For many Americans, the dream of owning a home feels increasingly out of reach. Housing affordability is now among the worst it has been in two decades, according to the Federal Reserve Bank of Atlanta. Since 2020, home prices have surged 47 percent, far outpacing wage growth. At the same time, property taxes and insurance costs have climbed higher, piling on additional financial strain. In Fannie Mae's June National Housing Survey, consumer sentiment reflected this frustration, with 71 percent of respondents saying it was a bad time to buy a home.
Rising borrowing costs have only added to the challenge. Mortgage rates remain stuck between 6.75 and 7 percent, with little sign of major relief ahead. For first-time buyers, who lack equity from a current property, the barrier to entry is even more daunting. A recent Bankrate survey found that 81 percent of aspiring buyers considered down payments and closing costs a significant obstacle to homeownership.
Part of the problem is perception. Many prospective buyers still believe they need to put 20 percent down to purchase a home, a belief that often leads them to conclude ownership is impossible. Given that the median home price in May was $422,800, a 20 percent down payment would mean saving more than $84,000. In high-cost markets like California, where median prices are around $900,000, the figure jumps to an overwhelming $180,000. It is little wonder that 20 percent of respondents in Bankrate's survey said they doubted they would ever be able to save enough for a down payment.
The reality, however, is different. The traditional 20 percent benchmark is largely a myth. Data from the National Association of Realtors shows that first-time buyers in recent years typically put down between 6 and 10 percent. Programs through the Federal Housing Administration allow buyers to put down as little as 3.5 percent, and conventional loan products backed by Fannie Mae and Freddie Mac offer options with down payments as low as 3 percent. For qualifying veterans and active-duty service members, VA loans require no down payment at all. These alternatives can dramatically reduce the upfront costs of buying a home, though they do often require mortgage insurance or result in higher monthly payments over time.
In addition to loan programs, down payment assistance can be a powerful resource. Thousands of state, local, nonprofit, and lender-sponsored programs exist to help buyers bridge the financial gap. Assistance can cover minimum down payment requirements, closing costs, or even help reduce monthly payments by lowering interest rates. Some programs are structured as grants that never need to be repaid. Others are designed for particular groups, such as teachers, first responders, or military families.
Awareness of these programs is growing as affordability challenges intensify. Down Payment Resource, a company that tracks more than 2,500 assistance programs nationwide, reported that a recent partnership with Zillow drew more than one million unique visitors checking their eligibility in just one year. Nearly all of them matched with at least one program.
Importantly, these opportunities are not limited to first-time buyers. Around 40 percent of assistance programs extend to repeat buyers, and income restrictions are often higher than many assume, sometimes stretching to 100 or even 120 percent of area median income—or disappearing altogether. Buyers who already have some savings can combine those funds with assistance to improve their loan terms, reduce debt-to-income ratios, and strengthen their overall application.
Research suggests that lack of awareness is a major reason buyers miss out. One study of declined mortgage applications found that roughly one-third could have been approved if the applicants had used available down payment assistance. In other words, many buyers who believe homeownership is out of reach may simply not know about the resources available to them.
While these programs cannot solve all the challenges of today's housing market, they can make the path to homeownership more realistic. For those discouraged by high prices, rising rates, and persistent affordability struggles, exploring these options may provide the key to unlocking their first home purchase.
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