Debunking Down Payment Myths

What new buyers get wrong – and what experts say instead.

Why it matters: Confusion around down payments can keep first-time buyers on the sidelines. Nearly 70% of U.S. adults don’t know down payment assistance exists, according to NeighborWorks America.

We asked industry pros to break down the most common myths – and the real story behind them.

Myth 1: You need 20% down.

Not true.

• “You don’t necessarily have to have 20 percent down to get in,” says Chris Copley of TD Bank.

• Examples:

  • 3% down programs that may eliminate private mortgage insurance

  • 80/10/10 loans – 10% down, plus a second loan to avoid PMI

• The median down payment for first-time buyers in 2024 was nine percent.

Bottom line: Shop around. With the right lender and program, 20% is far from required.

Myth 2: Assistance programs are only for low-income buyers.

“Many homebuyers … think down payment assistance is only for low-income buyers – not true,” Dottie Sheppick of Bank of America says.

• The reality: Nearly 9 in 10 U.S. homes could qualify for some type of assistance when income limits are factored in.

• Where to look:

  • Talk to a realtor or lender about what fits your financial picture.

  • Research down payment and closing-cost programs – some offer forgiving or favorable repayment.

  • Check city, county, and state housing agencies.

  • Ask local banks about their programs.

• “There are resources now more than ever to help guide you through the process,” Sheppick adds.

  • One major resource: Down Payment Resource, a database of 2,400+ programs.

  • “We create new opportunities … by uncovering these programs,” says Rob Chrane, its president.

Myth 3: It’s hard to qualify for a mortgage today.

Not anymore.

• Lenders have eased rules.

• Copley’s advice: “Find out what options are out there … Talk to a couple different lenders and see what kind of products they have.”

• Their job: walk you through options, finances and paperwork – and help you qualify.

Myth 4: I’m prequalified – now I can buy.

Not quite.

• Prequalification: A quick look at your finances to estimate what you might borrow. Helpful for showing agents you’re serious – but not a loan approval.

• Preapproval: Verified financial review (7–10 days). Sellers take you more seriously because your finances are already vetted.

Myth 5: You must buy mortgage insurance.

Not always.

If you put down less than 20%, mortgage insurance is typically required. But alternatives exist.

• "Programs that do use mortgage insurance can allow down payments as low as 3%," says Faramarz Moeen-Ziai of Commerce Home Mortgage. "But more down is still better."

• “Lenders often look at down payment amounts as your investment in the home … and it can influence whether … you’ll pay for private mortgage insurance,” Sheppick notes.

• For deeper guidance, Moeen-Ziai recommends the HUD website.

Follow NewHomeSource on Instagram and Facebook for more homebuying tips and check out our comprehensive new home listings.