How to Buy a Home with Little to No Money Down

Verani Realty

down payment for a houseMany first-time homebuyers mistakenly believe that unless they have saved for a substantial down payment, they don’t stand a chance at buying a home. But, you should know that there are programs that allow you buy with little to no money down.

A recent poll conducted by the National Association of Realtors found that about 85% of potential first time home buyers believed that a 10% down payment or more was required in order for them to qualify for a mortgage. This is misinformation. It is true that some loan programs require a down payment, and lenders generally prefer buyers have one because it tends to be an indication of their financial stability. However, there are programs that offer other options.

There are several types of loans that require small or even zero down payments.

  • A Federal Housing Administration (FHA) loan allows buyers to qualify for a home mortgage with only a 3.5% down payment.
  • Fannie Mae offers the conventional 97 loan, which requires borrowers to pay 3% of the purchase price as a down payment. This money can be a gift from a relative. Other programs may require as little as 5% or as much as 20% of the home’s asking price.
  • A VA loan is a government-sponsored loan and requires no money down to qualify, but you must be either a current service member or a veteran who has completed a specific amount of time in the service.
  • A USDA loan (sometimes called a rural home loan), a government sponsored loan offered through The United States Department of Agriculture, is open to all borrowers that qualify who wish to buy a home in a region designated as “rural” by the USDA. One recent report from USDA stated that almost 97% of the current land in the U.S. is listed as rural. So, just about every major town in the U.S. has at least some portion that is eligible for the USDA loan. Speak to your Realtor about viewing homes outside the major parts of town. Here are the highlights of the USDA program.

Before you even begin your search, sit down with a lender, get pre-qualified, and find out if they offer the above options or can suggest any other options. Even if you don’t have a large downpayment saved, they may be able to guide you to loan programs like those listed above.

Buying a home is one situation where you never want to assume you know all the facts based off what you may have heard. You may be able to qualify for more than you realize, and you could qualify for a little to no money down option that could help make your dream of owning a reality.

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