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Unless you are able to obtain a VA loan, you are probably going to need a down payment if you are planning on purchasing a home. Down payment minimum requirements can range from a VA loan’s zero, to 10 percent or more.

The FHA has a first-time homeowners program that will allow you to put only three and one-half percent down, and individual states like Minnesota have programs where you can borrow the down payment.

Regardless, understand that you are most likely going to need to accumulate some cash before you are allowed to receive traditional bank financing. A great place to start would be reading financial blogs and educating yourself about savings and best practices.

In the meantime, here are seven more things you should know about the down payment process:

Verify It

Lenders will want to know where your down payment originated to make sure that the seller is not artificially inflating the property’s purchase price and kicking down payment money back to you.

It Can Be a Gift

Your parents or a relative or friend can give you the down payment. Again, you will have to be sure that the money is traceable to the person you say provided it to you. You can receive a gift of up to $15,000 tax-free in 2018.

Start Saving Early

The best way to accumulate a down payment is to start saving early. When you’re living in a smaller town after college, for example, Champaign, Illinois where rent prices are very inexpensive, you can really start to put away big savings.

If you save $100 per month at three percent interest, in 12 years you will have over $17,000! 

The FHA is Your Friend, But…

A three and one-half percent down payment is great, but with an FHA loan, you will have to pay private mortgage insurance, or PMI, until you have a certain amount of equity in your home—usually 25 percent. This can add over one hundred dollars per month to your monthly payment. 

Credit Card Cash Advances 

Your mortgage lender is going to do a forensic accounting investigation into your financial status. Sure, you could max out a couple of credit cards a year before your proposed home purchase and take cash advances that you place in a savings account. If your down payment has been in a savings account for a year, the lender may assume you have legitimately saved the cash, but the problem is that your credit score will reflect the high credit card balances, and you may have to pay a higher interest rate, or you may even be denied a loan.

VA 

As mentioned previously, a VA loan is a great way to finance your home. If you or your spouse are veterans, you must take advantage of this opportunity. Your traditional lender can help you navigate the VA loan requirements. 

Don’t Be Afraid to Ask

If you are having problems coming up with down payment cash, ask your relatives, friends and business acquaintances. Never know when you might find someone that will help you.

There are many down payment resources available for first time home buyers. First, try to get a low down payment FHA loan, or even a no down payment VA loan. If that’s not possible, use some of the techniques we have mentioned, or talk to your lender as they will be aware of any government programs that can help you.