Understanding Down Payments: How 10% Gets You Started

The down payment is usually the biggest hurdle for first-time buyers. But with owner financing, 10% is all you need — and there are more ways to get it than you might think.

Why 10%?

The 10% minimum serves several purposes:

• Buyer commitment — it shows you're serious and financially prepared
• Lower monthly payments — less borrowed = lower payment
• Built-in equity — you start with 10% equity on day one
• Legal compliance — Dodd-Frank requires the buyer to have "skin in the game"

What Does 10% Look Like?

Where to Get Your Down Payment

1. Savings — the most straightforward option. Set up a dedicated savings account and automate transfers.
2. Tax refund — the average Texas tax refund is $2,800-$3,200. Two years of refunds gets you close on a $200K home.
3. Gift from family — family gifts are allowed for owner-financed purchases. Document it properly.
4. 401(k) loan — you can borrow up to 50% of your vested balance (max $50,000). You repay yourself with interest.
5. Side hustle — dedicated savings from a second income stream. Even $500/month for 3 years = $18,000.
6. Sell assets — vehicles, jewelry, equipment, cryptocurrency. Convert what you don't need into what you do.

Should You Put More Than 10% Down?

If you can, yes. A larger down payment means:

• Lower monthly payment
• More equity from day one
• Potentially better interest rate
• Smaller loan = less total interest paid over the life of the loan

But don't drain your savings to zero. Keep an emergency fund of 3-6 months of expenses. The worst thing is buying a home and then not being able to afford a surprise repair.

Down Payment Savings Plan

Want to buy in 18 months? Here's what to save per month:

• $200K home (10% = $20,000): Save $1,112/month
• $250K home (10% = $25,000): Save $1,389/month
• $300K home (10% = $30,000): Save $1,667/month

Already have your down payment? Get pre-qualified now — you could be in your new home in 3 weeks.