You do not need 20% down to buy a home.
The 20% myth is one of the biggest reasons buyers wait years longer than they have to. Here's the truth — broken down by loan type, with real Colorado numbers.
Where did the 20% myth come from?
The 20% figure comes from a real thing: putting 20% down on a conventional loan eliminates private mortgage insurance (PMI). That's a legitimate financial goal — but it's not a requirement to buy a home. Most buyers today put down far less.
The median down payment for first-time buyers is around 6–8%. VA loans allow 0% down. FHA loans allow 3.5% down. Conventional loans allow as little as 3% down. Waiting to save 20% often means years of paying rent while home prices and interest rates move against you.
Step 01
VA loans: 0% down for eligible veterans
If you or your spouse served in the military, a VA loan is almost certainly your best option. VA loans require no down payment, no private mortgage insurance, and offer competitive rates. The VA funding fee (typically 2.15% for first use) can be financed into the loan — meaning you can close with very little cash out of pocket. Eligibility is based on service history, and a Certificate of Eligibility (COE) is required. Jerry and Lisa work with VA loans every week and can pull your COE in minutes.
Key takeaways
VA loans have no PMI — saving $100–$300/month compared to low-down conventional loans
The VA funding fee can be waived entirely for veterans with a service-connected disability rating
VA loans can be used multiple times — your entitlement restores when you sell or pay off the home
Step 02
FHA loans: 3.5% down with flexible credit
FHA loans are backed by the Federal Housing Administration and allow down payments as low as 3.5% with a 580+ credit score. With a score between 500–579, the minimum is 10% down. FHA loans have more flexible debt-to-income requirements than conventional loans, making them popular with first-time buyers and those rebuilding credit. The tradeoff: FHA loans require mortgage insurance for the life of the loan (unless you refinance into a conventional loan later).
Key takeaways
FHA mortgage insurance includes an upfront premium (1.75% of loan amount, financeable) plus monthly MIP
FHA loan limits in El Paso County are updated annually — check current limits before assuming you qualify
Gift funds from family are allowed for the entire down payment on FHA loans
Step 03
Conventional loans: as low as 3% down
Fannie Mae HomeReady and Freddie Mac Home Possible programs allow conventional loans with just 3% down for buyers at or below 80% of area median income. Standard conventional loans allow 5% down. PMI is required when you put less than 20% down, but it can be removed once you reach 20% equity — unlike FHA mortgage insurance. Conventional loans also have higher loan limits than FHA, making them the right choice for higher-priced Colorado homes.
Key takeaways
PMI on a conventional loan typically costs 0.5–1.5% of the loan amount annually — but it goes away at 20% equity
A slightly higher credit score (720+) gets you the best PMI rates on conventional loans
Lender-paid PMI is an option — you take a slightly higher rate in exchange for no monthly PMI payment
Step 04
CHFA and Colorado down payment assistance
Colorado Housing and Finance Authority (CHFA) offers down payment assistance programs that can be layered on top of FHA, VA, and conventional loans. The CHFA SmartStep program provides a grant of up to 3% of the loan amount — money you don't have to repay. The CHFA Preferred program offers a second mortgage at a below-market rate. Income and purchase price limits apply, and a free homebuyer education course is required. These programs can dramatically reduce your cash-to-close.
Key takeaways
CHFA income limits for El Paso County are updated annually — current limits are available at chfainfo.com
The required homebuyer education course is free and available online — takes about 6–8 hours
Some CHFA programs have recapture provisions if you sell within a certain number of years — ask your broker
Step 05
The real cost of waiting to save 20%
Let's say you're targeting a $400,000 home and want to save 20% ($80,000). If home prices in Colorado Springs appreciate at 4% annually, that same home costs $432,000 in two years — and your target down payment grows to $86,400. Meanwhile, you've paid $24,000+ in rent. The math rarely favors waiting. A VA loan at 0% down or FHA at 3.5% down gets you into the home now, building equity while prices rise.
Key takeaways
Every year of waiting at 4% appreciation adds ~$16,000 to the purchase price on a $400K home
Rent paid while saving is money that builds zero equity — it's not 'wasted' but it's not working for you
Run the numbers with your broker — the break-even on PMI vs. waiting is often under 2 years
Step 06
What you actually need to close
Even with 0–3.5% down, you'll need cash for closing costs (typically 2–5% of the loan amount) and prepaid items (insurance, taxes, interest). On a $400,000 VA loan: expect $8,000–$14,000 in closing costs, which can often be covered by seller concessions. On a $400,000 FHA loan (3.5% down): $14,000 down + $8,000–$14,000 closing costs = $22,000–$28,000 total. Seller concessions, lender credits, and CHFA assistance can reduce these numbers significantly. Ask Jerry or Lisa for a real cash-to-close estimate for your scenario.
Key takeaways
Seller concessions (asking the seller to cover closing costs) are common in Colorado — especially in slower markets
Earnest money (1–2% of purchase price) is paid upfront but credited toward your closing costs
Your Loan Estimate (required within 3 business days of application) will itemize every dollar you need to close
Find out what you actually need to buy a home.
Jerry and Lisa will give you a real cash-to-close estimate based on your loan type, credit, and target price — no guesswork, no pressure.
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