Do You Really Need to Make a 20% Down Payment?

by | Apr 6, 2018 | Financial Featured

If you’re thinking about buying a house, you may have heard something about needing to make a 20% down payment. This may have you worried, since saving up 20% of the purchase price of a house would take many people years. This is not, however, a hard and fast rule. While some loans may require a 20% down payment, there are numerous other programs which do not. This article contains a list of home loans that require nowhere near 20% down. If you’re not sure whether you qualify for a particular loan program included in this list, contact a law firm like Adam Leitman Bailey P.C., and ask about your financing options.

1 – FHA Loans

The Federal Housing Administration (FHA) has been offering home loans to qualifying buyers since 1934. These loans only require buyers to put 3.5% down, a far more attainable number than the lofty 20% many buyers think they need. Because your loan is also insured by the FHA, lender’s are more likely to make a loan to you when they may not have in the absence of the promise of reimbursement.

2 – VA Loans

The Department of Veterans Affairs (VA) offers mortgage financing to veterans as an incentive and reward for military service. This program dates back to the original passage of the GI Bill in 1944. This type of loan is insured by the VA, and requires no money down whatsoever from the buyer. VA loans are a powerful tool available to help qualifying buyers achieve the dream of owning a home. The only requirements to qualify are that the buyer served in the armed forces or the national guard/national guard reserves.

3 – USDA Loans

That’s right, the U.S. Department of Agriculture (USDA) – the same agency that makes sure the food is safe to eat – is also in the mortgage business. USDA loans, also known as “farmer’s loans,” are a mortgage financing offer available to buyers in rural areas. This program requires a minimal down payment and carries a low rate of interest, making it a great option for lower income families looking to purchase a home. In order to qualify, the property you wish to buy must meet certain physical and geographic requirements, usually rural areas and small towns.

4 – 3% Down Progams

Conventional home loans from lenders Fannie Mae and Freddie Mac are available at only 3% down. This program was unavailable for many years, but has been resurrected in the wake of the Great Recession to help financially beleaguered Millennials afford their first homes. While this program is restricted to loans of $424,100 or less, this doesn’t pose much of an issue since most peoples’ first homes cost less than that amount.

5 – State and Local Assistance

Every state in the United States has at least one home buyer assistance program. Most of these programs have the goal of aiding low and middle-income buyers with affording a house, and therefore require little or no down payment. In addition to programs open to any lower income buyer, there are also usually programs that offer home buying assistance to first responders, teachers, and other members who provide a social benefit to the community. If you want to see what types of assistance programs are available where you live, check out the Department of Housing and Urban Development’s website.


Buying a home is expensive, but it doesn’t have to be prohibitively so. If you’re having trouble saving up the traditional 20% down payment, then consider some of the above alternatives that may allow you to realize the American Dream of home ownership at a lower cost.

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