How first-time buyers and investors are becoming homeowners faster with low down payment programs
For decades, people have believed that you need to save up a 20% down payment before buying a home. While that used to be the standard advice, today’s mortgage market is far more flexible and the truth is, you can buy a home with much less.
If you’ve been sitting on the sidelines thinking you can’t afford to buy, this guide will show you how lower down payment programs, government-backed loans, and assistance options can help you achieve homeownership sooner than you think.
The 20% myth where it came from and why it’s outdated
The idea of putting 20% down on a home started decades ago as a safeguard for lenders, it demonstrated that a buyer had “skin in the game.” But times have changed.
Today, lenders recognize that home prices have grown faster than wages, making it difficult for many Americans to save tens of thousands of dollars upfront. According to the National Association of Realtors (NAR), the median down payment for all homebuyers in 2024 was just 18%, and for first-time buyers, it was around 9%.
The best part? You can qualify for many mortgage programs with far less:
| Loan Type | Minimum Down Payment |
| Conventional Loan | 3% |
| FHA Loan | 3.5% |
| VA Loan | 0% |
| USDA Loan | 0% |
| Jumbo Loan | 10% |
Why waiting for 20% could cost you more in the long run
Let’s take a realistic example:
Suppose you want to buy a home priced at $400,000.
- 20% down = $80,000
- 5% down = $20,000
If it takes you 3–5 years to save the extra $60,000, the market could shift dramatically. Home prices might rise, and interest rates could climb. In that time, your dream home could become even more expensive, meaning you saved more, but you also need more.
Buying with a smaller down payment allows you to:
- Start building equity sooner (instead of paying rent)
- Lock in current home prices before they rise
- Benefit from appreciation as your home value increases
Even with a slightly higher payment due to mortgage insurance, the wealth you build through equity often outweighs the short-term costs.
How small down payments work with different loan types
Conventional Loans (as little as 3% down)
Perfect for buyers with solid credit. Many lenders offer programs like HomeReady and Home Possible that allow for just 3% down and reduced private mortgage insurance (PMI).
FHA Loans (3.5% down)
Ideal for first-time buyers or those with lower credit scores (580+). FHA loans are backed by the government, making them more flexible in approval and requiring lower cash to close.
VA Loans (0% down)
Exclusive to eligible veterans, active-duty service members, and some surviving spouses. These loans offer no down payment and no PMI, making them among the best deals available. (benefits.va.gov)
USDA Loans (0% down)
A fantastic option for buyers purchasing homes in rural or semi-rural areas. These loans are designed to promote homeownership outside urban centers and offer no down payment with affordable rates. (rd.usda.gov)
What about PMI (Private Mortgage Insurance)?
If you put down less than 20% on a conventional mortgage, you’ll likely pay Private Mortgage Insurance (PMI). This small monthly fee protects the lender if you default.
But here’s the good news: PMI isn’t forever.
Once you’ve built up 20% equity in your home, either through payments or appreciation you can request to remove it.
Tip: FHA loans have a similar concept called the Mortgage Insurance Premium (MIP), but many homeowners refinance into conventional loans later to remove that cost.
Down payment assistance programs can help bridge the gap
If saving up even 3% feels difficult, don’t worry, down payment assistance (DPA) programs exist to help first-time buyers and even investors in some cases.
These programs come in several forms:
- Grants (no repayment required)
- Forgivable loans (forgiven after a certain number of years)
- Deferred loans (paid back when you sell or refinance)
Examples include:
- Federal Programs: Check HUD’s state-by-state resource list for federal and local DPA programs.
- State Programs: Many Housing Finance Agencies (HFAs) offer low-interest loans or grants for qualified buyers.
- Local Initiatives: Some cities (like Houston and Los Angeles) offer up to $30,000 in assistance for first-time homebuyers.
These programs can often cover both your down payment and closing costs, bringing you significantly closer to homeownership.
Should you ever put more than 20% down?
If you can afford it comfortably, a larger down payment offers clear benefits:
- No PMI payments
- Lower monthly mortgage payments
- Better interest rate offers
- Faster equity growth
However, you shouldn’t delay buying a home just to hit 20%. In a rising market, you might pay more later for the same home, erasing any potential savings from a bigger down payment. Smart strategy: Use your cash wisely. Keep an emergency fund and avoid depleting all your savings at closing.
When putting less than 20% down makes sense
There are plenty of scenarios where a smaller down payment is the smarter move:
- You’re a first-time buyer who qualifies for FHA or DPA assistance
- You have strong income but limited liquid savings
- You’re an investor who prefers to keep cash available for multiple properties
- You expect property appreciation or rising rents to offset PMI costs
As long as your monthly payment fits comfortably into your budget, starting with less can still lead to major financial growth through home equity and tax benefits.
How First Nation Financial helps buyers with less than 20% down
At First Nation Financial, we specialize in helping buyers and investors secure home loans with flexible down payment options. Whether you’re purchasing your first home, refinancing, or investing in real estate, our experts can match you with the right loan program FHA, VA, USDA, Conventional, or custom investor financing.
Our mission is simple: to make homeownership accessible without unnecessary barriers.
Visit www.FNFLoan.com or call 832-955-9255 to explore programs that fit your goals.
Final thoughts: Stop waiting for 20% start building wealth now
The 20% down payment rule is a myth that keeps too many people renting when they could be owning.
With today’s mortgage programs, you can buy with less, start building equity, and enjoy the financial and emotional benefits of homeownership sooner.
Don’t let outdated advice hold you back, connect with a trusted mortgage expert who can show you your real options today.
At First Nation Financial, we don’t just push paperwork, we partner with you, guide you step by step, and help you understand exactly what you need to do to qualify. We believe in second chances, creative solutions, and turning “not yet” into “let’s do this.”
So if you’ve been waiting until everything’s “perfect,” here’s your sign: it doesn’t have to be. What you need is someone who understands where you’re coming from and knows how to get you where you want to go.
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