low as 3% down for qualified buyers, FHA to 3.5%. Twenty percent isn't required — it's one option with trade-offs, not a rule.

  • Lower down payment usually means mortgage insurance applies.
  • 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:

3quick 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