Do First-Time Homebuyers Need a Down Payment?

If you’re a first-time homebuyer, you’ll need a down payment, but how much you put down depends on various factors. 

Many people think you need a 20% down payment to buy a home. For a $250,000 home, that would be $50,000, which can feel out of reach for many buyers. In reality, deciding how much to put down as a first-time homebuyer depends on your financial situation, loan options, and long-term goals. 

While 20% can be a helpful target, it’s not required. Many buyers can purchase a home with much less up front.

Rather than focusing solely on saving for a large down payment, it’s more helpful to understand your full range of options and what may be available based on your situation. Focus Federal Credit Union helps Oklahoma homebuyers understand loan programs and down payment assistance options so you can better evaluate what is realistic for your budget and long-term goals.

So, do first-time homebuyers need a down payment? Let’s explore that.

Do First-Time Homebuyers Need a Down Payment? The Real Answer

Short answer: Yes, in most cases, but not as much as you might think.

Down payments are rarely as high as 20%. Typically, first-time buyers put down 6-9%. In 2025, the average was around 10%. The amount needed depends on the home’s price and your financial profile.

The type of loan you choose also impacts your down payment. Here are some options: 

• FHA Loans. Backed by the Federal Housing Administration, FHA loans are one of the most popular choices for first-time buyers. Loans require a minimum down payment of 3.5%, with credit score flexibility, often as low as 580. FHA loans require mortgage insurance premiums, including an upfront cost and a monthly fee.
• VA Loans. Available to eligible veterans, active-duty service members, and some surviving spouses, VA loans offer 0% down payment and no private mortgage insurance.
• USDA Loans. Designed for buyers in eligible rural and suburban areas, USDA loans offer 0% down payment and income-based eligibility. Since many areas throughout Oklahoma qualify for USDA financing, USDA loans are worth exploring for buyers looking outside major metro areas.
• Conventional Loans. Conventional loans are available with as little as 3% down, though they require private mortgage insurance for down payments below 20%. The advantage of conventional loans is that private mortgage insurance isn’t permanent, and you usually can remove it once you reach 20% equity in your home.

The Biggest Myth About Buying a Home (And Why It Stops Buyers)

The biggest myth in home buying is the idea that you need a 20% down payment. This idea is outdated. While it offers benefits, it’s not required. And aiming for 20% can delay your home purchase while prices rise.

Instead of focusing on a specific percentage, review what’s working for your financial situation today. With the right loan program, a smaller down payment can allow you to get into a home sooner, start building equity, and maintain flexibility to pay down debt or manage other financial goals.

A variety of low-down-payment options are available to make homeownership more accessible. The key is to understand your options and not let an outdated rule hold you back. In many cases, buying your first home may be more realistic than you think.

What You May Actually Need Upfront

Let’s look at what you might actually need instead. A down payment is just one piece of the puzzle. Being financially prepared for more than just the down payment ensures a smoother transition into homeownership. The more you understand upfront, the more confident you will feel when it is time to close and move in.

Costs to consider when buying a home:

• Closing Costs. Closing costs are the fees and expenses needed to finalize your home purchase. They typically range from 2-5% of your loan amount. Closing costs may include a loan origination fee, appraisal and inspection costs, title search and insurance, and recording fees. Often, you can request that the seller pay for part or all of your closing costs, but it’s good to be aware that these factor in. 
• Prepaid Expenses. These are upfront costs for property taxes and homeowners’ insurance, which are often placed into an escrow account at closing.
• Additional Fees. You may also encounter attorney fees if a lawyer is involved, as well as a survey fee to confirm property boundaries, or home inspection costs.

You will also want to plan for moving costs and expenses you may not have needed to budget for as a renter. Whether you hire professional movers or rent a truck, moving costs can add up. You may also need to budget for repairs or updates, such as painting or replacing fixtures. Include ongoing costs such as property taxes, homeowners’ insurance, utilities, maintenance, and HOA dues in your new budget.

Oklahoma Programs to Help Cover Your Down Payment

First-time homebuyers often overlook the option of down payment assistance (DPA). These programs can reduce or even eliminate upfront costs. 

Federal, state, county, and local government agencies, as well as nonprofits, offer DPA programs. Availability and qualification requirements vary, but they exist to make homeownership more accessible.

