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First-Time Homebuyer? Here’s How to Get the Money for Your Down Payment

First-time buyers have several options for getting a home with a down payment well below 20%.

Amy Fontinelle Amy Fontinelle Edited by Chris Jennings Updated January 4, 2022

First time home buyer down payment strategies hero

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. By refinancing your mortgage, total finance charges may be higher over the life of the loan.
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 paymentMonthly 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.

DTI is a percentage that tells lenders how much of your total monthly income goes toward debt payments each month, such as your credit cards and student loans. Here’s how it’s calculated:

(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:

  • How Your Credit Score Impacts Mortgage Rates
  • How to Buy a House as an Unmarried Couple

Low down payment mortgages for first-time homebuyers

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:

Loan typeDescriptionMin. down paymentMin. credit scoreMax. DTI
FHAGovernment-insured mortgage for borrowers with low credit scores3.5%50050%
Fannie Mae 97% LTV StandardAt least one borrower must be a first-time homebuyer3%62050%
Fannie Mae HomeReadyFor credit-worthy low-income borrowers3%62050%1
Freddie Mac Home PossibleVery-low-, low-, and moderate-income borrowers3%66045%1
VAMilitary service members (including qualified reservists) who meet length and character of service requirements, and their unmarried surviving spouses0%NoneNone
USDALow- and very-low-income applicants in eligible rural areas0%None41%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 location

While Credible doesn’t offer FHA loans, borrowers can use our platform to compare great rates for conventional loans. Get started now.

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How first-time homebuyers can pay for a down payment

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.

1. Find down payment assistance programs in your state

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.

For example: The My First Texas Home Program offers a 30-year, fixed-rate loan in addition to a down payment assistance grant of up to 5%. You’ll need to have a credit score of at least 620 and get in touch with a participating lender. Income and purchase price limits apply by county.

Check out Credible’s roundup of programs for first-time homebuyers to find down payment assistance programs in your state.

Upsides:

  • These programs often cover closing costs in addition to down payments
  • Tax relief may be available, too, through mortgage credit certificates

Downsides:

  • Income limits
  • Credit score minimums
  • Home location requirements
  • Limits on loan type and loan term
  • Requirements to work with certain approved lenders

Learn More: Do You Count as a First-Time Homebuyer? The Answer Might Surprise You

2. Crowdfund your down payment on dedicated websites

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:

  • You can tap into your social network to help fund a down payment
  • If you are getting married, crowdfunding sites can provide an alternative to a traditional gift registry.

Downside:

  • Crowdfunding platforms often take a cut. GoFundMe takes 2.9% transaction fee plus 30 cents per donation. FeatherTheNest charges a 5% transaction fee on every donation, and its credit card processing partner, Stripe, tacks on an additional 2.9% fee plus 30 cents per donation.

3. Request down payment gifts from family and friends

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:

  • Gift funds can allow you to purchase a nicer home than you would otherwise be able to afford.
  • Gift funds can mean the difference between being able to buy a house now and having to wait until you can save more.

Downsides

  • The documentation required for proof of the gift can be lengthy and exhausting — givers may be required to provide bank statements to verify that they have the financial ability to make the gift.
  • Receiving a down payment gift that helps you buy a more expensive home could put you in a position of paying more in property taxes and maintenance than you would have on a less-expensive home.

How much should you put down?

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.

The most important thing to remember: Weigh your decision carefully and fully understand the short- and long-term costs and benefits. If you can afford your choice and it makes you happy, then it’s the right choice for you.

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.
Keep Reading: 13 Tips for First-Time Homebuyers: Your Must-Know Advice

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About the author
Amy Fontinelle
Amy Fontinelle

Amy Fontinelle is a mortgage and credit card authority and a contributor to Credible. Her work has appeared in Forbes Advisor, The Motley Fool, Investopedia, International Business Times, MassMutual, and more.

Read More

Home » All » Mortgages » First-Time Homebuyer? Here’s How to Get the Money for Your Down Payment

First-Time Homebuyer Guide


  • First-Time Homebuyer Qualifications
  • First-Time Homebuyer Programs
  • First-Time Homebuyer Tips
  • How to Save for a House
  • Down Payment Strategies
  • First-Time Homebuyers Tax Credits
  • Buy a House with Student Loans
  • FHA Loans: Ultimate Guide

Homebuying Guide

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  • Renting vs. Buying
  • How to Buy a House
  • Homebuying Costs

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