One of the biggest myths in home buying is that you need 20% down to purchase a home. The truth? Whether you're buying in Frisco, Plano, McKinney, or anywhere in the DFW Metroplex, some loan programs let you buy with as little as 3% down, and a few allow no down payment at all, depending on the program and your situation. Let's explore your options.
Down Payment Options by Loan Type
FHA Loans: 3.5% Down
FHA loans are government-backed and designed for buyers with lower credit scores or limited savings. With a credit score of 580 or higher, the minimum down payment is 3.5%. Scores from 500 to 579 generally require at least 10% down, and many lenders require more than the government's minimums.
Example: On a $400,000 home, your minimum down payment would be $14,000.
Conventional Loans: 3% - 20% Down
Conventional loans offer flexibility. Some programs allow 3% down on a primary residence, for example for first-time buyers or for buyers whose income is at or below a program limit. 5%, 10%, and 20% options are also available, and second homes and investment properties generally require more.
Pro tip: Putting 20% down eliminates private mortgage insurance (PMI), which can lower your monthly payment.
VA Loans: 0% Down
For eligible service members and veterans, VA loans allow 100% financing with no down payment required and no monthly mortgage insurance. A one-time VA funding fee usually applies unless you are exempt, and it can be financed into the loan.
Eligibility: Service members, veterans (including National Guard and Reserve members), and some surviving spouses may qualify. A VA Certificate of Eligibility is required.
USDA Loans: 0% Down
USDA loans offer no-down-payment financing for qualifying buyers purchasing in USDA-eligible rural areas. Household income limits apply.
Note: Eligibility depends on the specific property address, which you can check on the USDA property eligibility map.
These are the main down payment options available in the market. Which programs are available to you depends on the lender and your situation, so ask your AXS Mortgage loan officer which ones apply.
Where Can Your Down Payment Come From?
Your down payment doesn't have to come entirely from your own savings. Here are acceptable sources:
- Personal savings:
Money from your checking, savings, or investment accounts.
- Gift funds:
Gifts from family members are allowed for most loan types, and a signed gift letter is typically required. FHA loans allow 100% of your down payment to be a gift.
- Down payment assistance programs:
Many state and local programs offer grants or low-interest loans for down payment assistance, especially for first-time buyers.
- Retirement accounts:
Some 401(k) plans allow loans or hardship withdrawals for home purchases. Withdrawals may be subject to taxes and penalties, so consult a financial or tax advisor before tapping retirement funds.
💡 The Real Cost of a Lower Down Payment
While lower down payments make homeownership more accessible, they come with trade-offs. You'll have a larger loan balance, higher monthly payments, and typically need to pay mortgage insurance. However, for many buyers, the opportunity to build equity sooner outweighs these costs, depending on their goals and how long they plan to stay.
Down Payment Comparison: $400,000 Home
| Down Payment % | Amount | Loan Amount | PMI Required? |
|---|---|---|---|
| 3% | $12,000 | $388,000 | Yes |
| 3.5% (FHA) | $14,000 | $386,000 | Yes (MIP) |
| 10% | $40,000 | $360,000 | Yes |
| 20% | $80,000 | $320,000 | No |
Illustrative arithmetic only. Your actual down payment requirement, mortgage insurance and monthly payment depend on your loan and program.
Texas-Specific Down Payment Assistance
Texas offers several programs to help first-time and qualifying homebuyers with down payments and closing costs. While program availability and terms change, options include:
- • Texas State Affordable Housing Corporation (TSAHC) programs, such as the Home Sweet Texas Home Loan Program
- • Texas Department of Housing and Community Affairs (TDHCA) programs, such as My First Texas Home
- • City and county assistance programs, which may have residency, employment, income or price limits
- • Employer-assisted housing programs
These programs have their own income, education and lender requirements, and amounts change, so ask your loan officer about current programs you may qualify for.
Need Help Planning Your Down Payment?
We'll help you explore all your options and find the best path to homeownership.
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