Where to Find Money for Your Down Payment

The Confident Buyer Series – Week 4 – Where to Find Money for Your Down Payment

Buying a home is one of the biggest financial decisions you’ll ever make—and for many buyers, the idea of coming up with a down payment can feel like the biggest hurdle of all.

But here’s the good news: it doesn’t have to be.

Once you’ve figured out your monthly budget and how much home you can comfortably afford (check out last week’s post: Do the Math – A Mortgage You Can Afford), the next step is figuring out how to fund your down payment in a way that works for your finances and long-term goals.

Here’s what you need to know about how much you might need—and where you can find it.

How Much Down Do You Really Need?

The amount you’ll need for a down payment depends on your loan program and personal goals:

• Conventional loans: Often require 5–20%, but some programs allow as little as 3%.
• FHA loans: Typically require 3.5%.
• VA loans: Often allow 0% down for eligible veterans and active-duty service members.

While it’s often said that 20% down is ideal, that’s not always necessary—or even smart—for many buyers. Especially here in Northern Colorado, where the market moves quickly, it’s more important to strike the right balance between a competitive offer and keeping some reserves for post-move expenses.

You may even be able to avoid private mortgage insurance (PMI) with less than 20% down using a slightly higher interest rate or specialized programs. We’ll look at that together.

Where Can That Down Payment Come From?

If you’re not sitting on a pile of savings, you’re not alone. Here are several options to explore:

Homebuyer Assistance Programs (Yes, Even for Non-First-Timers!)

In Colorado, there are a number of statewide and local programs that provide down payment assistance, low-interest loans, and even grants for qualified buyers—including those who’ve owned a home in the past but haven’t in the last few years.

Some examples include:

• CHFA (Colorado Housing and Finance Authority)
• MetroDPA (for buyers in the Denver metro and surrounding areas, including parts of Larimer and Weld Counties)
• Local city and county-specific programs for educators, first responders, and municipal employees

Many of these options can be layered with your mortgage, so you don’t need to drain your savings to buy a home.

Want to know what programs you might qualify for? Email me and I’ll walk you through the latest updates.

Should You Tap into Retirement Savings?

This isn’t always the best option—but it can be a good fit in certain circumstances. If you’re considering using funds from a 401(k), IRA, or Roth IRA, be sure to talk to your financial advisor first.

Here are a few ways buyers sometimes leverage retirement funds:

• 401(k) loans (if your employer allows it)
• IRA withdrawals (up to $10,000 penalty-free if you qualify under IRS rules)
• Roth IRA withdrawals (earnings may be tax-free if the account is at least 5 years old)

Each of these options has tradeoffs, so make sure it aligns with your long-term financial goals.

Help from Family or Friends

Gifted funds from relatives are a common and perfectly acceptable way to cover a down payment—especially in competitive markets like ours.

A few things to know:

• Your lender will need documentation that the funds are a gift, not a loan.
• There are IRS limits on tax-free gifts—check with your tax advisor if you’re receiving more than $16,000 from one person in a calendar year (as of 2024 limits).

Boost Your Savings Over Time

If you’re not quite ready to buy yet, here are a few ways to build your savings over time:

• Set up automatic transfers from checking to savings after each paycheck
• Cut back on recurring subscriptions or dining out
• Save your tax refund or work bonuses
• Sell unused items through local Facebook groups, Craigslist, or eBay

Even small, consistent contributions can add up faster than you’d think.

You Don’t Have to Figure It Out Alone

If you’ve been holding off on buying because of down payment fears, let’s talk. You might be surprised by what’s possible.

Sometimes, all it takes is a clear look at your options—and a little creativity—to make homeownership happen sooner than you think.

Click here to schedule a chat with me, and I’ll help you break down your options and create a plan that makes sense for your goals.Next up in the Confident Buyer Series: 5 Steps to Getting a Mortgage—we’ll cover what lenders are really looking for and how to choose the right financing option for YOU.