The most common sources are your own savings, help from family, and programs that reduce how much you need to save

Most people pay for a down payment using money they have already saved, a gift from a family member, or a combination of both. If you do not have savings built up yet, several paths exist: some mortgage lenders offer programs that let you put down less than the traditional 20 percent, some employers offer down payment help as an employee benefit, and some state and local governments run down payment information programs for first-time buyers or people in certain income ranges.

The route that works for you depends on what you have access to right now, how much you need, and what the lender will accept. A lender will not let you borrow the down payment from a credit card or personal loan — they want to see that the money came from somewhere stable. This guide walks through each real option and what each one actually requires.

Key Takeaways

  • Your own savings is the simplest path because the lender just needs to see the money in your account for a set period before closing.
  • Family gifts are allowed by most lenders if the giver signs a statement saying it is a gift, not a loan you will repay.
  • Down payment information programs exist in many states and counties, but they vary widely in income limits, the amount they cover, and whether you must be a first-time buyer.
  • Some employers, unions, and nonprofits offer down payment help as a benefit or grant, so checking with your workplace is worth a phone call.
  • Putting down less than 20 percent is possible with FHA loans, conventional loans with mortgage insurance, or VA loans if you are may be able to access, but each has different costs and rules.

Saving money yourself over time

Saving is the most straightforward way because you control the timeline and the lender's requirements are straightforward: the money needs to be in a bank account in your name, and the lender will ask to see statements showing the balance for the last two months before closing. This proves the money is real and that you did not borrow it.

How much you need to save depends on the purchase price and the down payment percentage you are aiming for. If you are buying a $300,000 house and want to put down 10 percent, you need $30,000. If you want 20 percent, you need $60,000. Many people start by setting a target and then breaking it into monthly savings goals — if you have two years to save $30,000, that is roughly $1,250 per month.

The challenge is that saving takes time, and housing prices and interest rates change while you wait. Some people open a separate savings account just for the down payment so the money does not get mixed with everyday spending. Others use automatic transfers from their paycheck so the money moves before they can spend it.

Receiving money as a gift from family

A family member can give you money toward the down payment, and most lenders allow this. The lender will require a gift letter — a signed statement from the person giving the money that says it is a gift, not a loan you will repay. The letter should include the giver's name, your name, the amount, and the date. Some lenders have a specific form they want you to use.

The giver does not need to be a close relative — it can be a friend, godparent, or anyone else. However, the lender will ask for proof that the money actually moved from their account to yours, usually a bank statement or a cancelled check. If the gift is large, the lender may also ask where the giver got the money, to make sure it did not come from a loan.

One important limit: the giver cannot be someone with a financial interest in the sale. For example, the seller of the house cannot gift you the down payment, because that would be a hidden discount on the price. The real estate agent cannot either. But a parent, sibling, grandparent, or friend can.

Down payment information programs run by states and cities

Many states and local governments offer down payment information to first-time homebuyers or to people buying in certain neighborhoods or income ranges. These programs vary widely — some cover a percentage of the down payment, some cover a fixed dollar amount, and some offer a forgivable loan (money you do not have to repay if you stay in the house for a set number of years).

To find programs in your area, start with your state housing finance agency. Search "[your state] housing finance agency" online, and you will find the state office that runs these programs. They maintain a list of what is available and the income limits. Your city or county housing authority may also run programs. If you are not sure where to start, you can call 211 (a free helpline) and ask what down payment programs exist where you live.

Income limits vary by program and by location. A program in a high-cost city may allow households earning up to $100,000 per year, while a program in a lower-cost area may cap out at $60,000. Most programs also require you to take a homebuyer education course — usually a few hours of classes or online modules about mortgages, budgeting, and home maintenance. This is not a barrier; it is a requirement they check off before approving you.

