First time home buyers don’t need a huge down payment

First time home buyers get access to many low-down-payment mortgages. For example, conventional loans let you buy a house with 3% down and a 620 credit score, and FHA loans allow a 3.5% down payment with credit as low as 580.

There are even mortgages for first time home buyers with 0% down. The two most common are USDA and VA loans. However, these both have special requirements, so not everyone will qualify. 

Even if you can’t get a zero-down loan as a first time home buyer, there’s a good chance you’ll qualify with just 3% or 3.5% down. 

Check your options to see what you can afford right now. 

In this article (Skip to…) 

• What is a down payment?
• Can you afford a down payment right now?
• How much do first-time home buyersto put down?
• How much a first time home buyer put down? 
• First time home buyer down payment assistance 
• Using gift funds to cover your down payment 
• First time home buyer loan programs 
• Find a low down payment loan 

First time home buyers often overestimate how much they need for a down payment. Consider the FHA loan, a popular mortgage for first time home buyers that only requires 3.5% down. On a $250,000 house, that’s an $8,750 down payment — almost exactly equal to the amount an average American has in their savings account: $8,863. 

FHA loans aren’t the only first-time home buyer loan with a low down payment, either. All of the following loans let first time home buyers put 5% down or less:

• FHA loan — 3.5% down
• Conventional 97 loan — 3% down
• Conventional loan — 5% down
• USDA loan — 0% down
• VA loan — 0% down
• Freddie Mac Home Possible loan — 3% down
• Fannie Mae HomeReady loan — 3% down
• FHA 203K renovation loan — 3.5% down

Of course, you might decide to put down more or less than the required down payment for your home, depending on what your financial goals are. 

But if your main goal is to become a homeowner in the near future, one of these loans could help you achieve that dream sooner than you thought. 

There are certain loans that let home buyers put zero percent down. But these are harder to qualify for than most mortgage types. So realistically, most first time home buyers have to put down at least 3% of the home’s purchase price for a conventional loan, or 3.5% for an FHA loan. 

Imagine you want to buy a $250,000 house. Here’s of how much you might have to put down as a first time home buyer, depending on your qualifications: 

To qualify for one of those zero-down first time home buyer loans, you have to meet special requirements.

For a VA loan, you need to be an eligible U.S. Armed Forces veteran or service member.

And to get a USDA loan, you need to buy a house in a qualified “rural” area — which usually means a population of 20,000 or less.  

But those other two loan types — conventional and FHA — are a lot easier to come by. 

You’ll still need to meet credit and income guidelines with one of these, just like any other mortgage. But there are no ‘special’ requirements to get a low-down-payment FHA or conventional loan as a first-time home buyer.

The amount you put down as a first time home buyer is up to you. For instance, you might qualify for a conventional loan with just 3% down. But then you’d have to pay for mortgage insurance. So if you can afford it, you might decide to make a 20% down payment anyway to lower your loan amount and monthly payment. 

Take a look at this example: 

As you can see from the table above, there are certain benefits to making a bigger down payment. Namely, you have a smaller loan amount. That means your monthly payments are smaller. 

You’ll also be able to avoid mortgage insurance if you put down 20% or more. That can shave another $100 or more off your monthly bill. 

But making a smaller down payment has benefits, too — even if they aren’t as obvious. 

When you make a smaller down payment, you keep money in your emergency fund. And you save yourself some money to make improvements and repairs to your new place (which many home buyers end up having to do). 

Plus, with a smaller down payment, you can get into a house and start building equity sooner — instead of having to wait up to 14 years to save 20%. 

Finally, remember that your mortgage isn’t set in stone. 

If you want to get into a house sooner, it often makes sense to make a smaller down payment with what you have saved now (or what you will have saved in the near future). 

Then, you can usually refinance a few years down the road to get rid of mortgage insurance and reduce your monthly payment.