20% Down Payment?
Have you hesitated to buy a house because you think you can’t, or shouldn’t, without a 20% down payment? You’ll be relieved to hear that isn’t necessarily the case! According to the National Association of Realtors, the average down payment was only 6% in 2017, down from 11% in 2016. While we do recommend talking to a mortgage or financial expert, read on to learn more about buying a home without a large down payment.
VA, FHA, Conventional Loan Programs and Down Payment Assistant Programs all help make it possible to buy a home with less than 20% down.
VA Loans are either fixed rate or adjustable rate mortgages that the U.S. Department of Veterans Affairs backs as a benefit for active-duty military personnel, veterans and some spouses/widow(er)s. While credit is taken into consideration, typically minimal requirements allow one to qualify for competitive rates as well as 0% down.
FHA, Federal Housing Administration, Loans allow one to put as little as 3.5% down and typically can help borrowers who would not qualify for other types of financing. Those with lower credit and higher debt to income ratios would use this loan as opposed to a conventional loan. However, although this loan allows many people to qualify to buy a home that otherwise would not be able to, there is mortgage insurance that must be paid on top of the actual loan amount for the life of the loan.
Conventional Loans require that the borrower have a minimum FICO score to qualify however do not require a 20% down payment. The rates for these loans are low but private mortgage insurance is typically required until the loan-to-value ratio reaches 80%.
Oftentimes restricted to first time homebuyers, down payment assistant programs are designed to be secondary loans or gifts to help meet minimum down payment requirements. Different variables are taken into consideration such as credit score, income level, property type, and property location to determine who and how much one will qualify for.
So while a lot can depend on individual scenarios, it is reassuring to know that there are several options out there that do not require a 20% down payment in order to get you into your Next Home!