This week’s myth: You need 10% or 20% down to buy a home.

Truth: You don’t! There are programs are available that let you buy a home with as little as 3% down, depending on your income and debt. In addition, there are many options to increase your down payment that won’t make you cash-poor.

If you’ve been putting off buying because saving a large chunk of money feels out of reach, I get it. Saving up a down payment can feel overwhelming. But it really doesn’t have to be. There are creative and smart ways to pull funds together without draining your accounts dry.

Once you’ve got a clear idea of your monthly budget and how much home you can afford, the next step is to sort out your down payment. Here’s how to do it.

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How Much Do You Actually Need?

The amount of money you’ll need for a down payment depends on the loan type that fits your financial situation:

• Conventional loans can require 5% to 20% down, depending on your credit and other factors.
• FHA loans often only require 3.5% down.
• VA loans allow qualified veterans to buy with zero down.

The best amount to put down depends on you. For most first-time buyers, it’s better to keep some cash in the bank for post-purchase expenses. Those new countertops won’t pay for themselves…

You’ll want a monthly payment that fits your budget, but you don’t need to put every last penny into your down payment.

A lot of buyers assume they have to put 20% down to avoid paying monthly mortgage insurance, but it’s not the only path! Some lenders offer programs that let you avoid PMI by slightly increasing your interest rate. In many cases, your monthly payment stays about the same, but the structure of the loan works better in your favor.

Once you have a clearer picture of what loans and programs you qualify for, you’ll have a better idea of what you’ll actually need out of pocket.

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Sources for Down Payment Funds

1. Homebuyer Assistance Programs

Seattle and Washington State offer a variety of programs designed to help first-time buyers. These may include grants or loans that cover part of your down payment or closing costs. If your income qualifies, this is an excellent first stop. Some programs are even designed for public employees and essential workers to help them live in the communities they serve. Your bank, lender, or the home developer can offer several programs too, depending on the home you’re buying or your current finances. 

I can walk you through what’s available right now in WA and help you see which programs might be a match.  

2. Retirement Accounts

If you’ve been building up a nest egg in a retirement account, you might be able to tap into it for your down payment. Just make sure to speak with a financial advisor about the tax implications and pros and cons of this approach.

• 401(k): Some plans allow loans for primary residence. If you leave your job, you may need to repay it quickly.
• Traditional IRA: First-time buyers can withdraw up to $10,000 penalty-free if certain criteria are met.
• Roth IRA: Withdrawals can also be used without penalty, provided the account has been open for five years.

These options vary by account and situation, so get expert guidance is required to make the right decision.

3. Family Help

It may feel awkward to ask, but family support is a great path to homeownership. Be clear about whether it’s a gift or a loan, as lenders will need to see documentation.

• Gifts: Immediate family can gift up to a certain amount per person annually without triggering a gift tax.
• Loans: These must be disclosed to your lender, who will factor the repayment into your debt-to-income ratio.

4. Boost Your Savings

This is where you have the most control. Even small consistent efforts can add up fast.

• Adjust tax withholding so you receive a larger refund to set aside.
• Set automatic deposits into a savings account after each paycheck.
• Sell anything you don’t need on Facebook Marketplace or local apps to turn into cash.

These efforts not only add up financially but also build a sense of momentum and control over the process.

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Let’s Make Your Next Move Possible

There are more ways to find your down payment than most buyers realize. Whether you take advantage of local assistance programs, pull from retirement savings, or build your own cushion slowly, homeownership is still within reach!

If you’re feeling stuck or unsure where to begin, let’s connect. I’ll help you sort through your options and map out a plan that’s realistic for your timeline and budget.

Next week, we’ll bust another common myth: why your credit score doesn’t have to derail your home-buying plans!