Most homebuyers need between 3% and 20% of a home’s purchase price saved before they can close, which on a $350,000 house means anywhere from $10,500 to $70,000. That’s a big range, and the good news is you don’t have to save every dollar yourself. Between government grants, low-down-payment loan programs, family gifts, retirement account access, and disciplined saving strategies, there are several realistic paths to pulling together the funds you need.
Down Payment Assistance Programs
More than 2,000 down payment assistance (DPA) programs exist across the country, run by state housing finance agencies, counties, and cities. These programs offer grants or low-interest loans that can cover part or all of your down payment, often providing between 3% and 10% of the purchase price. Some cap assistance at a fixed dollar amount, with maximums typically ranging from $10,000 to $25,000 depending on the program.
Eligibility requirements vary, but most programs share a common set of criteria. You generally need to be a first-time homebuyer (or someone who hasn’t owned a home in the past three years), earn a low to moderate income relative to your area’s median, buy a primary residence within local price limits, and use an approved lender. Credit score minimums hover around 640 for most programs, though a few set the bar as low as 620.
The assistance itself comes in different forms. Some programs offer outright grants you never repay. Others provide forgivable loans that disappear after you live in the home for a set number of years, typically five to ten. A third type is a deferred-payment second mortgage with no monthly payments due until you sell, refinance, or pay off the first loan. Your state’s housing finance agency website is the best starting point to see what’s available where you’re buying.
Loan Programs With Low or No Down Payment
Choosing the right mortgage program can dramatically reduce how much cash you need upfront. Three government-backed loan types stand out for buyers short on savings.
FHA loans require just 3.5% down and are open to any financially qualified borrower. There are no income limits or purchase price caps. FHA loans do require mortgage insurance, but the low entry point makes them one of the most popular choices for first-time buyers.
VA loans offer a true zero-down-payment option for veterans, active-duty service members, and eligible surviving spouses. You’ll need a Certificate of Eligibility from the Department of Veterans Affairs, but if you qualify, you can finance the entire purchase price.
USDA loans also allow zero down payment, but they’re designed for buyers in eligible rural and suburban areas who meet income limits. The definition of “rural” is broader than most people expect, covering many small towns and outer suburbs. You can check property eligibility on the USDA’s website before you start shopping.
Conventional loans from private lenders now go as low as 3% down for qualified buyers, often through programs aimed at first-time purchasers. You’ll pay private mortgage insurance (PMI) until you reach 20% equity, but that monthly cost may be worth it if waiting years to save a larger down payment means paying higher home prices or rents in the meantime.
Gift Money From Family
A cash gift from a relative is one of the most common ways buyers bridge the gap between their savings and the amount they need at closing. Lenders allow gift funds for down payments, but they have strict documentation rules you need to follow precisely.
You’ll need a signed gift letter from the donor that states the dollar amount, confirms no repayment is expected, and includes the donor’s name, address, phone number, and relationship to you. Your lender will also want to see a paper trail: the donor’s bank statement showing the withdrawal and your bank statement showing the deposit. Acceptable donors typically include parents, grandparents, siblings, and in some cases domestic partners or fiancés.
One special rule worth knowing: if the person giving you the gift has lived with you for at least 12 months and will continue living with you in the new home, the gift may be treated as your own funds. That distinction can matter when a lender requires a minimum contribution from your personal savings, because funds from a cohabiting donor can satisfy that requirement.
Tapping Retirement Accounts
Pulling from retirement savings is generally a last resort, but the tax code does carve out exceptions for homebuyers.
If you have a traditional or Roth IRA, you can withdraw up to $10,000 penalty-free for a first-time home purchase (or if you haven’t owned a home in at least two years). With a traditional IRA you’ll still owe income tax on the withdrawal, but you avoid the usual 10% early withdrawal penalty. With a Roth IRA, your contributions come out tax- and penalty-free at any time since you already paid taxes on that money. The $10,000 penalty-free allowance applies specifically to earnings withdrawn before age 59½.
A 401(k) loan is a different option that doesn’t trigger taxes or penalties at all. If your employer’s plan allows loans, you can borrow up to 50% of your vested balance or $50,000, whichever is less. You repay the loan with interest, and that interest goes back into your own account. The standard repayment window is five years, but many plans extend the term when the loan is used to buy a primary residence. The risk: if you leave your job before the loan is repaid, the remaining balance may become due quickly, and failure to repay can turn it into a taxable distribution.
Building Your Savings Faster
Even with assistance programs and gifts in the mix, most buyers still need to save a meaningful chunk on their own. Where you park that money matters. A standard savings account at a traditional bank pays an average of just 0.38% APY. High-yield savings accounts at online banks currently offer rates above 4%, with top options paying between 3.50% and 4.21% APY. On a $20,000 balance, that difference adds up to roughly $750 or more per year in extra interest.
High-yield savings accounts are ideal for down payment funds because they’re FDIC-insured, liquid, and earn meaningfully more than a checking account. If your timeline is 12 months or longer, short-term certificates of deposit (CDs) can lock in competitive rates, though you’ll face a penalty for early withdrawal if you need the money sooner than expected. For money you’ll need within one to three years, avoid investing in stocks or bonds. The potential for short-term losses could set your timeline back significantly right when you need the funds most.
On the income side, a few high-impact moves can accelerate your savings dramatically. Directing your full tax refund into a dedicated house fund, automating a fixed transfer from every paycheck, and temporarily redirecting any employer bonus or side income can compress a five-year saving timeline into two or three. Some buyers also reduce their 401(k) contributions temporarily to the employer match level, freeing up extra cash for the down payment while still capturing free retirement money.
Combining Multiple Sources
Most successful buyers don’t rely on a single strategy. A realistic plan might look like this: you save $12,000 over 18 months in a high-yield account, receive a $10,000 gift from a parent, and qualify for a $7,500 state DPA grant. Combined, that’s $29,500, enough for a 3.5% FHA down payment plus closing costs on a home priced around $350,000.
Start by figuring out your target number. Decide which loan program you’ll likely use, since that determines your minimum percentage. Then add estimated closing costs, which typically run 2% to 5% of the purchase price. Work backward from your desired purchase date to set a monthly savings goal, and layer in any assistance programs or gifts you expect. Having a clear, specific number makes the goal feel achievable and keeps your saving on track.