How To Buy A House With A Low Down Payment

By
Real Estate Broker/Owner with 1 Month Realty 49855-090

Buying a House

 

 

How To Buy A House With A Low Down Payment

Purchasing a home with a low down payment is important for a number of reasons, including the buyer's ability to have extra cash left over for closing costs, decorating expenses, upgrades and/or other essentials needed to turn their new house into a home.  Thanks to the level of competition between mortgage lenders, it's now easier than ever to buy a home with a low down payment.

 

First-Time Homebuyers

There are a lot of perks to being a first-solutionstime homebuyer, including the ability to get in the door with a low down payment.  Many lenders will ask for a down payment as low as five percent (three percent for FHA loans) to those looking to purchase their first home.

A first-time homebuyer is someone who has rented their previous home(s) or has never purchased a house on a permanent foundation.  Individuals who have owned manufactured homes may also be eligible for a first-time homebuyer loan, but the final decision is up to each individual lender.

 

FHA Loan

This type of loan is guaranteed by the Federal Housing Authority (FHA) and allows for a smaller down payment than many conventional loans.  In addition to offering down payments as low as three percent of the total purchase price, FHA loans often carry lower interest rates and are easier to qualify for.  This type of loan is ideal for first-time homebuyers, individuals with past credit problems or even those who wish to purchase a second home.

 FHA

Provide Your Land As Collateral

If you own the land that you intend to build on, many lenders will use the land in place of a down payment.  In other words, you build a house on the land that you already own, and the lender gets both if you default.  This is why individuals who own land often choose to build, while using the lot in place of a big down payment.  In addition, many lenders are more willing to approve a loan if the land is already owned by the buyer.

 

Owner Financing

When a seller lists their home, they have the option of considering owner financing.  In this situation, a buyer provides a down payment to the seller and signs an agreement to pay for the home (plus interest) over a preset number of years.  Owner financing typically requires a lower down payment, which can be any amount that the buyer and seller agree to.  Because there is no bank qualifying and no credit check, a seller can extend the offer on any terms that they wish.

 

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Comments (10)

Larry Johnston
Broker, Friends & Neighbors Real Estate and Elkhart County Subdivisions, LLC - Elkhart, IN
Broker,Friends & Neighbors Real Estate, Elkhart,IN

Hi Diana, Spelling out the ways to purchase a home, show the buyers there are options out there, that most buyers don't know about.  Nice blog.

Aug 23, 2014 09:06 AM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Hi Diana - helpful information here for new buyers.  Debbie Laity highlighted your blog.  Welcome to Active Rain.

Aug 23, 2014 09:41 AM
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Larry Johnston Thanks for your post.  Buyers are hungry for information and they need to know some of the choices available. 

@Grant Schneider

Aug 23, 2014 10:05 AM
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Grant Schneider ... Especially first time homebuyers need their hand held through the transaction ... but to get there they have to surf through a myriad of details.  This at least give them direction on down payments, etc.

Question:  What does that mean that my blog was "highlighted?"  I guess I'm still so new I don't know about that.

Aug 23, 2014 10:08 AM
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

Diana the information you provided will be really helpful to first time buyers.

Aug 23, 2014 03:43 PM
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Jennifer Fivelsdal ... thanks for your encouraging response.  And thanks for your email!  I'm looking forward to getting to know you better too!

Aug 23, 2014 04:08 PM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Diana -- many first time homebuyers struggle with necessary funds for a down payment, you present some great options for them.   

Aug 23, 2014 05:59 PM
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Michael Jacobs - Thanks for your response and encouraging words!

Aug 24, 2014 03:24 AM
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Diana, great information for buyers wanting a lower down payment option.  Of course, there is also VA or USDA for 100% financing that can definitely help a cash strapped buyer.

Aug 24, 2014 06:15 AM
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Nick T Pappas - I agree ... VA and USDA are great loans ... VA for Veterans with no money down and they can get seller assistance for the down payment and/or prepaids and USDA for those unique areas (in our area it's typically in the county versus the city ... but minimum costs.  Thanks for your input!  Very much appreciated.

Aug 24, 2014 11:16 AM