How to Buy a Home With a Low Down Payment
You don't need 20% down — and most people don't put down that much. What matters is knowing the real cash you'll need at closing and which program gets you there.
By Saman Khanian
Mortgage Professional
A smaller down payment, a real set of keys
The short answer
The down payment is one number. The down payment isn't the bill.
Every first-time buyer hears "20% down." In practice, the median first-time buyer puts down well under that — often 3% to 6% — and eligible veterans can put down nothing at all. The programs exist. What surprises buyers is everything sitting next to the down payment: lender fees, escrow, title, prepaid taxes and insurance, and the reserve cushion underwriters like to see.
So a "3% down" loan on a $500,000 home is $15,000 — but the cash you bring to the closing table might be $30,000 to $40,000 once closing costs are counted. That gap is where most buyers get stuck, and it's the gap that down payment assistance and seller credits are designed to close.
A good low-down-payment strategy does three things: picks the right program for your profile, stacks assistance and credits to cover the rest of the cash, and keeps your file clean enough that a seller's agent takes your offer seriously.
The real cash number
What you actually bring to closing
Cash to close is the sum of five things. The down payment is only one of them — and on a low-down-payment loan, it's often the smallest.
Down payment
Percentage set by your loan program
Lender fees
Origination, underwriting and processing
Escrow & title
Third-party settlement and title insurance
Prepaids
First months of taxes and homeowners insurance
Reserves
A cushion some programs require after closing
Where the money can come from
You don't have to fund the whole number from a savings account. These sources can be combined — your loan officer will confirm which are allowed for your specific program.
Your own savings
The most straightforward source — and the easiest to document clearly.
Gift funds
Family and close relatives can contribute, with a gift letter and transfer record.
Down payment assistance
Grants or deferred second liens from housing agencies and nonprofit programs.
Seller concessions
The seller credits part of your closing costs — capped by program and down payment.
Lender credits
A higher rate in exchange for covering some closing costs up front.
Employer programs
Some employers offer homebuyer assistance or matched savings programs.
Program comparison
Six low-down-payment paths
Each program trades off differently on down payment, credit and mortgage insurance. These are typical starting points — your exact terms depend on lender, credit, property and loan purpose.
VA Loan
- Credit
- Typically 580–620+ (lender overlay)
- Mortgage insurance
- No monthly mortgage insurance
Eligible veterans, active duty and surviving spouses. Usually the most powerful low-down-payment path.
FHA Loan
- Credit
- 580+ for 3.5% down
- Mortgage insurance
- Upfront + annual MIP
Buyers with thinner credit history or higher debt ratios who need flexible guidelines.
Conventional 97 / HomeReady
- Credit
- Typically 620+
- Mortgage insurance
- PMI until ~20% equity
First-time buyers with steady income, low debt and a clean credit file.
USDA Loan
- Credit
- Typically 640+
- Mortgage insurance
- Guarantee fee
Eligible properties in rural and some suburban areas, with household income limits.
CalHFA / State Programs
- Credit
- Varies by program
- Mortgage insurance
- Depends on the first loan
California buyers who qualify for below-market first mortgages plus second liens.
Bank Statement / Non-QM
- Credit
- Scenario-based
- Mortgage insurance
- Varies
Self-employed buyers whose tax returns don't reflect their real income.
Not sure which one fits? A five-minute scenario review usually settles it.
Apply NowAssistance & credits
Close the gap without more savings
Down payment assistance is the part most buyers never hear about before they start shopping. It comes in several shapes, and they stack differently depending on your program, income and location.
Eligibility is evaluated at pre-approval, not after you've found a house — which is why getting a full pre-approval first is so valuable.
Apply NowGrants
Money you don't repay. Often income- and location-restricted, and sometimes reserved for specific professions or first-time buyers.
Deferred second liens
A silent second mortgage that covers your down payment and closing costs. Typically repaid when you sell, refinance or pay off the home.
Seller concessions
The seller credits a percentage of your closing costs. The cap depends on your loan program and down payment.
Lender credits
Accept a slightly higher interest rate and the lender offsets part of your closing costs — useful when cash is tighter than your monthly budget.
How much cash will you actually need?
Adjust the numbers to see the picture for a home you have in mind.
Estimates only, for illustration. Actual costs vary by lender, property and program, and the figures shown are not a loan offer.
Your estimate
- Down payment (3.5%)$17,500
- Closing costs (3%)$15,000
- Seller credit / assistance-$0
- Reserves you keep$5,000
Loan amount: $482,500
Step by step
Seven steps to buy with a small down payment
- 1
Get a full pre-approval — not just a pre-qualification
A verified pre-approval with income, assets and credit reviewed shows sellers and their agents that your financing is real.
- 2
See what assistance you qualify for
Down payment assistance is confirmed up front. Knowing your maximum purchasing power before you shop prevents expensive surprises.
- 3
Set a budget that includes the payment — not just the price
Taxes, insurance and mortgage insurance change by property and program. Budget for the monthly payment, not just the sticker price.
- 4
Shop with your loan officer reachable
When you find the right home, you need numbers fast. A loan officer who can run scenarios quickly keeps you competitive.
- 5
Write a clean offer with realistic concessions
Seller credits and assistance requests must stay within program limits. Asking for the right amount keeps your offer credible.
- 6
Prepare documents before they're requested
Pay stubs, bank statements, tax returns and gift letters ready in advance keep underwriting moving and avoid conditional approvals.
- 7
Avoid new debt or big transfers before closing
New credit lines or large unexplained deposits can delay or derail underwriting. Keep the file stable until you've closed.
Frequently asked questions
The questions buyers ask most before their first offer.
Written by
Saman KhanianMortgage professional at Equitable Lending, helping first-time buyers, homeowners and investors across Los Angeles and nationwide find financing that fits their real circumstances.
Find out what you can buy — and with how little down
Get a full pre-approval with a loan officer who knows the low-down-payment and assistance options available to you.