Do You Really Need 20% Down to Buy a Home in Madison?

By Joshua Holt

Meet Joshua, a licensed real estate professional and accomplished broker. As the forward-thinking leader of the Holt Real Estate Team, he has forged a strategic alliance with Keller Williams and PLACE to deliver on Our Promise.

One of the questions we hear most often from buyers in the Madison area is whether they really need 20% down to purchase a home. The short answer is no, and that misconception is keeping a lot of people on the sidelines who could be building equity right now. We sat down with one of our favorite mortgage experts, Jess Rielly with Envoy Mortgage, to break down the options.

The 20% down payment is a myth. According to NerdWallet’s 2025 Home Buyer Report, 62% of Americans still believe a 20% down payment is required to buy a home. It’s the number one myth in homebuying, and it’s been persistent for years. The reality is that there are multiple loan programs designed specifically to get buyers into homes with far less than 20% down, and in some cases, no down payment at all.

Federal Housing Administration (FHA) loans require just 3.5% down. FHA is one of the most popular products among first-time buyers, though it’s not limited to first-time buyers. With an FHA loan, you only need 3.5% down, and the credit score requirements are more lenient than conventional loans. If you’ve had some credit challenges in the past, FHA is often a strong starting point.

Conventional loans start as low as 3% to 5% down. A lot of buyers don’t realize that conventional mortgages also offer low down payment options. You can purchase a home with as little as 3% to 5% down on a conventional loan, which opens up a much wider range of possibilities for buyers who assumed they needed to save for years before making a move.

Veterans Affairs (VA) loans offer 100% financing. For veterans and active military, VA home loans require no down payment at all. We work with a lot of veterans in the Madison area, and this is one of the most powerful loan programs available. If you’ve served, this benefit is worth exploring.

U.S. Department of Agriculture (USDA) loans also require zero down. For buyers looking at properties in eligible rural areas, USDA loans offer another path to homeownership with no down payment required. Between VA and USDA, there are two completely viable zero-down options that many buyers don’t know exist.

Private Mortgage Insurance (PMI) is not a reason to wait. Once buyers learn they don’t need 20% down, the next concern is usually PMI. Jess explained it simply: it would take most people years to save up 20%, and that’s exactly why these programs exist. The more you put down, the lower your PMI, and the better your credit, the lower your PMI.

On most loan programs, PMI will eventually be removed once you build enough equity. Even on programs where PMI doesn’t automatically come off, you can refinance into a different loan once you have 20% equity. You’re not stuck with it forever, and it shouldn’t hold you back from investing in a home today.

The cost of waiting adds up. If you’re thinking about waiting for interest rates to drop before jumping in, consider this: if and when rates drop, home values are most likely going to be higher. There is a real cost to waiting, and Envoy Mortgage has a cost-of-waiting calculator that can show you exactly what that looks like in real dollars. Reach out to Jess, and she can run those numbers for you.

The other factor is competition. When rates dip, buyers flood back into the market. Any money you might save by waiting could easily be spent competing for the same homes. On the other hand, when rates trend upward, other buyers tend to exit the market, which can actually be a great opportunity to get into a home with less competition.

If you want to talk through your options or run those numbers with Jess, you can reach her directly at (815) 997-0149 by call or text. To reach our team, call or text us at (608) 345-6594 or email us at info@holtrealestateteam.com. You can also explore our financing options or visit holtrealestateteam.com to learn more. We’d love to help you figure out your next step.