The most common sources are your own savings, family loans, and down payment information programs run by your state or local government

Finding down payment money usually means looking in three directions at once: your own bank account, people close to you who might lend, and public programs designed to help first-time buyers. Most people use a combination of these. Your bank or mortgage lender can tell you which programs exist in your area, but you'll need to search them out yourself — nobody automatically tells you about them.

The amount you need depends on the loan type and the home price. Conventional loans often require 3 to 20 percent down, while Federal Housing Administration (FHA) loans can go as low as 3.5 percent. Veterans Affairs (VA) loans and United States Department of Agriculture (USDA) loans sometimes require zero down. The lower your down payment, the more you'll pay in interest over time, and you may need to buy mortgage insurance.

Key Takeaways

  • Your own savings is the fastest source, but down payment information programs can cover part or all of what you need if you meet income and location requirements.
  • Family loans and gifts are common, though lenders require proof the money is a gift (not a loan you'll repay) if it counts toward your down payment.
  • State and local housing finance agencies run programs with different rules — some cover first-time buyers only, others focus on low-income households or specific neighborhoods.
  • Your mortgage lender can point you toward programs, but you'll need to contact the programs directly to learn what they require and whether funds are currently available.

Saving from your own income and cutting expenses

Saving money yourself takes time but gives you the most control. Start by tracking where your money goes for a month, then look for expenses you can reduce — subscriptions you don't use, dining out, or services you can cut back on. Even small amounts add up if you save consistently.

Open a separate savings account at a bank or credit union and set up automatic transfers from each paycheck. Seeing the balance grow makes the goal feel real. If your employer offers a 401(k) match, keep contributing to that first — it's information programs — but after that, a down payment savings account comes before other investments.

Some people speed this up by taking on extra work, selling things they no longer need, or putting tax refunds and bonuses directly into savings. The timeline depends on your income and how much you need, but most people find that saving takes longer than they expect.

Borrowing from family members

Family loans are common because the terms are flexible and there's no credit check. A parent, grandparent, or other relative can lend you money at whatever interest rate you agree on — or no interest at all. The key is to treat it like a real loan: write down the amount, the repayment schedule, and the interest rate (even if it's zero percent), and both of you sign it.

Mortgage lenders require proof that family money is a gift, not a loan you'll repay. If it's a loan, the lender counts the monthly payment as debt you owe, which can lower how much house you can afford. If it's a gift, you don't have to repay it and it doesn't count against you. Your lender will ask for a gift letter from the family member stating the money is a gift with no repayment expected.

Family loans can strain relationships if the terms aren't clear from the start. Be honest about your timeline and ability to repay, and consider putting the agreement in writing even if it feels awkward. If you can't repay, say so early rather than letting it become a source of conflict later.

Down payment information programs from your state or city

Most states and many cities run programs that give money toward down payments for people who meet certain rules. These programs have different names — some call it down payment information, others call it a grant or a forgivable loan — but they all work the same way: you meet the requirements, you get approved, and the program sends money to your lender or directly to closing.

Requirements vary widely. Many programs limit help to first-time homebuyers (someone who hasn't owned a home in the past three years). Some focus on low-income households and set a maximum income you can earn. Others target specific neighborhoods or require you to work in certain fields like teaching or nursing. A few have no income limit at all.

The amount of help also varies. Some programs cover a few thousand dollars, others cover 10 to 15 percent of the home price. Some are grants you don't repay, others are forgivable loans that disappear if you stay in the home for a set number of years (usually 5 to 10). A few are second mortgages with low interest rates.

To find programs in your area, start with your state housing finance agency — search "[your state] housing finance agency" online. You can also call your city or county assessor's office and ask what down payment help is available. Your mortgage lender or real estate agent may know about local programs, but they don't always mention them unless you ask.

Employer and nonprofit down payment help

Some employers offer down payment information as an employee benefit, especially larger companies and nonprofits. Ask your human resources department whether your employer has a homebuying program. These are less common than they used to be, but they still exist.

Nonprofits that focus on housing also run down payment programs, often in partnership with local government. These organizations usually serve specific groups — teachers, healthcare workers, people returning from incarceration, or households below a certain income. Search "[your city] nonprofit down payment information" or ask your local housing authority for a list.

Some credit unions offer down payment help to members. If you belong to a credit union, ask whether they have a homebuying program or can refer you to one. Credit unions sometimes have lower fees and more flexible rules than banks.

Gifts from friends and what lenders allow

Money from friends works the same way as family gifts: it must be a true gift with no repayment expected. Your lender will ask for a gift letter from the friend stating the amount and that no repayment is required. The friend doesn't need to be related to you.

Some lenders limit how much of your down payment can come from gifts. A few require that you put in at least 5 or 10 percent of your own money. Ask your lender about their gift policy before you accept money from anyone.

The gift letter is straightforward — it's just a statement from the person giving the money, signed and dated, saying they're giving you the money as a gift and don't expect it back. Your lender will provide a template or example. Without this letter, the lender may count the money as a loan you owe, which changes your debt-to-income ratio and could affect your loan approval.

Retirement accounts and what to know before withdrawing

Some retirement accounts let you withdraw money for a first home without the usual early withdrawal penalty. A traditional or Roth IRA lets you withdraw up to $10,000 in your lifetime for a first home purchase (this limit is per person, so a couple can withdraw $20,000 combined). You still owe income tax on the withdrawal, but you avoid the 10 percent early withdrawal penalty.

A 401(k) usually allows you to borrow against your balance rather than withdraw it. You repay the loan to yourself with interest, so you're not losing the money permanently. However, if you leave your job, you typically have to repay the loan quickly or it becomes a taxable withdrawal.

Withdrawing from retirement accounts should be a last resort because you're reducing the money available for your future. Talk to a tax professional or financial advisor before you withdraw — the tax bill can be larger than you expect, and you lose years of compound growth on that money.

Frequently Asked Questions

Can I use a personal loan for a down payment?

Technically yes, but most mortgage lenders will count the monthly payment as debt you owe, which lowers how much you can borrow for the house. A personal loan also costs more in interest than a mortgage. If you need to borrow, a down payment information program or a family loan is usually cheaper and doesn't hurt your mortgage approval.

What if I don't have enough saved and no one can lend me money?

Look for programs that allow lower down payments — FHA loans go as low as 3.5 percent, and USDA or VA loans sometimes require zero down if you meet the requirements. You can also delay buying until you've saved more, or look for a less expensive home. Down payment information programs exist specifically for this situation, so contact your state housing finance agency to see what's available.

Do I have to tell my lender where my down payment money comes from?

Yes. Your lender will ask for bank statements and documentation showing where the money came from. They do this to prevent fraud and to make sure you're not taking on hidden debt. Be honest about the source — gifts, savings, family loans, and information programs are all normal and acceptable.

What happens if a down payment information program gives me more money than I need?

Some programs let you use extra funds for closing costs or to pay down the loan amount. Others require you to use only what you need for the down payment. Ask the program before you accept the money so you know what you can do with it.

Can I get down payment help if I'm not a first-time buyer?

Most programs limit help to first-time buyers, but some don't. A few programs target repeat buyers or focus on specific neighborhoods or income levels instead. Contact programs in your area directly — the rules vary enough that it's worth asking even if you've owned a home before.