The down payment is often the biggest financial hurdle for first-time homebuyers. It’s the portion of the home’s purchase price that you pay upfront. This guide covers how much you need to save and explores strategies to help you reach your goal.

How Much Do You Really Need for a Down Payment?

The long-held belief that you need 20% down is a myth for most buyers. While a 20% down payment allows you to avoid Private Mortgage Insurance (PMI) on a conventional loan, many loan programs allow for much smaller down payments.

Loan Type	Minimum Down Payment
Conventional Loan	3%
FHA Loan	3.5%
VA Loan	0%
USDA Loan	0%

Use our Mortgage Calculator to see how different down payment amounts affect your monthly payment.

Strategies for Saving for a Down Payment

1. Create a Dedicated Savings Account: Open a high-yield savings account specifically for your down payment. This keeps the money separate from your everyday spending and can help it grow faster.
2. Automate Your Savings: Set up automatic transfers from your checking account to your down payment savings account each payday. Treat it like any other bill.
3. Cut Unnecessary Expenses: Track your spending for a month to identify areas where you can cut back, such as dining out, subscriptions, or entertainment.
4. Increase Your Income: Consider taking on a side hustle, selling items you no longer need, or negotiating a raise at work.
5. Use Windfalls Wisely: If you receive a tax refund, bonus, or other unexpected cash, put a significant portion of it directly into your down payment fund.

Using Gift Funds for a Down Payment

Most loan programs allow you to use gift funds from a relative for part or all of your down payment. However, there are rules:

• The funds must be a true gift, not a loan that needs to be repaid.
• You will need a signed gift letter from the donor stating that repayment is not expected.
• The lender will need to see documentation of the funds being transferred from the donor’s account to yours (a paper trail).