Purchasing a home—whether it’s your first or simply your next—is no small task. For many prospective buyers, however, coming up with a sufficient down payment for a house is a major stumbling block. Fortunately, not having much money for a down payment isn’t a deal breaker.
Although the recommended down payment is approximately 20% of the purchase price, it’s still possible to purchase a house with a minimal (or zero) payment.1
Buying Your Dream House on a Budget
There are multiple ways you can move forward with a home purchase regardless of how much you have for a down payment. The following are just a few examples:
- Conventional Loans
The most common method of purchasing a home is to obtain a loan from a private mortgage lender, such as a bank. Interest rates for fixed-rate loans vary by lender and change regularly with the market, and they depend on whether you select a 15-year or 30-year option.1 If you don’t have 20% of the purchase price for a down payment with a conventional loan, that’s okay—but you’ll have to pay what’s known as private mortgage insurance (PMI). Because a borrower with a low down payment would traditionally be considered somewhat risky for a lender, PMI allows you to go through with the borrowing process while paying into a pool of money that helps to cover your lender’s losses in the case that you default on your mortgage loan.2
- FHA Loans
An FHA mortgage loan is one obtained from a private lender via the Federal Housing Administration. This type of loan is only available to those who cannot afford conventional down payments and interest rates—usually low-to-middle-income families. FHA loans generally have lower interest rates than the average fixed-rate loan, and prospective buyers who qualify can be approved for a loan with as little a down payment as 3 percent of the purchase price. FHA loans do require mortgage insurance payments (MIP), the duration of which depends upon the amount you are able to put down. If you put down at least 10% of the purchase price, you will only have to pay MIP for 11 years (or until the home is sold or refinanced).2
- VA Loans
As the name suggests, these loans are provided by the U.S. Department of Veterans Affairs and are only available to veterans of the U.S. military (not including remarried spouses).3 Because of the value of their service, veterans are able to receive a VA loan with no down payment or mortgage insurance. However, there will be a one-time funding fee that must be paid at closing.2
A and N Mortgage Can Help!
As an experienced, well-respected mortgage company in Chicago, A and N Mortgage can help you find the best residential mortgage loan for your needs. With a variety of loan programs and services to help you streamline the process, we strive to make your borrowing experience easy and successful. To learn more about your mortgage loan options and get professional home buying advice from our expert staff, call us today at (774) 305-5626.