The question most asked when it comes to making a home purchase is, what kind of down payment should I make? 5%, 10% 20%? And the answer is...it depends. I know that really isn't an answer but the truth is that everyone's situation is different and thus what can and should be done varies from one situation to the next.

Most people simply do not have enough money to put down 20% and avoid PMI but there are other ways to avoid paying PMI...VA and USDA loans still allow up to 100% financing. If you are not a veteran and you are not purchasing a home that falls within the boundaries of a USDA eligible zone, then the next option is an FHA loan. FHA loans do carry MI but as far as down payment goes they are the next best option because a borrower can get into an FHA loan for as little as 3.5% down.

I'm often asked, can I/we be given a gift and use that money as our down payment? And the answer is yes, you can use gifted funds as a source of down payment provided it is properly documented and you can prove the source of the funds. For example, if your parents give you the money you would have to show a copy of the account statement that it came from.

You can also get a loan for the down payment but that is sub-optimal for a number of reasons and really should only be done if you have no other options. If you did a loan from a family member it must have a term of at least five years, have an amount of interest being paid on it and be properly documented of course. You also have the option of getting a loan from your 401(k) if your account administrator allows it, and not all do so you have to do research to figure that out.

If you simply do not yet have enough money to make an appropriate down payment and have no family willing to gift you or loan it to you, then you must do it the old fashioned way...you will have to save up the money for however long it takes.