For decades, buying a home came with one familiar rule. Save a 20% down payment before applying for a mortgage. That advice helped buyers avoid extra costs and secure better loan terms. Today, that goal has become much harder to reach.
Home prices have climbed much faster than incomes in many parts of the country. As a result, saving tens of thousands of dollars before buying a home is no longer realistic for many families. The good news is that buyers now have more options than ever before. Banks, lenders, and governments have introduced programs that make homeownership possible with far less money up front.
However, that does not mean a 20% down payment has lost its value. A larger down payment still reduces monthly mortgage costs and lowers the amount of interest paid over the life of the loan. Even so, many buyers are deciding that waiting years to save more money is not worth delaying homeownership.
The 80,10,10 Loan Offers a Practical Solution
The first mortgage covers 80% of the home’s purchase price. A second loan covers another 10%. The buyer provides the remaining 10% as the down payment.
This arrangement helps buyers avoid private mortgage insurance, often called PMI. Normally, lenders require PMI when the down payment is less than 20%. That insurance protects the lender, not the homeowner, and it increases the monthly mortgage payment.
Although the piggyback loan creates two monthly loan payments, it can still save money over time. Depending on interest rates and loan terms, paying a second mortgage may cost less than paying PMI every month.
The option also gives buyers more flexibility. Some people use it when purchasing a new home before selling their current one. Others choose it because it helps them stay below loan limits that trigger jumbo mortgage requirements.
Buyers are Finding New Ways to Cover the Down Payment
Personal savings remain the largest source of down payment money, but they are no longer the only option. Recent housing data shows that nearly 30% of buyers now rely on alternative funding sources. That is the highest level seen in several years.
Family gifts have become increasingly common, especially among younger buyers. Parents and grandparents often help with down payment costs so loved ones can enter the housing market sooner. These gifts can significantly reduce the amount of time needed to save enough cash.
Some buyers also use personal loans or retirement savings to bridge the gap. These choices require careful planning because borrowing money or withdrawing retirement funds can create long-term financial consequences. Even so, they have become more common as housing costs continue to rise.
The trend is especially noticeable among Gen Z buyers. Research shows that about one in five first-time buyers from this generation received financial help through gifts or borrowed funds. Millennials are also using similar strategies as they compete in an expensive housing market.
Assistance Programs are Opening More Doors
Many down payment assistance programs provide grants or low-interest loans that reduce upfront costs. Some programs offer as much as $30,000 to eligible first-time buyers. Others focus on first-generation homeowners and provide even larger amounts of financial support.
Oregon lawmakers, for example, have proposed increasing assistance limits to as much as $100,000 for qualifying first-generation homebuyers. Similar efforts are taking shape in other states as housing affordability becomes a growing concern.
Maine is also working to expand long-term funding for first-generation homebuyer assistance. These programs aim to give more families a realistic path toward owning a home instead of renting indefinitely.