If the down payment is insufficient, consider increasing savings, seeking family support, exploring government programs, or using alternative loans like a personal loan or HELOC. Negotiate with the seller for a price reduction or ask the lender about flexible requirements. Prioritize programs such as FHA loans (3.5% down), VA loans (0% down for veterans), or state-specific assistance.

The primary challenge is balancing affordability with creditworthiness. A 2023 Federal Reserve report found that 40% of first-time buyers relied on family or friend assistance to meet down payment gaps, highlighting its commonality. Government programs like the FHA and Fannie Mae’s HomeReady initiative reduce requirements to 3% or lower, making homeownership accessible to lower-income households. However, lenders often require a credit score of 580+ for FHA loans, emphasizing the need for credit repair if necessary. Personal loans, averaging 15-25% APR, are riskier than mortgage rates (around 6-8% in 2023) but can bridge short-term gaps. A 2022 Harvard study noted that 28% of buyers used alternative financing, with 62% reporting financial stress during the process. Proactive steps—such as splitting the purchase with a co-borrower or leveraging employer-sponsored housing benefits—can also mitigate shortfalls. Ultimately, combining multiple strategies, like a smaller down payment paired with mortgage insurance (PMI), may be necessary to proceed while minimizing long-term costs.