You do not need 20% down to buy a house in Pennsylvania. This is the single most common and most costly misconception among first-time and move-up buyers alike. Qualified buyers can purchase with as little as 3% down on a conventional loan, 3.5% on an FHA loan, and 0% on VA and USDA loans, and Pennsylvania’s PHFA programs can reduce the cash needed even further through down payment assistance. The 20% figure persists because it is the threshold at which private mortgage insurance is no longer required, but it is a preference, not a requirement. Understanding the real numbers, including the costs beyond the down payment itself, is what lets buyers know when they can actually afford to buy.
This guide lays out the real down payment options and the full cash picture.
The down payment options
Conventional loans: as low as 3% down. For qualified buyers, particularly first-time buyers, conventional loans through Fannie Mae and Freddie Mac programs allow down payments as low as 3%. On a $400,000 home, that is $12,000, not $80,000. These loans require private mortgage insurance (PMI) until the buyer reaches roughly 20% equity, at which point PMI can typically be removed, a key advantage over FHA.
FHA loans: 3.5% down. FHA loans require 3.5% down ($14,000 on a $400,000 home) and offer more flexible credit requirements, making them a common choice for buyers with shorter or thinner credit histories. The trade-off is that FHA mortgage insurance generally remains for the life of the loan, so many buyers refinance out of FHA once they have built equity.
VA loans: 0% down. Eligible veterans, active service members, and certain surviving spouses can purchase with no down payment and no mortgage insurance through VA loans, among the most favorable terms available anywhere. Buyers who qualify should strongly consider this option.
USDA loans: 0% down. For homes in eligible rural and some suburban areas, USDA loans offer no-down-payment financing. Parts of the outer Philadelphia suburbs and more rural Bucks and Chester County areas can qualify, worth checking for a specific address.
PHFA assistance: less cash still. Pennsylvania’s PHFA programs can layer down payment and closing cost assistance on top of these loan types, further reducing the cash a buyer needs at closing. The guide to first-time homebuyer programs in Pennsylvania covers these in detail.
When 20% down still makes sense
Putting 20% down is not wrong; it is simply not required. It makes sense for buyers who have the cash and want to:
- Avoid private mortgage insurance entirely from the start
- Lower the monthly payment by borrowing less
- Strengthen an offer in a competitive situation, where a larger down payment can signal financial strength to a seller
For a buyer who has the funds, 20% down has real advantages. For a buyer who does not, waiting years to save 20% often costs more in continued rent and missed appreciation than buying sooner with a smaller down payment and PMI would. The right answer depends on the individual situation, and it is worth modeling both paths.
The cash you need beyond the down payment
The down payment is not the only cash required at closing, and buyers who budget only for the down payment are caught short. The full cash-to-close picture in Pennsylvania includes:
Closing costs. Lender fees, title insurance, and related charges typically run 2% to 5% of the purchase price. The guide to what it costs to buy a home in Pennsylvania breaks these down line by line.
Transfer tax. Pennsylvania’s realty transfer tax (commonly 2% total) is customarily split between buyer and seller, so the buyer typically pays around 1%, though this is negotiable.
Prepaid items and escrow reserves. Lenders collect prepaid homeowners insurance, prepaid interest, and several months of property tax and insurance reserves for the escrow account at closing.
Inspection and appraisal. Paid during the transaction: an inspection runs roughly $450 to $700, an appraisal $550 to $850.
On a $400,000 purchase, a buyer using a 3% down conventional loan ($12,000 down) should still expect to bring meaningfully more than $12,000 to closing once closing costs, transfer tax, and prepaids are included, often in the range of $25,000 to $35,000 total. PHFA assistance can reduce this. The point is to budget for the full figure, not the down payment alone.
How to find your real number
The only way to know your actual down payment and cash-to-close requirement is to talk to a lender and get pre-approved. The lender will assess your credit, income, and the loan programs you qualify for, and produce a real cash-to-close estimate for a target price range. This should happen before house hunting, not after finding a home.
A buyer who assumes they need 20% and a buyer who has been pre-approved with a 3% conventional loan and PHFA assistance are often the same person, with completely different conclusions about whether they can buy this year.
This guide is general information, not lending advice. Loan terms, rates, and program availability change, and a lender should confirm the specifics for any buyer.
Working with Karen
Karen Langsfeld is a REALTOR® and Pricing Strategy Advisor (P.S.A.) with Berkshire Hathaway HomeServices Fox & Roach in Blue Bell. She works with first-time and move-up buyers across Montgomery County, Bucks County, the Main Line, and South Jersey, and can introduce lenders who will lay out the real down payment and cash-to-close options before the search begins.
For the affordability side of the question, the guide to how much house you can afford in the Philadelphia suburbs covers debt-to-income and the effect of property taxes. The first-time buyer service page describes how Karen supports first-time buyers.
Contact Karen at (215) 495-2914 or through the contact page.