Your down payment can come from more than one documented source, including savings, proceeds from another home, eligible gifts, approved assistance, and certain other assets. The best plan also preserves enough money for closing costs, reserves, moving, repairs, and the first expenses of homeownership.
The most common mistake is treating the down payment and total cash to close as the same number. They are related, but they are not identical. Current CFPB guidance also recommends reserving money for closing costs, moving, initial home expenses, and an emergency cushion rather than putting every available dollar into the down payment.
Twenty percent down is not required for every home purchase. Depending on eligibility, occupancy, property, loan amount, credit, income, and program rules, common possibilities may include:
| General program category | Possible minimum structure | Important considerations |
|---|---|---|
| Eligible conventional primary residence | Some options permit 3 percent down | Income limits, first-time-buyer definitions, property type, credit, or mortgage insurance may matter |
| FHA | 3.5 percent for eligible borrowers meeting applicable credit requirements | Upfront and annual mortgage insurance apply, and property standards must be satisfied |
| VA | Zero down may be available to an eligible borrower | Entitlement, residual income, funding fee or exemption, occupancy, appraisal, and lender approval matter |
| USDA | Zero down may be available | Property location, household income limits, occupancy, guarantee fees, and program eligibility apply |
| Second home or investment property | Generally higher than a primary-residence minimum | Reserves, loan limits, property type, number of financed properties, and pricing can be important |
Minimum down is not automatically the best strategy. Compare monthly payment, mortgage insurance, rate pricing, reserves, and expected ownership period. Review the low down payment mortgage options and Colorado down payment assistance guide for more detail.
Funds in a verified account are often the simplest source. The lender may review recent statements, large deposits, transfers, account ownership, and whether the money remains available through closing.
Stocks, bonds, mutual funds, and other eligible assets may be liquidated for closing. Market movement, settlement timing, taxes, and documentation matter. Do not assume the full displayed account value is available for underwriting or immediate withdrawal.
Net sale proceeds can fund a down payment when timing and documentation support the transaction. If the next home must close before the current home sells, compare buy-before-you-sell strategies, a bridge loan, a home-equity line, or a coordinated closing.
Many programs permit gifts from eligible donors. The lender may require a gift letter, evidence of transfer, proof of the donor’s ability to provide the funds, or other documentation. The funds must be a true gift when the program requires no repayment.
Assistance may be structured as a grant, forgivable second mortgage, deferred second mortgage, or repayable second mortgage. Evaluate the first-mortgage pricing, second-lien terms, repayment triggers, occupancy rules, income limits, and long-term cost rather than choosing only by the largest advertised assistance amount.
A plan loan or withdrawal may be permitted by the retirement plan and mortgage program, but taxes, penalties, repayment terms, reduced investment growth, and employment changes can create meaningful tradeoffs. Confirm plan and tax consequences before acting.
Depending on the program, possibilities may include grants, employer assistance, trust distributions, inheritance, sale of personal property, secured borrowing, sweat equity, or other documented funds. Every source has its own eligibility and paper trail.
Seller credits are generally used for eligible closing costs, prepaid expenses, discount points, or an allowed temporary buydown. They usually do not replace the minimum down payment required from eligible borrower funds, gifts, grants, or assistance. Program limits and the actual amount of eligible costs control how much credit can be used.
A seller credit can still improve the plan by preserving money that would otherwise pay closing costs. Compare a price reduction with a closing-cost credit, points, or a buydown based on the actual payment and cash-to-close effect.
No. It may eliminate conventional PMI and reduce the loan amount, but it also uses more cash. A lower down payment with stronger reserves can be more appropriate for some households.
Documentation requirements vary. Lenders commonly review recent statements and investigate large deposits. Some funds can be documented through a direct source and transfer rather than waiting for a fixed “seasoning” period.
Many programs allow eligible gift funds for some or all permitted cash-to-close items. Donor eligibility, minimum borrower contribution, property type, and documentation depend on the program.
Run both scenarios. Paying a selected debt may improve DTI more than the same dollars added to the down payment, while a larger down payment may improve payment, pricing, or mortgage insurance. Preserve required reserves in either case.
Compare down payment, closing costs, reserves, gifts, assistance, seller credits, and possible sale proceeds before you make an offer.
Schedule a Consultation Start a Secure ApplicationReviewed September 2, 2026 by Michael Shotnik, Broker | Owner, Milestone Home Mortgage, LLC, NMLS 218281. Educational information only. Program eligibility, minimum investment, gift rules, assistance terms, seller-credit limits, reserves, and documentation vary and can change. Consult a qualified tax or financial professional before using retirement or investment assets.
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Milestone Home Mortgage LLC NMLS #2588937. Michael Shotnik NMLS: 218281, CO License: 100017466. Not licensed in Alaska or New York. To check license status of mortgage loan originator, visit D.O.R.A. and NMLS consumer access.
