Is a Low Home Down Payment Possible?

Is a Low Home Down Payment Possible? 

One of the biggest concerns when buying a home is the amount of down payment that is needed. Standard belief is that you need 20% of the home’s price as down payment. You might be surprised to learn that 2/3 of recent home buyers have purchased their homes by making a down payment of 5% or less. Add the possibility of a low down payment with low interest rates, and this is the perfect time to buy a home. Still, I hear you asking, “Is a low home down payment possible?”

It’s not only possible to buy a home with a low down payment, it’s possible to buy one with no down payment. Keep in mind that your ability to secure no or low down payment is based on several factors. Lenders will look at your credit report to see if you are a good liability. This is where good financial habits become even more rewarding.

Your income plays a factor in determining the size of your down payment in some of these cases. You’ll need to have a stable income to secure a mortgage loan of any type, but to secure one with no money down or low money down, you’ll want to make sure you have everything in order where your job and pay checks are concerned.

The VA Loan

The Veterans Affairs Department offers home loans to qualified veterans. Most of these loans are secured with no money down. This happens because the Veterans Affairs Department guarantees payment to private lenders.

The qualified veteran pays a funding fee on these loans. The fee is dependent upon the type of service, length of service, and previous loans of this type. The fee is added in to the loan amount, which means the buyer pays no money down on the home.

The Navy Federal Loan

In order to qualify for this no down payment home loan, you will need to be a member of the military, a military family member, a military employee, or work for the U.S. Department of Defense. The only other qualification is that it must be for your primary home.

The Navy Federal Credit Union offers these no down payment loans with a fee that is similar to the Veterans Affairs Department. However, the Navy Federal Credit Union has a lower fee. These loans are beneficial for members of the military who are required to move due to their job.

The Department of Agriculture

This is one of the most popular of the no down payment home loan options. The Department of Agriculture guarantees home loans much like the Veterans Affairs Department. The down side to securing one of these loans through the Department of Agriculture is timing. They are known for running out of money each year because they help so many people purchase homes.

If you plan to apply for one of these loans, you’ll want to do so early in the fiscal year. This is where having a real estate professional working with you can make all the difference. They are aware of the importance of timing, and they know the schedules for loans of these types.

Don’t think that you have to live in a rural area to qualify for one of these no money down loans. Even though the loans are guaranteed by the Department of Agriculture, they don’t focus on strictly rural areas. This is good news for those who qualify but would rather live in a more urban setting.

The Federal Housing Administration

The FHA works much like the Veterans Affairs Department. They guarantee the loan that is made by the lender, when it meets certain qualifications. This is a low down payment option with benefits to those who might not have the high a credit score that is required by other lenders.

The FHA looks at credit score with an objective eye. They look deeper than just the number to learn why your credit score may be low. They take life circumstances into account. They do prefer you have a credit score of at least 500.

If you have the desire to purchase a home but you are struggling to come up with the usual 20% down payment, do yourself a favor and contact The Donohue|Christian group today at 917-751-3234. They have the knowledge and experience to help you sort through the red tape and find a solution to your down payment dilemma.

Wondering what your current home is worth? Check our home value estimator.

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