Employer and nonprofit down payment help

Some employers offer down payment information as an employee benefit. This might be a grant (money you keep) or a forgivable loan (money you repay only if you leave the company within a certain time). Tech companies, hospitals, school districts, and large corporations are more likely to offer this than small businesses, but it is worth asking your human resources department.

Unions sometimes offer down payment help to members. If you belong to a union, contact your local representative and ask whether the benefit exists. Some nonprofits that focus on community development also offer down payment grants to people in their service area, particularly people with lower incomes or people of color who have faced barriers to homeownership.

The amount varies — some employers offer $5,000, others offer $25,000 or more. The rules also vary: some require you to work there for a minimum time before you are may be able to access, and some require you to stay for a certain period after you buy the house. Ask your employer or union for the details in writing so you know exactly what you are getting.

Putting down less than 20 percent with mortgage insurance

If you do not have 20 percent saved, you can still buy a house by putting down less — but the lender will charge you mortgage insurance, which is an extra monthly fee added to your mortgage payment. This insurance protects the lender if you stop paying the loan, not you.

With a conventional loan (the most common type), you can put down as little as 3 percent, but the lower your down payment, the higher your mortgage insurance cost. With an FHA loan (a loan backed by the Federal Housing Administration), you can put down as little as 3.5 percent, and the insurance cost is set by the government. The tradeoff is that FHA loans have stricter rules about the condition of the house and the amount you can borrow.

If you are a veteran or active-duty service member, you may be may be able to access for a VA loan, which often requires no down payment at all. VA loans are backed by the Department of Veterans Affairs and have different rules and costs than conventional or FHA loans.

Mortgage insurance is not permanent. Once you have paid down the loan enough (usually when you have paid 20 percent of the original price), you can ask the lender to remove it. This takes time — it might take 5 to 10 years depending on your loan type and how much you put down initially.

Borrowing against retirement savings or life insurance

Some retirement accounts allow you to borrow against your own money without penalty. A 401(k) plan may let you take a loan against your balance, and you repay yourself with interest. An IRA has different rules — you cannot borrow from it, but you may be able to withdraw up to $10,000 penalty-free if you are a first-time buyer (this varies by IRA type and your situation).

If you have a whole life insurance policy, you may be able to borrow against the cash value. The insurance company charges interest, but the loan does not show up on your credit report the way a personal loan would.

These options come with real costs and risks. Borrowing from a 401(k) means you are not investing that money for retirement, and if you leave your job, the loan may become due when ready. Withdrawing from an IRA means that money is gone and cannot grow for retirement. Before you go this route, talk to a financial advisor or tax professional about whether it makes sense for your situation.

Frequently Asked Questions

Can I use a credit card or personal loan for the down payment?

No. Lenders will not allow this because they want to see that the down payment came from stable sources — your own savings, a gift, or an information program. If you borrow the money, the lender sees a new debt on your credit report, which changes your debt-to-income ratio and may disqualify you or raise your interest rate.

What if I do not have any family who can give me money?

Focus on saving, down payment information programs, and putting down less than 20 percent with mortgage insurance. Many people buy homes without family help by combining their own savings with a low-down-payment loan option. A down payment information program in your state or city may also cover part of what you need.

Do I have to be a first-time buyer to use a down payment information program?

Most programs are for first-time buyers, but some are not. It depends on the specific program. Some target people in certain income ranges or neighborhoods instead. Check with your state housing finance agency or local housing authority to see which programs you may be able to use.

If I put down less than 20 percent, how long until I can remove the mortgage insurance?

It depends on your loan type. With a conventional loan, you can usually request removal once you have paid the loan down to 80 percent of the original purchase price, which might take 5 to 10 years. FHA loans have different rules. Ask your lender for the exact timeline before you sign the loan.

What happens if a down payment information program gives me a forgivable loan?

A forgivable loan means you do not repay it if you meet the program's conditions — usually staying in the house for a set number of years, like 5 or 10. If you sell or move before that time is up, you may have to repay part or all of it. Read the program agreement carefully so you understand the conditions.