When considering DPA programs, remember:

• Down payment assistance can come in several forms. Most programs are for first-time buyers, low- to moderate-income borrowers, or those purchasing in development or targeted areas:
• Grants provide funds that you don’t have to repay.
• Forgivable loans are second mortgage loans that may be forgiven after a set period, provided the borrower meets program requirements.
• Low-interest second mortgages are affordable options to help cover upfront costs alongside your primary mortgage.
• Deferred-payment loans allow you to postpone repayment until you sell, refinance, or pay off your home.

Oklahoma programs that eligible buyers reduce upfront costs include:

• The Oklahoma Housing Finance Agency (OHFA) offers down payment assistance of about 3.5-5%, which you can use toward down payment and closing costs. These programs are available statewide to qualified borrowers.
• The City of Oklahoma City First-Time Homebuyers Program provides assistance for eligible buyers within city limits. This program can offer up to $18,000 in down payment and closing cost assistance through a zero percent-interest, deferred, forgivable loan. In most cases, the loan is forgiven for over 10 years, as long as the buyer continues to use the home as their primary residence.

Do I Need to Save for a Down Payment?

You don’t need a 20% down payment, but making a down payment offers clear benefits, like instant equity and avoiding private mortgage insurance (PMI) on conventional loans. 

A bigger down payment can offer long-term financial advantages, including:

• Lower Monthly Payments. The more you put down up front, the less you need to borrow. This reduces your loan amount, resulting in smaller monthly mortgage payments and less interest paid over the life of the loan.
• Better Interest Rates. Lenders often view borrowers who put more money down as lower risk, which can result in more competitive interest rates.
• Less Interest Over Time. Because you are borrowing less, you will pay a lower total amount of interest over the life of the loan.
• No Private Mortgage Insurance. If your down payment is under 20%, most conventional loans require PMI, which is an additional monthly cost. PMI typically ranges from about 0.5-1% of the loan amount per year.
• Faster Equity Building. A larger down payment means you own a bigger share of your home right away. This equity can provide future financial flexibility, whether through refinancing options or as a financial cushion.

Once you understand the pros and trade-offs of different down payment amounts, the next step is to get clear on what you actually qualify for through a lender.

How To Know What You Qualify For

Before deciding how much to put down on a home, you’ll want to know what you actually qualify for. Lenders evaluate borrowers based on factors such as credit score, debt-to-income ratio, income, and employment history.

Factors lenders look at when determining what you qualify for:

• Credit Score. Higher scores can improve your loan options and may help you qualify for down payment programs.
• Debt-to-Income Ratio (DTI). A lower DTI shows lenders that you can comfortably manage monthly payments.
• Income and Employment. Stable, consistent income improves your chances of approval.
• Loan Type. Loans such as VA and USDA loans have specific qualification requirements.

You’ll want to take a structured approach when preparing for homeownership. Start by setting a clear target based on home prices in your desired area and the type of loan you are considering. Use the information to map out a realistic savings timeline.

To prepare for homeownership:

• Stick to a Budget. Track your income and expenses and cut back where possible to increase savings.
• Automate Your Savings. Set up automatic transfers to a dedicated savings account to grow your savings.
• Earn Extra. Overtime work, side jobs, or freelance income can help increase your savings.
• Reduce Debt. Lowering debt payments can free up more monthly cash for saving.

When deciding how much to put down, consider the expected and unexpected costs of buying and owning a home. Your down payment can impact your loan options, monthly mortgage payment, interest rate, and whether you will need to pay mortgage insurance. Taking a full-picture approach helps ensure you choose a down payment amount.

Why Oklahoma Buyers Work With Focus Federal Credit Union

Down payment assistance programs can make a major difference in how quickly you can move into homeownership, especially once you realize that you don’t necessarily need 20% down. 

A smaller down payment can open the door to homeownership sooner, but it is still essential to understand the long-term financial impact and talk with a mortgage expert about what fits your situation. 

With hundreds of assistance programs available, it can be difficult to know where to start. Focus Federal Credit Union can help you explore options. Instead of feeling overwhelmed, you get clear guidance, practical solutions, and a realistic plan to understand if you need a down payment. Contact us today.