Down Payment Options You Can Afford
Many people may still believe that a 20% down payment is their only path to homeownership. It’s true that this substantial up-front cost was standard at one time, but it’s no longer a necessity.
While many home prices are still on the rise, today’s home shoppers can take some comfort in knowing that a relatively small down payment will likely be enough to satisfy their mortgage program’s requirements. If the size of your savings account has your home search on hold, be sure you’ve considered all of the options available to minimize the amount of cash you need to move forward.
Low Down Payment
Various mortgage programs feature a low down payment requirement of less than 4%. The government-backed FHA loan pairs a 3.5% down payment with a minimum credit score of 580. While the interest rates may be higher than a conventional loan program, it’s an option worth considering for home buyers building or re-building their credit.
Conventional loans make up the majority of mortgages but aren’t guaranteed by the federal government. They typically require higher credit scores than their federally-insured counterparts but are also available with attractive down payment requirements. While a 3% down payment is common, many lenders have unique or first-time buyer loan programs to reduce that even further. One caveat is that any program that minimizes your down payment is likely to cap your purchase amount. However, it will be well above an area’s average home price in most cases.
No Down Payment
In some instances, you could qualify for a loan program with no down payment required at all. Because of the added risk, your best chance to avoid any down payment is via eligibility for certain government loans.
VA loans offered to military personnel and their families are one example of a zero-down payment loan. The US Department of Agriculture also offers loans with no down payment to low-income buyers purchasing a home in certain rural areas.
Down Payment Assistance
Buyers who aren’t eligible for those zero-down programs may not be entirely out of luck. Some state and local governments may offer down payment assistance to offset the small down payments of a conventional loan. These may be targeted to areas where revitalization is a priority or have other limitations but can result in significant savings.
Special loan programs or financial assistance may also be available for buyers in certain professions, such as teachers or first responders. Before starting your mortgage search, be sure to do your research and ask any lender you work with about local and career-specific loan programs you might qualify for.
Explore all the loan programs Open Mortgage has to offer by visiting us online or calling one of our origination specialists today.