⏱️ 10 min read
Last Updated: Arpil 7, 2026
Next Update: April 1, 2027
Most buyers don’t need 20% down. For move-up buyers working with equity from a home sale, the down payment calculation often looks different than it does for someone saving from a paycheck. Either way, the options are broader than the 20% figure suggests. Depending on the loan type you qualify for, you may only need 3–3.5% from savings to get started. On a $400,000 home, that’s $12,000–$14,000.
The 20% number has been floating around for decades. Here’s what you need to know, by loan type, by situation, and by what’s available in Indiana and Kentucky right now.
Table of Contents
What’s the Actual Minimum Down Payment By Loan Type?
The minimum down payment for a house depends on which loan program you qualify for. Conventional loans require as little as 3% for first-time buyers. For repeat buyers, the conventional minimum is typically 5%. On a $400,000 home, that’s $20,000. FHA loans require 3.5% with a 580+ credit score. VA and USDA loans offer 0% down for qualifying borrowers. Your credit history, income, and home location all affect which options are available to you.
Here’s how the main programs compare:
| Loan Type | Minimum Down Payment | Who Qualifies | PMI Required? |
| Conventional | 3% (first-time buyers); 5% for repeat buyers | Most buyers with qualifying credit | Yes, if less than 20% down |
| FHA | 3.5% | Buyers with a 580+ credit score | Yes (MIP, different from PMI) |
| VA | 0% | Eligible veterans and active service members | No |
| USDA | 0% | Low-to-moderate income, rural/suburban areas | No (guarantee fee instead) |
* minimum Down Payment by Loan Type (2026).
A few things worth knowing before you pick a path.
FHA loan requirements set by HUD allow lower credit scores than conventional programs, which makes them popular with first-time buyers still building their credit history. VA loans are available only to eligible veterans and active service members. If you qualify, 0% down is genuinely one of the best deals in mortgage lending. USDA loans require the property to be in a qualifying area, which includes several communities in Indiana and Kentucky.
There is one thing to note, however. Putting less than 20% down on a conventional loan means you’ll pay private mortgage insurance (PMI). It’s an extra monthly cost, but it’s not permanent. Once you reach 20% equity, you can request cancellation.
Related article: Mortgage Myths and Facts for New Home Buyers
What Does the Average Buyer Actually Put Down?
In 2025, the median down payment for all U.S. homebuyers was 19% of the purchase price, according to the National Association of Realtors. But that number is heavily skewed by repeat buyers, who often use equity from a home sale. That means for many move-up buyers, it’s a realistic reference point, not an inflated one. For buyers funding a down payment from savings alone, the median was just 10%. On a $400,000 home, that’s $40,000.
How much you put down as a repeat buyer comes down to three things:
- how much equity you’re working with
- How much you have in savings
- and how much you want to keep in reserve after closing.
The generational breakdown reflects this. Buyers ages 60–69 put down closer to 28% in 2025, largely because of accumulated equity from prior home sales. Buyers ages 35–44 put down a median of 11.7%, often drawing on proceeds from a previous home sale. Buyers ages 26–34 put down a median of 10%, most of them funding it from savings alone.
None of these numbers is the universal target. Where you land depends on your equity, your loan program, and how you want to structure the transaction.
The PMI Question: Is Putting Less Down Worth It?
According to Freddie Mac, PMI typically adds about $30–$70 per month for every $100,000 you borrow. So on a $400,000 loan, that’s roughly $120–$280 per month, depending on your credit profile and other factors. It’s a real cost, but for many buyers, getting into a home sooner outweighs the wait to avoid it.
Here’s the math. To put 20% down on a $400,000 home, you need $80,000. Saving $1,500 a month gets you there in under five years. During those years, you’re paying rent that builds no equity, and home prices may keep rising. A $400,000 home today might not be a $400,000 home in 2031.
Buy now with 5% down ($20,000), and you start building equity immediately. Yes, you’ll pay PMI, but per the Consumer Financial Protection Bureau, you can request PMI cancellation once you reach 20% equity on a conventional loan.
Neither path is wrong. It comes down to your savings rate, your regional market, and how long you’re willing to wait. The thing worth pushing back on is treating 20% as the only acceptable starting point. It was never actually required.
Down Payment Assistance Programs in Indiana and Kentucky
Down payment assistance (DPA) programs help eligible buyers cover some or all of their down payment, and often closing costs too. Some are specifically for first-time buyers, but several are available to move-up buyers as well.
The three main types:
- Grants: Money that doesn’t need to be paid back. A true gift toward your down payment.
- Forgivable loans: A second mortgage that’s forgiven over time, as long as you meet the residency requirement. Move too soon, and you repay a portion.
- Deferred payment loans: A second mortgage at low or no interest that you repay when you sell, refinance, or move out.
In Indiana, the Indiana Housing and Community Development Authority (IHCDA) offers several programs, including First Step and Next Home. First Step provides up to 5% in down payment assistance for first-time buyers, while Next Home offers 2.5% — 3.5% in forgivable assistance and is available to both first-time and repeat buyers. Income limits and purchase price caps apply and vary by county.
