Purchasing a home as a first time home buyer is a new and exciting experience. However, it can also come with its concerns. One primary concern is how to come up with the money for a down payment.

Thankfully, there are various options available to help you get the funding for your down payment, so don't let this one piece of the puzzle stop you from achieving your goal of purchasing your own home.

Here are five common first time home buyer down payment strategies to consider.


Many first time home buyer grants can cover all or a portion of your down payment, depending on how much you need.

Many states provide a list of down payment grants for first time home buyers. Some will come with specific requirements, such as having to live in your home for several years, and as long as you meet the requirements, you don't have to repay the money.

Alternatively, there might be a max sales price or income limits you have to consider.

Others don't have many requirements at all.

Doing a little research can open the doors to grant options that can save you a great deal on your down payment.

Retirement Withdrawal or Loan

You might be able to take a loan against your retirement account.

You should be cautious with this option and understand the potential risks of going this route. This is especially true if you are already behind on saving for retirement.

However, if it is a good option for you, you want to review the withdrawal rules, whether you have a 401(k), IRA, or Roth IRA. Depending on the account, you might have to pay a tax penalty or interest, while some plans allow you to do so tax-free if you've held the account for several years.

Family Gifts and Loans

If you have family members or friends who will give you the money for your down payment, you can use it to cover the costs. This isn't an uncommon practice as parents, grandparents, or other relatives will often pitch in to cover the costs, especially for younger first time home buyers.

In accepting a down payment gift, you will need to provide paperwork to your lender to use the funds.

This includes getting a gift letter stating that the money is a gift, not a loan that has to be repaid.

Whoever provided you with the funds will also have to provide bank statements as proof.

However, suppose the money you receive from a family member is indeed a loan. In that case, your lender will need to be made aware, and the debt will be documented and considered during the underwriting process.


Crowdfunding is common covering various business-related and various personal needs. As the practice has become more popular, it has spread to raising money for down payments.

There are sites available that allow you to collect funds from those you know and strangers willing to donate. You can then use the money raised to contribute toward your down payment.

Keep in mind that you might have to pay fees to the crowdfunding site, but any money raised can help you get closer to your down payment goal.

High-Yield Products

If purchasing a home is further down the road, you can save the funds in a high-yield account, such as a money market account. With each contribution, you earn more in interest to help you achieve your down payment savings goal faster.

Low Down Payment Loan

Another opportunity for a first home buyer is to secure a loan with low or no down payment requirements.

Some options include:

VA Loan: The Department of Veteran Affairs backs a VA Loan. It allows former and active military members or the spouse of a deceased military member to purchase a home with no down payment.

USDA Loan: A USDA Loan is a $0 down payment mortgage loan backed by the Department of Agriculture to promote homes in rural areas.

FHA Loan: An FHA Loan is backed by the Department of Housing and Urban Development. It has more flexible qualification requirements and only requires a 3.5% down payment compared to the traditional 20% down payment.

Conventional Loan: Some conventional loans will allow you to qualify for a down payment as low as 3% of the purchase price.

Take Advantage Of These First Time Home Buyer Down Payment Strategies

Whether you choose to secure your down payment via a family gift, save the money in a high-yield account, or opt for a low or no down payment mortgage, you want to take advantage of the option that will best help you achieve your home buying goals.

Read more of our first time home buyer tips to help you with your purchase beyond the down payment.

First Time Home Buyer Tips