Mortgage Options for First-Time Buyers With Limited Savings
A 20% down payment is not the entry ticket people think it is. Most first-time buyers in 2026 put down far less — and some put down nothing at all.
By Saman Khanian
Mortgage Professional
3.5%
FHA down
0%
VA down
3%
Conventional
The down payment is rarely the whole bill
First-time buyers focus on the down payment, but the real hurdle is total cash to close: down payment plus closing costs, prepaid taxes and insurance, and — ideally — a little reserve left over.
On a $450,000 purchase, 3% down is $13,500, but closing costs often run 2–3% more. Easing the down payment is half the work; the other half is seller credits, assistance programs and lender credits.
Low savings does not mean unqualified. It means you need to plan the stack — loan, assistance, seller contribution and reserves — before you start touring homes.
Six paths, each with a different cash requirement
The right one depends on your eligibility, credit, income and where the home is located.
FHA loan
3.5%The workhorse for first-time buyers. Low down payment, flexible credit, and eligible for many down payment assistance programs. Mortgage insurance applies.
VA loan
0%For eligible veterans, active-duty service members and surviving spouses. No monthly mortgage insurance, though a one-time funding fee applies.
Conventional 97 / HomeReady
3–5%Standard Fannie Mae and Freddie Mac programs with low down payments. Mortgage insurance can drop off once you reach 20% equity.
USDA
0%For eligible rural and suburban areas with income limits. No down payment and low insurance costs; property eligibility is location-driven.
CalHFA MyHome
3%+ (with assistance)California Housing Finance Agency programs combine a first mortgage with down payment assistance. Eligibility and income limits apply.
Bank statement / non-QM
10–20%For self-employed buyers whose tax returns understate income. Higher down payment, but a path when agency loans decline on income.
The other half of the cash gap
Assistance programs don’t reduce the price, but they can cover much of the cash needed to close.
Down payment grants
Funds you do not repay, subject to income and purchase-price limits. Often layered with the first mortgage.
Deferred second liens
Assistance funded as a silent second that is repaid only on sale, refinance or payoff — sometimes with a preferred-lender requirement.
Seller concessions
The seller contributes toward closing costs (typically 3–6%). Negotiate this up front, and confirm the appraisal supports the price.
Lender credits
The lender covers part of closing costs in exchange for a slightly higher rate. Useful when cash is the constraint, not the rate.
Programs change quarterly and many are tied to the specific property or zip code. We review eligibility with you during pre-approval, not after the offer.
How much cash will you actually need?
Estimated cash to close
$24,750
Down payment $13,500 + closing 11,250
With reserves you keep after closing
$30,750
About 3% down. On a $450,000 home, 3% down with typical closing costs and a seller credit lands near this number — and leaves you a cushion.
Apply NowEstimates only. Actual closing costs, seller credits and down payment requirements depend on the program and lender. Not a commitment to lend.
Five moves before you make an offer
- 1
Get pre-approved before touring
A pre-approval tells you the loan amount, the cash you need and which programs you qualify for — before you fall in love with a house.
- 2
Stack the cash plan
Down payment, closing costs, seller credit and any assistance. Confirm each piece fits the program’s limits before writing the offer.
- 3
Protect your credit
Do not open new accounts or co-sign during the process. Scores determine both the program and the rate.
- 4
Ask about lender credits
If cash is tight and the rate is less important than the amount out of pocket, a lender credit can shift costs to the monthly payment.
- 5
Leave a cushion
Buying with zero reserves means the first repair comes out of a credit card. Keep something.
What trips buyers up
- Spending every dollar on the down payment
- Ignoring closing costs when setting the price range
- Closing cards to “tidy up” before applying — it can hurt the score
- Assuming you must make 20% down to be taken seriously
- Forgetting that property taxes and insurance must be prepaid at closing
Know your cash number?
We’ll confirm which programs fit and what assistance you may qualify for.
Apply NowFirst-time buyer FAQs
Can I buy a house with very little saved?
Often, yes. VA loans allow 0% down for eligible veterans, FHA allows 3.5%, and conventional loans allow 3% for qualifying first-time buyers. Down payment assistance and seller concessions can cover more. What matters most is the total cash to close — down payment plus closing costs plus reserves — and your debt-to-income.
Do I need a 20% down payment to buy a home?
No. The 20% figure is a rule of thumb, not a requirement. It avoids mortgage insurance on conventional loans, but FHA and VA programs accept much less. Many first-time buyers put down 3–5% or nothing at all.
What is down payment assistance, and can I combine it with an FHA loan?
DAPs are grants or deferred second liens from housing agencies. Many can be layered with FHA or conventional financing, but each program has its own eligibility rules, income limits and repayment terms. Availability is located-by-property in many cases.
Can the seller pay my closing costs?
Yes, within limits. Sellers can usually contribute 3–6% of the purchase price depending on loan type, as long as the negotiated price and appraisal support it. It is a common way to reduce cash to close in a buyer-friendly market.
Will a low down payment mean a higher interest rate?
Not exactly. The rate is mostly driven by credit and loan program, but mortgage insurance is added on most low-down-payment loans, and it raises the monthly cost. FHA and conventional use different insurance structures, so comparing them matters.
Can a co-borrower help me qualify with limited savings?
Yes. A co-borrower’s income and assets can count toward qualification and reserves. FHA also allows non-occupant co-borrowers in some cases, while conventional rules are stricter.
How much do I really need in reserves?
Reserves are money left after closing. Many first-time buyer programs require little to none, but having two months of payments set aside protects you if something breaks in the first year. It also strengthens your offer.
What is the biggest mistake buyers with limited savings make?
Spending every available dollar on closing and draining reserves. A tight budget with zero cushion turns a small repair or a missed paycheck into a problem. Leave some cash — even a modest amount — after closing.
Written by
Saman Khanian
Saman Khanian is a mortgage professional at Equitable Lending, a Los Angeles-based lender specializing in purchase, refinance, reverse mortgages and Non-QM programs — including FHA, VA and conventional loans with down payment assistance for first-time buyers. “Mortgages Made Easy.”
More about SamanYour first home may be closer than you think
Bring us any lender’s offer and we’ll likely beat it. Start your application online or call to talk through your scenario.
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