How to Buy a Home Without a Big Down Payment

How to Buy a Home Without a Big Down Payment

Did you know that first time homebuyer down payments average between 5-8%? Not having a large down payment doesn’t have to hold you back. There are many options today for buying a home with less than 20% down—even without mortgage insurance. Here’s how to get on track and find the best solution for your situation.

Not One-Size-Fits-All

Your down payment options depend on your loan type, which is based on your financial profile and the home you’re interested in. Each lender offers different loan programs, so shop around to find one that fits your needs.

Steps to Determine Your Down Payment

1. Monthly Budget → Correlating Sales Price → Mortgage Options → Down Payment
2. This process helps pinpoint what you can afford and narrow down the right mortgage options for you.
3. Don’t forget closing costs, typically around 3% of the purchase price.

Down Payment Options

Different loan types allow different down payment amounts:

• Conventional Loans: Require as little as 3% down.
• FHA Loans: 3.5% down, but may increase monthly payments with fees.
• VA Loans: 0% down if you’re a veteran.
• Assistance Programs: For moderate-income buyers, there are down payment assistance programs to explore.

Many buyers can avoid 20% down while bypassing Private Mortgage Insurance (PMI). This series will cover PMI options in a future installment.

Why More Down May Not Be Necessary

1. Avoid Delays: Saving 20% can be daunting, keeping you from buying sooner.
2. Maintain Savings: Avoid draining your savings just to reach 10% or 20%. You’ll need cash for home repairs and emergencies.
3. More Loan Options: Lenders today are flexible, offering grants and assistance.
4. Assistance Programs: Local and state programs might help cover down payments or closing costs. Free money is worth exploring!

Tips to Boost Savings

• Consider options like a 401(k) loan, IRA withdrawal, gifts, or increasing your tax refund.
• Cut back on expenses, sell items, or take on a side job.

If you’re interested in buying, don’t let a small down payment stop you! There are more options than ever. Reach out so we can discuss what’s possible—there’s no harm in finding out your options.