Think you can't afford a home? Down payment gifts and co-signers
Affordability has genuinely got harder, and plenty of people have concluded ownership isn't available to them. Two routes make it possible more often than most buyers realise — but both come with strings worth understanding before you ask anyone for anything.
FHA minimum down
3.5%
Common for first-time buyers
Conventional minimum
3%
5% is more common
VA and USDA
0%
If you qualify
You don't need 20% down for a home you'll live in
That's where the confusion comes from. Twenty percent is a real requirement — for investment property. People hear it, apply it to their own first home, and conclude they need to save for another decade.
For a primary residence: FHA goes as low as 3.5%. Conventional allows 3%, though 5% is more common if you're not a first-time buyer. VA is zero down for active duty, reservists and veterans. USDA is zero down in qualifying rural areas.
What a small down payment actually costs
Less down means a larger loan, which means a higher monthly payment. That part is obvious.
The part people miss is mortgage insurance. On a conventional loan, anything under 20% down adds monthly mortgage insurance to the payment. On an FHA loan with less than 10% down, that insurance stays for the life of the loan — it doesn't fall away as you build equity the way conventional coverage does.
Credit matters too. A low down payment combined with weaker credit produces a materially higher monthly cost.
None of that is an argument against buying with less down. It's an argument for knowing the real number. Our breakdown of what a Las Vegas home actually costs per month shows the difference across programs on actual listings.
Down payment gift funds
If someone is willing to help — parents most often — that money can go toward your down payment. More down means a lower payment, and potentially a better interest rate.
On a conventional loan, the gift can come from almost anyone. A parent, a partner, a friend, an investment partner. The one hard exclusion is the seller.
How to do it properly
The funds have to be sourced, and sometimes paper-trailed. Lenders need to see where the money came from and confirm it isn't a disguised loan.
The cleanest method is having the donor wire the funds directly to title. Ask your lender before anything moves.
What causes problems is money arriving informally — a relative sending several Zelle transfers over a few weeks. That's now unsourced cash sitting in your account, and unwinding it during underwriting is far harder than doing it correctly from the start.
Have the conversation with your lender before you have it with your family.
Co-signers and co-borrowers
These get used interchangeably and they aren't the same thing.
| Co-borrower | Co-signer | |
|---|---|---|
| On the loan | Yes | Yes |
| Shares financial responsibility | Yes | Yes |
| Lives in the home | Yes | No |
| Known in lending as | Co-borrower | Non-occupying co-borrower |
Either one helps if you can't qualify on your income alone. They improve your debt-to-income ratio, reduce the lender's risk, and can improve your loan-to-value position.
The relationship rules differ by program
FHA: a non-occupying co-borrower generally needs to be a related family member. If they aren't family, the maximum loan-to-value drops to 75% — meaning 25% down, which usually defeats the purpose.
Conventional: no relationship required at all. The only restriction is that they can't have an interest in the sale. So if your mother is selling you the house, she can't also be your co-borrower.
Their debts come with them
This is the part people don't anticipate. A co-signer's obligations get counted against your combined income — credit cards, auto loans, and rent if they don't own.
Owning a home themselves is fine. Carrying substantial consumer debt is not, and a co-signer with a great income and a lot of car payments may help far less than you expect.
The strings, and there are several
It becomes their debt too. A co-signed mortgage appears on their credit report. If they want to buy something themselves in two years, this affects what they can borrow.
If you default, you damage their credit. Not just the relationship — their actual borrowing capacity, for years.
Equity needs deciding in advance. If the market performs well and there's substantial equity at sale or refinance, how is it divided? Work that out at the start, not when there's money on the table.
Agree an exit strategy. Is this person on the loan for its full term, or is there a plan to remove them once you qualify alone? Both are legitimate. Not having decided is not.
Put it in an operating agreement, even with family. Especially with family.
Have all of this settled before you start making offers. The pressure of an accepted contract is the worst possible time to discover you and your co-signer had different assumptions.
Qualifying for more doesn't mean buying more
Suppose you qualify for $300,000 alone, and adding a co-borrower takes you to $500,000. That doesn't mean you should buy at $500,000.
Buy what's comfortable to repay without stress, particularly on a first home. Homeownership generates costs that are hard to anticipate until you're in it — the water heater fails, the garage door stops working, and there's no landlord to call.
If you're at the absolute maximum and living paycheck to paycheck, those become crises rather than inconveniences. Rates can move, insurance has been rising, and a house is endless maintenance.
Reverse engineer it instead
Most buyers start with a price. "I'm looking at $500,000, maybe $600,000." Then they see the payment and reconsider everything.
Start from the other end. "I'm comfortable at $3,000 a month — what does that buy?" It's a far better question, and it means every house you look at is one you could actually live with.
Down payment and co-signer FAQ
Do you really need 20% down to buy a house?
Not for a primary residence. Twenty percent applies to investment property, which is where the confusion originates. For a home you'll live in, FHA allows 3.5% down, conventional allows 3% though 5% is more common, and VA and USDA loans allow zero down for those who qualify.
Can my parents give me money for a down payment?
Yes. On a conventional loan, gift funds can come from almost anyone — family, a partner, a friend, an investment partner — with the seller being the main exclusion. The funds must be sourced and sometimes paper-trailed, so the cleanest approach is having the donor wire money directly to title. Speak to your lender before any money moves, as informal transfers are much harder to document afterwards.
What's the difference between a co-signer and a co-borrower?
A co-borrower is on the loan, shares financial responsibility, and lives in the home. A co-signer, known in lending as a non-occupying co-borrower, is on the mortgage and helps you qualify but doesn't live there. Both improve your debt-to-income ratio and reduce the lender's risk.
Does a co-signer have to be a family member?
It depends on the loan. On FHA, a non-occupying co-borrower generally must be a related family member — if not, the maximum loan-to-value drops to 75%, requiring 25% down. On a conventional loan there's no relationship requirement at all, though the co-borrower can't have an interest in the sale, so a parent selling you the property cannot also co-borrow.
What are the risks of co-signing a mortgage?
The debt appears on the co-signer's credit, affecting what they can borrow themselves. A default damages their credit for years. Their existing obligations — credit cards, auto loans, even rent — are counted against your combined income, so a co-signer carrying consumer debt may help less than expected. Equity division and an exit strategy should both be agreed in writing before offers are made.
Should I buy at the top of what I qualify for?
Generally not, particularly on a first home. Qualifying for $500,000 doesn't mean the payment is comfortable. Homeownership brings unpredictable costs, and buying at your maximum turns a failed water heater into a financial crisis. A better approach is working backwards from a monthly payment you're genuinely comfortable with and finding what that buys.
Map it out before you look
Before you start viewing homes or asking anyone for money, let's build the plan. What different gift amounts do to your payment, whether a co-signer is needed, which loan programs fit, and what monthly payment is genuinely realistic for your life.
Doing this first makes every conversation afterwards easier — including the one with your family.