The good news? The 20% “rule” of saving for a down payment on a house doesn’t necessarily apply. Today, homebuyers purchase with as little as 0 to 3.5% down, depending on the loan program. As of 2026, President Trump has announced plans to allow penalty-free 401(k) withdrawals for down payments, helping shorten or even eliminate the savings period.
A large down payment has benefits if you have it. It can give you the potential for higher home equity, a lower mortgage payment, and avoiding paying monthly private mortgage insurance (PMI). But plenty of loans with a low or no down payment exist, and there are also options for decreasing it.
The latest Profile of Home Buyers and Sellers shows that the median down payment for all homebuyers is 18%, dropping to 9% for first-time buyers.
8 ways to make your down payment cheaper
Here are some strong strategies to start with:
1. Learn more about the new 401(k) proposal
Your 401(k) offers two ways to access funds: a loan (which you repay to yourself without tax penalties) or a hardship withdrawal (which triggers taxes and potential penalties). Some buyers opt to use a 401(k) loan when selling one home while buying another since the paid interest goes back into your account.
2026 update: President Trump plans to allow homebuyers to withdraw from 401(k) retirement accounts penalty-free specifically for down payments. The proposed policy aims to help more Americans access homeownership. While this expands options beyond traditional 401(k) loans, it’s still important to weigh the impact on long-term retirement security before using this strategy.
2. Ask about a USDA or VA loan
Veterans and active-duty military may qualify for VA loans with zero down payment, while USDA loans offer the same benefit for buyers in eligible rural and suburban areas. If you’re not military-affiliated and are willing to live outside a city, try searching USDA-eligible homes to eliminate your down payment. USDA loans typically come with a lower interest rate compared to conventional loans.
3. See if you’re eligible for down payment assistance (DPA)
There are thousands of programs that offer financial help with down payment/closing costs. Most vary by location. Some programs offer a percentage of a loan’s value that can be put toward a down payment; normally, income and home price limits apply. Just ask your loan officer, Google “down payment assistance grants + [your city/county/state],” or use this search tool.
How can we help? Contact your local Cornerstone loan officer to find out which DPA programs you may qualify for.
4. Look for lender credits
When buying a new construction home, some builders offer preferred lender credits—incentive for using their lender partner. These credits can be applied toward closing costs or used for an interest rate buydown. While you can’t use the credit toward your down payment, it can help to reduce the cash needed at closing, freeing up extra funds.
5. Ask for seller credits
Like a lender, a seller can’t fund your down payment directly. But if you pay asking price, a seller might be willing to credit your closing costs, freeing up more money for your down payment. This is called a seller concession. Once closing is covered, any excess can be used to pay prepaid PMI or homeowners insurance—again, indirectly reducing your down payment.
6. Use gift funds
Family members can gift up to $19,000 per person annually without triggering a gift tax—and married couples can combine their limits to gift $38,000 together. This means parents who are able could potentially gift $38,000, while grandparents could also contribute the maximum amount. When using gift funds for a down payment, a signed gift letter and bank documentation verifying funds may be required.
7. Look into employer assistance
Many employers now offer homebuyer assistance programs as part of their benefits packages, providing low-interest loans, matching funds, or cash assistance. For example, companies that partner with Cornerstone may offer a homebuying incentive, like a closing credit. Check with your HR department to see if your employer offers homebuyer benefits—you might be surprised by what’s available.
8. Save your tax refund
Tax refunds can boost your down payment fund, with the average refund amount exceeding $3,000. This sum could cover a substantial portion of your down payment or closing costs, especially when combined with a low down payment loan program. If you’re planning to buy a home, consider adjusting your tax withholdings now to maximize your refund and create a built-in savings plan.
If you want to lower your down payment:
Get in touch. Your local Cornerstone loan officer can help you find out which low/no down payment loans and down payment assistance programs you may qualify for.
Sources deemed reliable but not guaranteed. For educational purposes only.