Housing News

More Homebuyers Are Finding New Ways to Make a Down Payment

Saving for a down payment can be one of the biggest hurdles to buying a home. Yet a growing number of homebuyers are finding other ways to come up with the cash.

Nearly three in 10 homebuyers are using money from somewhere other than their personal savings to make a down payment, according to the July 2026 ICE Mortgage Monitor. At 29%, using alternative funding sources has reached its highest level in seven years.

The shift shows how the traditional path to homeownership is changing. Instead of relying on a single savings account, homebuyers are piecing together funds from several sources. Others need far less cash than they realize. Thousands of programs can offset upfront costs, while certain mortgages allow qualified homebuyers to purchase a home with little or no money down.

“The buyers making it work aren’t all sitting on savings, they’re stacking resources most people never ask about,” said New American Funding Senior Vice President of Growth and Expansion Mosi Gatling.

Here are some of the ways homebuyers are finding the money to buy a home.

Family gifts can cover a down payment

Money from family has become an important down payment resource, especially for younger and first-time homebuyers who have had less time to build savings or home equity.

A gift from a parent, grandparent, or other eligible donor can close the gap between what someone has saved and the amount needed to purchase a home.

Gift funds can be used for all or part of the down payment and closing costs on eligible mortgages. The exact rules depend on the mortgage program, property type, and source of the money.

Homebuyers generally need to document where the funds came from and confirm that the money is a true gift rather than an undisclosed loan that must be repaid.

Anyone expecting help from family should discuss the gift with a lender.

Borrowed money can bridge the gap

Loans are another source of down payment funds.

The rules depend on the mortgage program and the source of the borrowed money. Eligible sources can vary by loan type.

New debt can affect monthly obligations and the debt-to-income ratio lenders use to determine how much someone can borrow.

Taking out a loan or opening a new credit account during the mortgage process can also change a homebuyer’s financial profile. Anyone considering this route should speak with a lender before borrowing the money.

Assistance can provide thousands in help

Homebuyers can also look to down payment assistance.

There are thousands of homebuyer assistance programs available nationwide. Assistance comes in several forms, including grants that do not need to be repaid. Other programs offer forgivable loans, deferred-payment loans, or second mortgages to cover a down payment or closing costs.

Eligibility can be based on income, location, profession, military service, or other requirements. Certain programs are designed for first-generation homebuyers or people purchasing homes in particular communities.

Even the definition of a first-time homebuyer can be broader than it sounds.

Help is not limited to people buying their first home, either. Depending on the program, someone who has not owned a principal residence during the previous three years can qualify.

“If you’re planning to use a down payment assistance program, your first step is to connect with a mortgage lender approved by your state’s housing authority before you start shopping for a home,” said Jason Gelios, a real estate professional with Community Choice Realty in Detroit, Mich. “Most programs have eligibility requirements, such as minimum credit score and income guidelines.”

Retirement funds can fill the gap

Retirement accounts are another source of money for a home purchase.

How the money can be accessed depends on the type of retirement account and the homebuyer’s circumstances. Options can include a withdrawal or a loan.

The financial consequences vary. A withdrawal can trigger taxes or penalties, while a loan must be repaid according to specific rules.

Taking money out of a retirement account also reduces the amount left to grow for the future.

Anyone considering this option should understand the long-term cost before moving retirement money into a home purchase.

A smaller down payment can cut the wait

Many homebuyers still believe they need to save 20% of a home’s purchase price before they can buy. Certain mortgage programs allow qualified homebuyers to put down far less.

The difference could be substantial.

On a $400,000 home, a 20% down payment comes to $80,000. A 3% down payment is $12,000. A 3.5% down payment is $14,000.

For a household saving $500 a month, reaching $80,000 would take more than 13 years, without factoring in interest earned on savings or changes in home prices. Saving $12,000 would take two years.

Federal Housing Administration (FHA) loans can allow eligible homebuyers to put down as little as 3.5%.

Eligible veterans, active duty servicemembers, and certain surviving spouses can purchase a home with no down payment through a U.S. Department of Veterans Affairs (VA) loan, although lender requirements and individual circumstances vary.

Putting down less can result in a larger mortgage payment and require mortgage insurance. It can also sharply reduce the amount of time needed to save enough to buy a home.

Mosi Gatling NMLS# 557166