You do not need 20 percent down to buy a home in 2026. Conventional loans go as low as 3 percent down, FHA loans 3.5 percent, and VA loans zero. The trade-off for less down is mortgage insurance and a larger monthly payment.
Where the 20 percent myth comes from
The belief that you need 20 percent down is the single biggest reason qualified buyers delay homeownership for years. It is not a rule. It never was.
Twenty percent is the threshold at which you avoid private mortgage insurance on a conventional loan. That is a real benefit, but it is a financial optimization, not a requirement to buy. Plenty of buyers in Simi Valley and across Ventura County purchase with far less, and understanding the actual minimums changes the entire conversation.
What each loan type actually requires
Down payment minimums depend on the loan program. Here are the common options as of 2026, with the trade-offs each one carries.
| Loan type | Minimum down | Mortgage insurance | Notes |
|---|---|---|---|
| Conventional | 3% (first-time) to 5% | PMI until ~20% equity | PMI is cancellable later |
| FHA | 3.5% | MIP, often for the life of the loan | Flexible credit guidelines |
| VA | 0% | None | Eligible veterans and service members |
| USDA | 0% | Guarantee fee applies | Limited rural-eligible areas only |
| Conventional 20% down | 20% | None | Lower payment, no PMI |
A real Simi Valley example
Take a Simi Valley home at the current median of roughly $780,000. At 20 percent down, that is $156,000, which is a genuine barrier for most buyers. At 5 percent down, it is $39,000. At 3 percent on a conventional first-time loan, about $23,400.
The gap between $156,000 and $39,000 is the difference between buying this year and buying in a decade. The lower down payment means a bigger loan and PMI, so the monthly payment is higher, and at 2026 mortgage rates in the 6.2 to 6.8 percent range, that monthly difference is real. But for many buyers, paying PMI for a few years while building equity beats renting while trying to save six figures.
The costs beyond the down payment
The down payment is not the only cash you need at closing. Budget for closing costs, which in California commonly run roughly 2 to 4 percent of the purchase price and cover loan fees, title, escrow, and prepaid items like taxes and insurance.
You should also keep cash reserves after closing. Lenders often want to see a few months of mortgage payments in the bank, and beyond that, you simply do not want to be house poor. What I tell clients: do not drain every account to hit a bigger down payment. A slightly smaller down payment with a healthy emergency fund is a stronger position than a perfect 20 percent and nothing left.
Down payment assistance and gift funds
California has down payment assistance programs aimed at first-time and moderate-income buyers, and they change periodically in funding and eligibility. They are worth investigating with a knowledgeable lender, because the right program can meaningfully lower your cash to close.
Gift funds are also allowed on most loan programs. A relative can gift money toward your down payment, with proper documentation, often called a gift letter. If family is willing and able to help, that is a legitimate and common path. Your lender will explain exactly how to document it.
How to figure out your real number
The honest answer to how much you need is: it depends on the loan, the price, and your full financial picture. The way to get a real number is to talk to a good lender, review your credit and income, and look at a few specific loan scenarios side by side.
Do not let an imagined 20 percent requirement keep you renting if the actual numbers say you can buy responsibly. And do not stretch into a payment that hurts just because a low down payment makes the entry cheap. The right down payment is the one that gets you into a home you can comfortably afford, with a cushion intact.
Frequently Asked Questions
Do I really need 20 percent down to buy a home?
No. Twenty percent lets you avoid PMI on a conventional loan, but it is not required. Conventional loans go as low as 3 percent down, FHA 3.5 percent, and VA zero.
What is the lowest down payment available in 2026?
VA loans for eligible veterans and USDA loans in eligible areas can require zero down. Conventional first-time programs can go as low as 3 percent, and FHA requires 3.5 percent.
What is PMI?
Private mortgage insurance is an added cost on conventional loans with less than 20 percent down. It protects the lender and can usually be cancelled once you reach about 20 percent equity.
How much are closing costs in California?
Closing costs commonly run about 2 to 4 percent of the purchase price and cover loan fees, title, escrow, and prepaid items. Budget for these in addition to your down payment.
Can I use gift money for my down payment?
Yes. Most loan programs allow gift funds from a relative with proper documentation. California also offers down payment assistance programs worth exploring with a lender.
