Buying your first home is a significant milestone. It brings excitement, but can also feel overwhelming. One frequent question first-time homebuyers have concerns about down payments: “Does a first-time home buyer need a down payment?”
How much might you need, and what if your savings account isn’t quite there yet? Let’s explore down payments for the first-time buyer.
Don’t let upfront costs keep you from your dream home. See what down payment assistance options may be available to you today.
What Is a Down Payment?
Think of a down payment as your first big step toward homeownership—it’s the chunk of money you put down upfront when buying a house. Rather than covering the full price out of pocket, you’re paying a portion now (usually a percentage of the total cost), and financing the rest with a mortgage.
Not only does this show lenders you’re serious about the purchase, but it also reduces the amount you need to borrow. That can mean better loan terms and smaller monthly payments—which is a win for your future budget.
Do First-Time Homebuyers Need a Down Payment?
In most cases, yes—first-time buyers are typically expected to make a down payment. But there’s good news: it’s not one-size-fits-all. Some loan programs are designed specifically for first-time buyers and offer low or even zero down payment options to help make homeownership more accessible.
That said, putting some money down is still a smart move. It shows lenders you’re financially invested, which can make them more confident in offering you favorable terms. In fact, contributing even a small down payment can help you qualify for better rates and reduce your monthly mortgage costs.
How Much Down Payment Do You Need?
The amount you’ll need for a down payment isn’t set in stone—it depends on a variety of factors, including the type of loan you choose and your unique financial profile. Some buyers may qualify for low or even zero-down options, while others may benefit from putting more down upfront to reduce long-term costs.
Here’s a breakdown of typical down payment expectations by loan type:
| Loan Type | Minimum Down Payment | Highlights |
| Conventional | 3%–20% | – 3% for qualified first-time buyers- PMI required if under 20% down |
| FHA | 3.5% | – Easier credit requirements- Requires upfront and annual MIP |
| VA | 0% | – For eligible veterans/military- No PMI or MIP, often lower interest rates |
| USDA | 0% | – For rural/suburban areas- Income/location restrictions apply |
What Impacts Your Down Payment Amount?
Several personal and financial factors influence how much you’ll need to put down:
- Credit Score – Higher scores may help you qualify for lower down payment options.
- Debt-to-Income Ratio (DTI) – A lower DTI signals stronger financial health to lenders.
- Loan Type – Government-backed loans (like FHA, VA, and USDA) often allow lower or no down payments.
- Home Price – A higher purchase price naturally means a higher down payment, even at the same percentage.
- Lender Requirements – Some lenders may have stricter standards depending on the loan and borrower profile.
Why a Bigger Down Payment Can Pay Off
Sure, it’s possible to buy a home with a small down payment—but if you have the means to put more money down upfront, the long-term benefits can really add up. A larger down payment doesn’t just impress lenders—it can improve your financial outlook for years to come. Here’s how:
- Lower Monthly Payments
The more you put down, the less you need to borrow. That means smaller monthly payments and less interest paid over the life of your loan. - Better Interest Rates
Lenders view borrowers with larger down payments as less risky, and that often translates into more competitive mortgage rates. - No Private Mortgage Insurance (PMI)
Conventional loans typically require PMI if your down payment is under 20%. Hitting that 20% mark lets you skip this extra cost. FHA loans include mortgage insurance premiums (MIP), which may stick around for the life of the loan unless your down payment is substantial enough. - Build Equity Faster
From the moment you close, a larger down payment gives you a bigger ownership stake in your home—providing equity that can serve as a financial buffer or be tapped in the future.
These perks can add up to major savings and peace of mind. That said, holding off on homeownership just to hit a 20% target might not always be the best move. Waiting too long could mean missing out on rising home values or today’s favorable mortgage rates. Depending on the market, buying sooner with a smaller down payment—and refinancing later—could be a smart strategy.
Options for First-Time Buyers with Little Savings
If your savings account isn’t exactly overflowing, don’t let that stop you from pursuing homeownership. Many first-time buyers assume you need a huge chunk of cash to get started—but that’s not always the case. There are several programs and loan options designed to help you buy a home with little or even no money down.
Down Payment Assistance Programs (DPAs)
Down payment assistance programs exist at the state, county, and city level—and they’re specifically designed to help first-time buyers like you get over that initial hurdle.
Here are a few types of help you might qualify for:
- Grants – These don’t have to be paid back. For example, Pennsylvania’s Keystone Advantage Assistance Loan offers up to $6,000 in assistance as a second loan with zero interest.
- Forgivable Loans – These loans may be forgiven after a set number of years living in the home. For instance, a local program might offer $10,000 that’s forgiven after five years.
- Deferred Payment Loans – Repayment isn’t required until you sell, refinance, or pay off your mortgage.
- Tax Credits – Some programs offer Mortgage Credit Certificates (MCCs) that can reduce the amount of federal income tax you owe.(especially for self-employed borrowers)
First-time buyer? Don’t go it alone. Tap into local and national resources that can help with your down payment.
