20% Down Payment Myth When Buying Your Home

Many consumers believe the American dream is unachievable for them because they haven’t the 20% down payment necessary to purchase a home. While the wisest financial decision you can make when buying a home is putting money down, this is certainly not a deal-breaker if you don’t have the money and still want to make a purchase. Buying a home without a down payment means you’re looking at paying Private Mortgage Insurance until you owe less than 80% of the value of your home, but there are some options for you.

FHA Loans

This is a loan option that the federal government issues to some buyers. You must qualify for this kind of loan with your lender to buy a home, but you get to do it with only 3.5% down if you do qualify. You’ll need to find an FHA-approved lender with which to work, and you must provide all the correct paperwork and information to get the process started. There are many stipulations that come with buying an FHA-approved home, and your realtor and lender will work together to ensure you’re aware of what the process entails before you begin.

VA Loans

Did you or your spouse ever enlist and work for any branch of the United States Military? If you are currently enlisted or you were previously enlisted, you can always apply for a VA loan. You put nothing down for this kind of financing, and you’re not required to pay Private Mortgage Insurance even if you choose to put nothing down and finance 100%. There is a lot of paperwork associated with a VA loan, and you must meet all the requirements for a loan like this one.

USDA Loans

This is a loan for rural property outside city limits. It’s for anyone who wants to buy a home with a low interest rate, a low-down payment, and you must be a low or middle-income family to qualify. This is a loan that does require you meet very strict requirements to qualify. You must have no more than the income allowed in your area. There’s no one income limit to watch for because the cost of living and income averages are different everywhere. You must live in a community with fewer than 25,000 residents, and you must find a home that meets the requirements of this mortgage.

Conventional 3% Mortgage

If you want to go a more traditional route because you don’t qualify for any of the other mortgages on the list that help with down payment and rates, you can apply for this kind of program. It’s a conventional home loan without too many added requirements for qualification, but you are only required to make a 3% down payment. The loan you take out cannot be more than $424,100, but you can buy a more expensive home if you’re willing to put more money down to get the price of the home down to this level.

No Down Payment

You aren’t required to put 20% down on a home anymore, but you do need to know that this doesn’t work for all buyers. If you cannot afford a down payment but you do not qualify for other financing measures, you want to think about looking into state and local assistance programs. You can head to your local courthouse to ask about these, or check out the HUD website to find out if there is anything there you can use to make home buying affordable for you.

Making the decision to buy a home is a big one, and you should take the time to familiarize yourself with all the options, learn what you can afford, and stay within your budget. This is the most expensive thing you will likely ever own, and it’s not the kind of purchase you make without weighing all the pros and cons and without considering what it means for your future. Take advantage of these programs if you qualify, and you could end up achieving your personal American dream in a slightly different manner. You might be surprised just what you can afford when you go this route.

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