Down payments are one of the biggest hurdles most homebuyers face. Unless you can pay cash for your home, you will need financing. Unfortunately, banks want you to put some "skin in the game" with money upfront. However, it is not as hard as many people think to buy a house with a small down payment. Unfortunately, you will probably need to put some money down, but the hurdle may not be that high.

Down Payment Requirements

There is a common misconception among homebuyers that you need to make a down payment of at least 20 percent of the purchase price before you can get financing. Fortunately, this is not the case. You can qualify for a mortgage with less than 20 percent down. In some cases, you can get financing with as little as 3 percent down. However, several factors determine how much of a down payment you will need.

Your credit score, your debt-to-income ratio, your available assets, and your job history are just a short list of factors that determine whether you qualify for a mortgage. For example, if you have really good credit, and your debt-to-income ratio is below 38 percent, some lenders may allow down payments as low as 3.5 percent.

Understand that it is entirely up to the lender to decide whether to give you financing with a small down payment. Also, smaller down payments (below 20 percent) usually trigger mortgage insurance requirements. Mortgage insurance protects lenders in the event you default on your mortgage. In many cases, you will pay an upfront mortgage insurance premium, and you will pay a monthly insurance premium. However, once you build up at least 20 percent equity, you can cancel your mortgage insurance premium.

Down Payment Assistance Programs

Many people avoid buying a home because of the down payment. Although they may have good credit, a good job, and very little debt, they think they need thousands of dollars to put down. Fortunately, low-down-payment options exist to help homebuyers who think they cannot qualify. Here are some of your options.

Department of Veteran's Affairs- If you are a veteran, you can qualify for a mortgage with no down payment and a low-interest rate.

Department of Agriculture- Although you might think of farming when you think of the USDA, the agency actually offers homeownership programs with no down payment requirements.

Fannie Mae/Freddie Mac- The responsibility of these two agencies government-sponsored agencies is to keep the housing and mortgage market stable. They accomplish this by offering affordable home loans. Three percent down payments are not uncommon. There are instances where lenders offer 0 percent down payment mortgages. Fannie Mae and Freddie Mac also have programs with low down payments for first-time homebuyers.

Your state and local housing agencies typically offer down payment assistance. Every state in the U.S. has some type of homeownership program. In the end, it is best to build a financial strategy that helps you save money for a down payment. You do not need to save a fortune for your down payment, but putting a decent amount down will save you money in the long run.