FHA Loans
FHA loans are backed by the Federal Housing Administration and are a go-to option for many first-time buyers thanks to:
- Low down payment – As little as 3.5% down.
- Flexible credit requirements – You may qualify with a credit score as low as 580.
Example: If you’re buying a $250,000 home, your down payment could be just $8,750 with an FHA loan.
Keep in mind: FHA loans require mortgage insurance premiums (MIP), which include an upfront fee and monthly payments. The insurance protects the lender, not you—but it’s part of the trade-off for the lower barrier to entry.
VA Loans: Zero Down for Veterans and Service Members
If you’re a veteran, active-duty service member, or a surviving spouse, a VA loan could make buying your first home much more accessible.
- No down payment required
- No private mortgage insurance (PMI)
- Competitive interest rates
Example: A qualified veteran could buy a $300,000 home with $0 down and no monthly mortgage insurance—saving hundreds each month.
Pro tip: You’ll need a Certificate of Eligibility (COE) to apply, which verifies your military service. The VA funding fee may apply but can often be rolled into the loan.
USDA Loans: Zero Down for Rural and Suburban Buyers
If you’re open to buying in a rural or certain suburban area, a USDA loan could be a great fit.
- 100% financing available – No down payment required
- Income limits apply – Typically for low- to moderate-income households
- Property location matters – Homes must be in eligible USDA areas
Example: A buyer purchasing a home in a rural Pennsylvania township could finance the entire cost of a $200,000 home with no money down.
Saving for a Down Payment: Where to Start
Planning to save up for a down payment? You’re not alone—and with the right strategy, it’s more achievable than you might think. The key is taking a structured, intentional approach based on your homeownership goals and financial situation.
Here’s how to get started:
- Set a Clear Target: Calculate how much you’ll need based on home prices in your desired area and the type of loan you’re planning to use. Use a savings calculator to map out your timeline and stay on track.
- Stick to a Smart Budget: Track your income and expenses closely. Look for areas to trim back—like unused subscriptions or frequent takeout—and reroute that money straight into your savings.
- Automate Your Progress: Make saving easier by setting up automatic transfers from your checking account to a dedicated savings or money market account every payday.
- Earn More on Your Savings: Consider high-yield savings accounts, or explore short-term CDs for potentially better returns. Even a slight boost in interest can add up over time.
- Boost Your Income: Whether it’s overtime at your current job, a freelance side hustle, or launching a small venture, extra income can fast-track your down payment fund.
- Cut Back Temporarily: Pause non-essential spending—like streaming services or weekend splurges—and redirect those dollars toward your homeownership goal.
- Tackle High-Interest Debt: Reducing your monthly debt payments frees up more cash for savings. Consider balance transfers or refinancing options—but be mindful of fees and terms.
Remember, consistency matters more than size. Small, regular contributions build momentum—and each milestone is worth celebrating.Want more creative ideas to build your down payment fund faster? Check out our full article: Creative Strategies for Saving for a House in 2025 — it’s packed with fresh, practical tips to help you reach your goal with confidence.
The 20% Down Payment Myth Busted
You’ve probably heard it before—you need 20% down to buy a home. While there are benefits to hitting that number, like avoiding private mortgage insurance (PMI), the truth is, it’s not a hard rule.
In fact, many buyers—especially first-timers—put down far less. According to the National Association of Realtors, the average down payment for first-time homebuyers is often just 6–7%. That means plenty of people are getting into homes without waiting years to save up a massive amount of cash.
There are a variety of low down payment loan programs designed to help make homeownership more accessible. So don’t let the 20% myth hold you back—buying your first home may be more realistic than you think.
Small Down Payment? Here’s What to Consider
Choosing a smaller down payment can help you buy a home sooner—but it’s not without its trade-offs. Whether it’s the right move depends on your financial goals, risk tolerance, and overall budget. Let’s break down the pros and cons:
Pros of a Smaller Down Payment:
- Get Into a Home Sooner: You won’t have to wait years to save up 20%—you can start building equity now.
- Keep More Cash on Hand: A smaller down payment lets you hold onto more of your savings for emergencies, moving expenses, or home upgrades.
- More Flexibility With Your Money: You could use the extra funds to invest or pay down higher-interest debts. Just keep in mind, investing comes with its own risks.
Cons of a Smaller Down Payment:
- Higher Monthly Payments: With a bigger loan balance, your monthly principal and interest payments will be higher.
- More Interest Over Time: Borrowing more means you’ll pay more in interest over the life of your mortgage.
- Mortgage Insurance Adds Up: If you’re putting down less than 20% on a conventional loan, you’ll likely need to pay for private mortgage insurance (PMI). FHA loans come with mortgage insurance premiums (MIP) as well. These add to your monthly costs—and they don’t protect you, they protect the lender.
- Lower Starting Equity: A smaller down payment means you’ll own less of your home from day one. If the market dips, you could end up owing more than your home is worth—known as being “underwater.
