The 20% down payment myth keeps more first-time buyers renting in the DFW area longer than necessary than almost any other misconception in home buying. The real answer for a down payment for first-time homebuyers depends on the loan program, and most options require far less than 20%, sometimes nothing at all.
Here’s the real range, program by program.
The Quick Answer: Down Payment Ranges by Loan Program
Conventional loans allow as little as 3% down for qualified first-time buyers. FHA loans require 3.5% down. VA loans allow eligible veterans and service members to buy with 0% down. Texas also offers down payment assistance programs that can reduce what you need out of pocket even further.
The Complete Guide to Buying Your First Home in Texas →
Conventional Loans: As Low as 3% Down
Several conventional loan programs allow first-time buyers to put down just 3%, provided credit and income requirements are met. Below 20% down, private mortgage insurance (PMI) applies, but PMI cancels automatically once your loan balance reaches 78% of the home’s original value.
FHA vs. Conventional: Which Is Better for a First-Time Buyer? →
FHA Loans: 3.5% Down
FHA loans require 3.5% down and allow more flexible credit requirements than most conventional programs, often accepting scores as low as 580. The trade-off is mortgage insurance that, with less than 10% down, generally lasts for the life of the loan.
VA Loans: 0% Down for Eligible Veterans
Eligible veterans, active-duty service members, and certain surviving spouses can purchase with no down payment at all through a VA loan, one of the strongest benefits available to first-time military buyers.
Texas Down Payment Assistance Programs
Texas runs two major state-level down payment assistance programs. The Texas Department of Housing and Community Affairs (TDHCA) offers My First Texas Home, which pairs a 30-year fixed mortgage with down payment assistance of up to 5% of the loan amount, structured as a deferred, zero-interest second loan. The Texas State Affordable Housing Corporation (TSAHC) offers Home Sweet Texas, open to eligible buyers generally, and Homes for Texas Heroes, designed for teachers, firefighters, police officers, veterans, and other public service professions, offering assistance as a grant or a deferred second lien depending on the program.
Most of these programs require a minimum 620 credit score, completion of an approved homebuyer education course, and fall within county-specific income and purchase price limits. Programs and availability can shift, so it’s worth confirming current details and eligibility directly before counting on a specific number.
Down Payment Vs. Total Cash Needed to Close
Your down payment isn’t the only cash you’ll need at closing. Closing costs, typically 2 to 6% of the loan amount, are separate and due on top of your down payment. Earnest money you’ve already paid gets credited toward that total, reducing what you bring on closing day, but it’s not the same thing as your down payment itself.
First-Time Homebuyer Mistakes to Avoid →
How Much Should You Actually Put Down?
More isn’t automatically better. A larger down payment lowers your monthly payment and can eliminate PMI, but it also ties up cash that might serve you better elsewhere, in reserves, in an emergency fund, or invested. The right amount depends on your full financial picture, not just what gets you to 20%.
How Lenders Calculate Debt-to-Income Ratio →
A Simple Example
On a $350,000 home, a 3% conventional down payment comes to $10,500. Add estimated closing costs of roughly 2.5%, about $8,750, and total cash needed to close comes to approximately $19,250, well short of the $70,000 a 20% down payment myth would suggest.
Mortgage Planner’s Perspective
The 20% down payment rule isn’t a requirement. It’s a myth that keeps a lot of ready buyers on the sidelines longer than necessary. The real number depends on your loan program, your eligibility for assistance, and what actually makes sense for your broader financial picture, not a flat percentage everyone assumes applies to them.
NEXT STEP
Curious what your own down payment and payment could look like? Run your numbers through our First-Time Homebuyer PITI Calculator and grab our free Homebuyer’s Planning Guide. It walks through down payment options, assistance programs, and what to expect at every step.
Or explore our low down payment loan options.
RELATED ARTICLES
The Complete Guide to Buying Your First Home in Texas
FHA vs. Conventional: Which Is Better for a First-Time Buyer?
First-Time Homebuyer Mistakes to Avoid
How Lenders Calculate Debt-to-Income Ratio
FREQUENTLY ASKED QUESTIONS
Down Payment by Program
Q: Do I really need 20% down to buy a home in Texas?
A: No. Conventional loans allow as little as 3% down, FHA loans require 3.5%, and VA loans allow eligible veterans to buy with 0% down. The 20% figure is a guideline, not a requirement, mainly relevant to avoiding PMI.
Q: What’s the minimum down payment for an FHA loan?
A: 3.5%, with credit scores as low as 580 often accepted, making it a common choice for buyers still building their credit.
Assistance and Total Costs
Q: Are there down payment assistance programs in Texas?
A: Yes. TDHCA’s My First Texas Home and TSAHC’s Home Sweet Texas and Homes for Texas Heroes programs can provide up to 5% in down payment assistance for eligible buyers, typically requiring a 620 credit score and a homebuyer education course.
Q: Is my down payment the only cash I need at closing?
A: No. Closing costs, typically 2 to 6% of the loan amount, are separate and due on top of your down payment, though any earnest money you’ve paid is credited toward that total.
Q: Should I put down more than the minimum if I can afford to?
A: Not necessarily. A larger down payment lowers your payment and can remove PMI, but it also uses cash that might serve you better as reserves or elsewhere. The right amount depends on your full financial picture. This is one area where mortgage planning can benefit you.
Texas Mortgage Plan – 50+ years of combined mortgage experience, serving homeowners and homebuyers across Flower Mound and the DFW Metroplex. Elizabeth Rose, NMLS 252686, CDLP® Certified Divorce Lending Professional | Shea Patton, Mortgage Advisor, NMLS #251397, Licensed Realtor. Texas Mortgage Plan is a d/b/a of Legacy Mortgage, NMLS #1759275 | Equal Housing Lender
