Are you a renter tired of paying another person’s mortgage? This may be the best time to get your foot in the door of your own new home. You may be thinking I don’t have the money for a down payment on a home. The days of having 20% for a down payment are long gone. There are many alternatives available. Here’s what you need to know if buying a house is in your future.
Down Payment Options
You might not have 20% down payment for a home. While there are benefits to having equity in the home you’re buying, that doesn’t mean you are out of the running to becoming a homeowner. There are other options for down payments.
For an FHA loan, the minimum down payment is 3.5%. Most FHA lenders can lend up to $417,000. It comes with a monthly mortgage insurance payment which can make it more expensive than a conventional loan. In some markets, the higher loan amounts allow someone with strong income and less cash to still purchase.
Another popular option is to use a conventional loan and put 5% down. As an alternative to the higher priced FHA loan, the conventional loan allows for getting rid of the PMI after accumulating the 20% equity after a minimum of 24 months.
Two options are available for 0% down loans: one through the U.S Department of Veteran’s Affairs that allows veterans to purchase a home for literally no money down. Of course, you need to be a military veteran to qualify for this type of loan. An alternative to this program is a loan guaranteed by the U.S Department of Agriculture. You do not need to be a veteran
It’s important to remember that if you are putting less than 20% down on a home, your monthly property taxes and fire insurance terms are required to be built into the monthly mortgage payment and that will make it higher.