The bottom line? A smaller down payment can open the door to homeownership sooner, but it’s important to understand the long-term financial impact. Talk with a mortgage expert to explore what works best for your situation.
Don’t Forget the Other Costs of Buying a Home
While the down payment gets most of the attention, it’s only one piece of the financial puzzle. First-time homebuyers should be prepared for several other expenses that come with closing on a home and settling in. Planning for these costs ahead of time can help you avoid surprises and stay on budget.
Closing Costs: The Final Step Before You Get the Keys
Closing costs are the fees and expenses required to finalize your home purchase. They typically range from 2% to 5% of your loan amount and may include:
- Appraisal Fee – Covers the cost of determining the home’s market value.
- Loan Origination Fee – Charged by the lender for processing your mortgage.
- Title Search & Title Insurance – Confirms clear ownership and protects against future title disputes.
- Recording Fees – Paid to your local government to officially record the transaction.
- Attorney Fees – If a lawyer is involved in your closing process.
- Prepaid Items – Upfront costs for property taxes and homeowners insurance, often placed in escrow.
- Survey Fee – Sometimes required to confirm property boundaries.
Tip: Some down payment assistance programs also help cover closing costs—so it’s worth asking your lender or housing counselor about all available options.
Other Expenses to Plan For
Once you’ve closed, there are a few more items to budget for:
- Moving Costs – Whether you hire movers or rent a truck, getting into your new home comes with a price tag.
- Initial Repairs or Updates – Even new homes may need some work right away, like painting or replacing fixtures.
- Furniture & Appliances – If your new place is larger or differently configured, you may need to purchase extra items.
- Ongoing Costs – These include property taxes, homeowners insurance, utility bills, maintenance, and any HOA dues.
Being financially prepared for more than just the down payment can help ensure a smoother transition into homeownership. The more you know upfront, the more confident you’ll feel when it’s time to close and move in.
Getting Professional Help
Buying a home is a big milestone—and it comes with a lot of moving parts. Partnering with knowledgeable professionals can make the process smoother, reduce stress, and help you avoid expensive missteps. Here’s who you’ll want on your team:
- Real Estate Agent: A trusted buyer’s agent will advocate for you, help you find the right property, negotiate offers, and guide you through the paperwork. Choose someone with experience helping first-time buyers in your preferred area.
- Mortgage Lender: It’s smart to talk with several lenders to compare rates, loan types (like 15-year vs. 30-year mortgages), and closing costs. Read reviews, ask questions, and get pre-approved early so you know exactly what you can afford. Tools like mortgage calculators can also help clarify the numbers.
- Financial Advisor: If you’re unsure about how homeownership fits into your long-term financial picture, a financial advisor can help. From budgeting and saving to evaluating life insurance or tapping into retirement accounts, they can offer tailored advice based on your goals.
- Housing Counselor: HUD-approved housing counselors provide affordable, impartial support with budgeting, credit repair, and understanding the homebuying process. Many offer services for free or at low cost.
These professionals are there to help you make informed, confident decisions. Ask questions, take notes, and lean on their expertise as you move forward.
Conclusion
So, to revisit the core question: does a first time home buyer need a down payment? While most situations require one, the amount needed isn’t always the daunting 20% figure often discussed. Many loan programs, like FHA, VA, and USDA loans, along with various down payment assistance programs, make homeownership accessible with significantly less upfront cash.
Options exist for nearly every first-time buyer, regardless of the balance in their savings accounts. Understanding your mortgage loan choices, diligently managing your credit score, and accounting for all costs, including closing costs and future monthly payments, is crucial. Saving diligently, exploring assistance programs, and seeking professional guidance from mortgage lenders and real estate agents are key steps.
With careful planning and research into resources like payment assistance, even buyers starting with modest savings can successfully purchase their first home. Your path to owning real estate is achievable with the right approach and support.
Wondering how others afford their first home? The answer might be down payment assistance. Find out what’s available to you.
FAQs About Does a First-Time Homebuyer Need a Down Payment?
Do first-time homebuyers always need a down payment?
Not always. Some loan programs—like USDA and VA loans—offer 0% down payment options for eligible buyers. However, most conventional and FHA loans do require some form of down payment.
What’s the typical down payment for a first-time homebuyer?
While 20% is often mentioned, many first-time buyers put down much less. FHA loans may require as little as 3.5%, and some conventional loans allow down payments as low as 3%.
Are there programs that help with down payments?
Yes! There are thousands of down payment assistance (DPA) programs nationwide. These can offer grants, forgivable loans, or deferred-payment loans to help reduce upfront costs.
Can gift money be used for a down payment?
In many cases, yes. Most lenders allow family members to gift funds for a down payment, but they may require a signed gift letter and documentation of the transfer.
What factors determine how much I need to put down?
Your loan type, credit score, income, and property location all play a role. Speaking with a lender or using tools like the Down Payment Resource Center can help you estimate what you’ll need.