Yes. And most buyers do.
The idea that you need 20% down to buy a home is one of the most persistent myths in real estate — and it stops a lot of people from buying years earlier than they need to.
Here’s the reality: most Austin homebuyers put down far less than 20%, and in many cases the financial difference is smaller than they expected.
Let’s break down your actual options.
Where Did the 20% Rule Come From?
The 20% figure comes from a real concept — if you put down less than 20%, lenders typically require private mortgage insurance (PMI). PMI protects the lender if you default.
Somewhere along the way, “you’ll need to pay PMI if you put down less than 20%” turned into “you need 20% down to buy a home.” Those are two very different things.
The real question isn’t whether you pay PMI — it’s whether the cost of PMI makes sense compared to the years you’d spend saving toward 20% while Austin home prices continue to move.
Option 1: Conventional Loan — As Low as 3% Down
Conventional loans — the most common loan type — allow down payments as low as 3% through programs like Fannie Mae HomeReady and Freddie Mac Home Possible, or 5% for standard conventional loans.
On a $450,000 home in Austin, that means:
3% down: $13,500
5% down: $22,500
20% down: $90,000
The difference between 5% and 20% is $67,500 — money most buyers would rather keep.
The PMI Surprise: It’s Cheaper Than You Think (Especially With Good Credit)
Here’s something I see catch buyers off guard all the time: when you have a strong credit score, PMI costs a lot less than people assume.
PMI on a conventional loan is not a flat rate — it’s priced based on your credit score, your down payment, and the loan amount. The better your credit, the lower the rate.
Example — $400,000 loan, 5% down, 760+ credit score:
PMI rate: approximately 0.2%–0.4% annually
Monthly PMI cost: roughly $67–$133/month
Most buyers expect PMI to be a painful monthly expense. For someone with strong credit, it’s often less than their cell phone bill.
And here’s the key: PMI goes away. Once you reach 20% equity — either through payments or appreciation — you can request PMI removal. It’s not permanent.
Option 2: FHA Loan — 3.5% Down, Flexible Credit
FHA loans are popular with first-time buyers for good reason: they’re designed for people who are just getting started.
3.5% down with a 580+ credit score
More flexible on credit history and debt-to-income ratio
Gift funds allowed for the down payment
On that same $450,000 home: $15,750 down.
The trade-off with FHA is that mortgage insurance works differently than conventional. FHA charges an upfront MIP (rolled into the loan) plus a monthly MIP — and if you put less than 10% down, the monthly MIP stays for the life of the loan.
For buyers with strong credit, a conventional loan with PMI is often the better deal because PMI eventually goes away. For buyers still building their credit profile, FHA is often the right starting point.
Learn more about FHA loans in Texas →
Option 3: VA Loan — 0% Down for Veterans
If you’ve served in the military, this is the most powerful mortgage available.
$0 down payment required
No PMI — ever
Competitive interest rates
No loan limit for eligible veterans with full entitlement
A veteran buying a $500,000 home in Austin could do it with zero down and no monthly mortgage insurance. That’s a benefit that’s hard to overstate — and one that a surprising number of veterans don’t take advantage of.
Learn more about VA loans in Texas →
So What’s the Right Down Payment for You?
It depends on your situation, and there’s no universal answer. Here’s how I think about it with clients:
Put less down if:
You have strong credit (PMI will be low)
Home prices in your target area are rising and waiting costs you more
You want to preserve cash reserves after closing
You qualify for VA (then the answer is always $0 if it makes sense for you)
Consider putting more down if:
Your credit score is lower (PMI will be higher)
You’re close to 20% and can get there without waiting long
You want a lower monthly payment and have the cash to spare
The honest answer: most buyers are better served by getting into a home sooner with less down than by waiting years to hit 20%. But the right answer depends on your credit, your timeline, and what the monthly numbers actually look like.
What Does Your Monthly Payment Actually Look Like?
That’s the easiest question I can answer — and the most useful one to start with.
Give me your target purchase price, your approximate credit score, and how much you’re thinking of putting down, and I can show you real numbers across multiple lenders in minutes. No commitment, no cost.
Get Pre-Approved or Run the Numbers Get Pre-Approved
Or call or text me: 512-423-4663
I’ve helped thousands of Texas buyers figure out the right loan structure for their situation. Most of them were surprised by how affordable it actually was.
Russell Stout | Texas Mortgage Consultants, PLLC | NMLS# 220896 | Company NMLS# 1843758 | Licensed by the Texas Department of Savings and Mortgage Lending | Equal Housing Lender | All loans subject to credit approval. Rates, terms, and PMI costs vary based on credit score, loan amount, and lender. Contact us for a personalized quote.