In Kentucky, the Kentucky Housing Corporation (KHC) offers two core options when paired with a KHC first mortgage: Regular DAP, which provides up to $10,000 in repayable assistance at a low fixed rate, and Affordable DAP, which offers up to $7,500 for income-eligible buyers. Both programs are available to first-time and repeat buyers, subject to income and purchase price limits that vary by county.
DPA programs change frequently and require application through an approved lender. Ask about your options before assuming you need to save the full amount yourself.
Our team at Jagoe can point you toward current programs available in your market. Reach out through our Mortgage Center to get started.
How Buying a New Construction Home Changes the Down Payment Process
Buying a new construction home from a builder changes the financing process.
Most builders require a construction loan, a separate financing product with its own qualification process, interest rate, and fees. Once the home is finished, that loan converts to a traditional mortgage, or you refinance. It’s a legitimate path. It just adds layers that most buyers don’t anticipate going in.
With Jagoe, you skip that step entirely. We finance the build. Pay your down payment, sign your purchase agreement, make your design selections at our Design Studio, and your new home is ready within 3–5 months. Your traditional mortgage closes when the home is complete. No construction loan, no payments during the build, and up-front, transparent pricing from the start.Down payment assistance programs apply to new construction purchases the same way they do to existing homes. And if you’re a current homeowner figuring out how to time the sale of your existing home alongside a new build, ask us about our SureTrade program. It’s designed to help manage exactly that. You can also browse our Home Loan Learning Center for a deeper look at how the full financing process works.
How Move-Up Buyers Typically Fund a Down Payment
For most move-up buyers, the down payment isn’t a savings question. It’s an equity question. The proceeds from your current home sale are usually the primary source. This means the real challenge is figuring out how to time the sale of your existing home alongside a new build.
A few things that make the process more concrete:
- Know your equity position first. Get a current market estimate on your existing home so you know what you’re actually working with. Your equity minus selling costs gives you a realistic figure for what you can put toward the down payment on your new home.
- Get pre-qualified before you start shopping. Your lender confirms what you can qualify for and helps you understand how your equity, income, and credit profile shape your options together.
- Keep reserves. Don’t put every dollar of equity into the down payment. Closing costs typically run 2–5% of the loan amount. For most Jagoe buyers, that range is $7,500 – $8,500. And if you use Jagoe’s preferred lender, Jagoe contributes $2,500 toward those costs. Having a cushion after you close makes a big difference.
- Ask about the SureTrade program. Timing a home sale with a new build is one of the most common stressors for move-up buyers. Jagoe’s SureTrade program is specifically designed to help you manage that transition.
- Ask about gift funds. Most loan programs allow family members to contribute toward your down payment. Your lender will need a gift letter confirming it’s not a loan, but it’s a legitimate and commonly used option.
- Check DPA eligibility. Indiana and Kentucky both have active programs available to repeat buyers, not just first-time buyers. Next Home through IHCDA and both KHC programs include eligibility options for move-up buyers. You might qualify for more assistance than you expect.
Still figuring out where you stand? Jagoe’s team can walk you through financing options, down payment assistance programs available in your area, and what your transition looks like based on your current home and our communities.
Visit our Mortgage Center or call us at 270-515-9093.
Down payments are rarely as complicated as they first appear. The options are broader, the sources are more varied, and the path forward is usually clearer than you’d expect before you start asking questions.
Frequently Asked Questions About Down Payments
Down payment questions are some of the most common ones we get. Here are straight answers to what buyers ask most.
What’s the minimum down payment to buy a home?
Can I use the equity from my current home as a down payment on a new build?
How much do I need to save before I can buy a home?
What are down payment assistance programs, and how do I qualify?
Is it better to put more money down or keep savings in the bank?
What happens if I put less than 20% down?
How does buying a new construction home affect the down payment process?
Can I use gift money for a down payment?
An energy efficient Jagoe Home begins with intelligent design, quality construction, and generations of working to exceed our own standards of excellence. Jagoe Homes committed to all the practices it takes to build truly energy efficient homes, and we work closely with RESNET (Residential Energy Services Network) to achieve great ratings from that organization.
HERS® (Home Energy Rating System) INDEX
*Based on the US Department of Energy definition of HERS index of 130. This information presented for educational purposes only. Savings are average estimates based on Jagoe Homes’ top five selling plans. Savings will vary based on house type, orientation, house size, utility rates, climate and operations of the home.
The lower a home scores on RESNET’S HERS (Home Energy Rating) Index, the more energy efficient it is. A standard new home that’s built to meet the 2006 IECC will score a HERS Index of 100. New Jagoe homes score an average of 62, making them at least 38% more efficient than a standard new home and at least 68% more efficient than a used home.
Financing Your New Home Build, Simplified
Need answers fast? Our Jagoe Acrisure Financing Team is located in Owensboro, Kentucky, and has the resources and staff to get you into your new Jagoe Home. We work closely with you, combining expertise and advanced tools to make navigating your home loan process simple and seamless. Whether you’re ready to build a house on your land now or just exploring financing options, we are committed to helping you achieve your goals quickly and effectively. Our team is committed to getting you started with a stress-free experience from start to finish.
For Financing please call an Acrisure Mortgage Team Member
Bambi L. Winstead
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