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Jan 2020

Mortgage Loans with Little to No Down Payments

We’ve all been there — living with messy roommates, feuding with loud upstairs neighbors, or trying to get your landlord to fix something, anything. We get it. It’s time to get your own place. Maybe you’re ready to move out of that rental and you’re thinking about buying your own place. But if the thought of a down payment is a bit intimidating? It doesn’t have to be. There are plenty of little to no down payment options that make homeownership even more attainable now.

What is a down payment?

When you buy a home, you know to expect a monthly mortgage payment that will be yours for 15 or 30 years, or until you’ve paid off the loan balance. The down payment, on the other hand, is a one-time cost that you’ll be responsible for paying at closing. Depending on the loan program you choose, your down payment could range from nothing all the way up to 20% of the purchase price (or even more, if you choose). Fortunately, there are many mortgage programs available that meet the needs of most homebuyers.

So how much do you need?

Whether you have the cash set aside to put 20% down, or you prefer to keep some of your savings and put a smaller down payment on your new home, you have options. Generally, a conventional loan will require at least 3% down. Or, if you want to avoid Private Mortgage Insurance (or PMI), 20% down is required. But if you’re not in a position to put that much down at once, there are some government-backed loans that range from 0-3.5% down. A few government-insured options that you may consider include: FHA loan – This program requires buyers to put down 3.5% of the home’s purchase price and will come with monthly mortgage insurance. USDA loan – This program has no down payment, but mortgage insurance is required and can be paid upfront or financed into the loan for borrowers buying a home in an eligible rural area. VA loan – This program is tailored specifically to active duty military, their families, and veterans and requires no down payment or monthly mortgage insurance, but the VA Guarantee Fee replaces mortgage insurance and is paid upfront.

Start Saving

It’s never too early to contact a mortgage banker to talk about your options. Once you have determined the amount of home you qualify for, you can see if you’re ready to buy now, or if it’d be smarter to wait a while longer and keep saving money for a down payment. So what are some ways to start saving now? Save your tax refund. If you’re getting a large refund, put that directly into your savings as if you never had it to spend. Might be hard, but it’s a good chunk to start with. Reduce expenses. Take a look at how you’re spending your money. Eating out a lot? Try eating at home or packing a lunch. Listing out your expenses can really be an eye-opening exercise on your spending habits. Sell your stuff. ’Tis the season for bargain hunters. Selling clothes or shoes you no longer wear on specific apps can help you not only declutter, but help make you some extra cash. But remember, this isn’t spending money, it’s saving money now. When you’re ready to take the first step toward homeownership, contact a mortgage banker to get started.