Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."
Getting the funds for a down payment can be a major hurdle to homeownership. In fact, 13% percent of homebuyers said saving for the down payment was the most difficult step of the homebuying process, according to a 2020 report from the National Association of Realtors. The challenge was greatest for 20- to 29-year-olds, 30% of whom said saving for a down payment was their biggest hurdle.
Rest assured, there are several ways for first-time homebuyers to get a home loan without settling for the traditional 20% down payment — though you may not want to put down the bare minimum.
Here’s what first-time homebuyers need to consider when it comes to their down payment:
- How much does a first-time homebuyer need to put down?
- How first-time homebuyers can pay for a down payment
- How much should you put down?
How much does a first-time homebuyer need to put down?
While a traditional down payment is 20%, first-time homebuyers can get away with putting down as little as 3% — or even 0% — depending on the loan program.
Before you look into first-time homebuyer programs, you should know that the smaller your down payment, the higher your monthly principal and interest payment will be on your mortgage.
How a down payment affects monthly payments on a $250,000 house:
| Down payment | Monthly principal and interest payment |
|---|---|
| 0% | $1,054 |
| 3% | $1,022 |
| 3.5% | $1,017 |
| 5% | $1,001 |
| 10% | $948 |
| 20% | $843 |
| Calculations assume a 30-year mortgage with a 3% fixed interest rate and excludes taxes and insurance. | |
It’s important to note that low down payment mortgages have restrictions. You must surpass minimum credit score requirements, and you can’t exceed maximum debt-to-income (DTI) ratio requirements.
(Total monthly debt) / (Gross monthly income) x 100 = DTI Other requirements for a low down payment home loan may include not exceeding a certain income threshold or home price, completing homeownership education, or, in the case of USDA loans, living in a certain area. Military service is a requirement for VA loans. Learn More: If you’re a first-time homebuyer looking for low down payment mortgage options, several may be available to you. In fact, many of these options are available even if you aren’t a first-time homebuyer. Low down payment mortgage options and requirements: While Credible doesn’t offer FHA loans, borrowers can use our platform to compare great rates for conventional loans. Get started now. As a first-time homebuyer, whether you decide to take advantage of low down payment loans or not, you may not have to save up for the down payment all by yourself. Several options are available to help you. Every state operates down payment assistance (DPA) programs offering grants and low-interest (or no-interest loans) to first-time homebuyers. Requirements depend on where you live and how much you earn. Check out Credible’s roundup of programs for first-time homebuyers to find down payment assistance programs in your state. Upsides: Downsides: Learn More: Do You Count as a First-Time Homebuyer? The Answer Might Surprise You Crowdfunding is unlikely to yield the entire down payment you need, but it can help if you’re a little short. Some first-time homebuyers use large crowdfunding platforms, like GoFundMe, to source their down payments. You can also try a real-estate-specific crowdfunding site, such as FeatherTheNest or HomeFundIt. Upsides: Downside: There’s no shame in asking for help. In 2019, 32% of first-time homebuyers used a gift or loan from a friend or family member to pay part of their down payment. Lenders may require significant documentation of the gift. They will want assurance that the money doesn’t have to be repaid. Upsides: Downsides While some people might say that you should only buy a home if you can put 20% down, that’s just their opinion. Yes, your monthly payment will be lower, you won’t have to pay mortgage insurance premiums, and you’ll have a larger equity stake. But the right amount to put down depends on many factors, including how soon you want to buy and what you can comfortably afford. For some people, those trade-offs can be worth it if it means moving less often, establishing a foothold in an appreciating market, getting out of a bad rental situation sooner, or having a yard. If you’re gearing up to buy a home, Credible can help you compare mortgage rates from multiple lenders. See your prequalified rates from our partner lenders in the table below in just a few minutes. Low down payment mortgages for first-time homebuyers
Loan type Description Min. down payment Min. credit score Max. DTI
FHA Government-insured mortgage for borrowers with low credit scores 3.5% 500 50%
Fannie Mae 97% LTV Standard At least one borrower must be a first-time homebuyer 3% 620 50%
Fannie Mae HomeReady For credit-worthy low-income borrowers 3% 620 50%1
Freddie Mac Home Possible Very-low-, low-, and moderate-income borrowers 3% 660 45%1
VA Military service members (including qualified reservists) who meet length and character of service requirements, and their unmarried surviving spouses 0% None None
USDA Low- and very-low-income applicants in eligible rural areas 0% None 41%2
1Maximum income cannot exceed 80% of area median income
2Adjusted income must be at or below the applicable low-income limit for the home’s locationHow first-time homebuyers can pay for a down payment
1. Find down payment assistance programs in your state
2. Crowdfund your down payment on dedicated websites
3. Request down payment gifts from family and friends
How much should you put down?
