Financing Options for Buyers With Low Down Payments

Buying a home in Washington can feel out of reach if you don’t have 20% saved—but here’s the truth: very few buyers put 20% down anymore. Many first-time buyers purchase with 3–5% down, and depending on the loan type, some buy with zero down. Washington has a wide range of programs designed specifically for buyers who don’t have large savings, and choosing the right one can make homeownership far more achievable.

Below is a full breakdown of the most common low–down payment options available today—plus how each one works and when it makes sense.

1. FHA Loans (3.5% Down)

FHA loans are one of the most popular options for buyers who need flexibility. With only 3.5% down required, FHA is widely used by buyers who don’t have large savings or who may not have perfect credit. These loans often allow more lenient credit scores and approve buyers with non-traditional or variable income. They also allow gift funds from family, which can make a big difference for first-time buyers. FHA loans can sometimes come with slightly better interest rates than buyers expect, though they do require mortgage insurance. If you’re still early in the process and weighing what type of home might be best for your first purchase, check out my blog “How Condos Compare to Single-Family Homes for First-Time Buyers” for more guidance.

2. Conventional Loans with 3% or 5% Down

Conventional loans aren’t just for buyers with large down payments. Many lenders now offer programs allowing as little as 3% down for first-time buyers. These loans tend to reward stronger credit with better terms and the major advantage is flexibility in mortgage insurance. Unlike FHA, which requires mortgage insurance for most of the loan’s life, conventional PMI can be removed once you reach 20% equity—meaning you could see significant long-term savings. The upfront costs are often slightly higher than FHA, but for buyers with decent credit scores, conventional loans may offer the best long-term financial outcome. If you're thinking ahead about appreciation and long-term equity, my blog “How to Spot Neighborhoods Poised for Appreciation” is a great next read.

3. USDA Loans (0% Down)

For buyers willing to live slightly outside metro centers, USDA loans are an incredible opportunity. They require zero down payment and offer competitive interest rates, often lower than FHA or conventional. USDA loans do have limitations: the home must be located in a USDA-approved rural or semi-rural area, and buyers must meet specific income limits. However, many communities just outside Everett, Monroe, Bonney Lake, and parts of Maple Valley qualify. For buyers prioritizing affordability and willing to consider suburban or rural options, USDA loans can significantly reduce upfront costs.

4. VA Loans (0% Down)

VA loans offer unmatched advantages for eligible buyers, including active-duty service members, veterans, and certain surviving spouses. These loans require no down payment, no mortgage insurance, and typically have lower interest rates than other loan types. They also offer flexibility in underwriting, making them one of the most affordable paths to homeownership. For anyone eligible, a VA loan is nearly always the strongest option.

5. Down Payment Assistance Programs (DPA)

Washington State has several assistance programs designed to help buyers overcome upfront costs. The Washington State Housing Finance Commission (WSHFC) offers programs like the Home Advantage Program, which provides down payment assistance that can be paired with FHA, conventional, VA, or USDA loans. Some programs can cover up to 4% of your loan amount depending on qualification. Additional offerings—such as House Key Opportunity or veteran-specific assistance—can further reduce the amount of cash needed at closing. These options are ideal for buyers with steady income who need help bridging the gap toward their first home.

6. Seller Credits & Rate Buydowns

In today’s shifting Washington market, many buyers successfully negotiate seller credits to reduce upfront expenses. These credits can be applied toward closing costs or interest rate buydowns, helping lower your monthly payment. While sellers cannot directly pay for your down payment, credits can significantly reduce the total cash needed to close. Understanding how to negotiate them—especially after an inspection—can be a major advantage. To learn more about navigating inspections and leveraging them strategically, read my blog “How to Read a Home Inspection Report.”

7. Bridge Loans (A Niche but Helpful Option)

Bridge loans are designed for buyers who want to purchase their next home before selling their current one. These short-term loans allow you to access the equity in your existing property to use toward the down payment on your next home, even before your sale closes. This option isn’t commonly used for first-time buyers, but it’s helpful for move-up buyers who don’t have savings available until their current home sells.

Choosing the Right Low–Down Payment Loan

The best loan for you depends on several factors, including your credit score, monthly budget, and how long you plan to stay in the home. Your comfort with mortgage insurance, location preferences, and eligibility for programs like VA or USDA will also influence your decision. This is where working closely with both your lender and your Realtor makes a huge difference. If you’re still deciding which area best fits your goals, take a look at “Best Neighborhoods in King County” for more guidance.

Final Thoughts

Buying a home with a low down payment is not only possible—it’s completely normal, especially in Washington. Whether you're looking at 0%, 3%, or 5% down, there are multiple paths that can help you get into a home sooner than you might think. The key is choosing the loan that aligns with your long-term financial comfort and homeownership goals.

If you want help exploring your options or building a plan, feel free to reach out anytime.
➡️ Ready to find a low–down payment option that fits your budget? Contact me today.