But when you’re shelling out high rent every month, paying for utilities, and racking up a pile of extra bills, it can seem impossible to save for a down payment on a house. And after months of ditching lattes and daily takeout and cutting back on streaming services, you may have managed to save a few thousand at best. But is it enough for a first home?
The answer is yes and no. There are options for assistance, including government programs that help pay down payments. And some programs may let you avoid payments altogether, but they’re not for everyone. Here’s what the pros have to say about small down payments or even no installments.
“The best advice I can give is to get some recommendations for loan officers in your area,” says Nathan Perkins Jr., a Century 21 Envision agent in Upper Marlboro, MD. “Then ask each of them how much down payment you will need for pre-approval for a mortgage.
You will need to provide details of your income, debts, financial accounts and work history to start the process. Then, after pre-approval applications are processed, lenders must let you know which programs you qualify for.
“There may be a program that would even bring in a few thousand dollars for the down payment,” Perkins says.
How much can a deposit be?
“Well, $3,000 isn’t enough for a down payment on most homes,” says Jill Gonzalez, analyst at WalletHub. “The lowest down payment percentage required is 3.5% for a FHA loan. So $3,000 would be enough for a loan of around $85,000, although that’s well below the current median home price of $300,000.
Suppose you find a house for $85,000, congratulations! But let’s say you’ve saved a few thousand dollars and found a more expensive home that would cost you less than 20% of the purchase price. In this case, keep in mind that borrowers who pay less than 20% generally have to pay private mortgage insurance, Where PMI. PMI is added to a monthly house payment and typically ranges from 0.5% to 1% of your loan amount each year.
Loans without deposit
There is still hope if you don’t have enough money for a down payment. Some specialty loans do not charge a penny for eligible individuals, such as a Veterans Loan Where USDA Loan, which is supported by the guaranteed loans program for rural development.
There are, however, a few problems. To be eligible for a VA loan, you must have served in the Army, National Guard, or Reserves, or be the spouse of a military member who died in the line of duty. For the USDA loan, you have to buy a house that Rural development program identifies as rural, defined as “open countryside and settlements of less than 2,500 people”. Yes, a rural property can be a farm. But it can also be a house in a town a few kilometers from a city.
The USDA loan program has other benefits as well.
“Benefits from the government’s rural development program also allow for flexible credit guidelines, low interest rates, closing costs, and lower monthly mortgage insurance,” says Adam Fuller, Senior Loan Officer at Mortgage 1 in Grand Rapids, MI.
State-Specific Programs for Low Down Payments
What happens if you don’t meet the eligibility requirements for a VA, FHA, or USDA loan? Many states have their own homeownership programs.
“We often see first-time or second-home buyers who can qualify for a variety of different options,” advises Fuller.
These programs help buyers secure loans with down payment assistance, low down payments and no closing costs.
Some states also offer “specialty” loans for home buyers with disabilities, first responders, teachers, etc. Before contacting any lenders, do a bit of research by visiting your state’s housing and development authority website to see what type of programs they offer.
Don’t give up on your dream of home ownership
“If you haven’t explored your options or spoken with someone who has experience in finance or real estate, you could sell yourself short,” says Fuller. “I once had a client who was literally shaking in my office because she was so worried about her. credit score, and three months later, we closed the loan on his first home.
Fuller recommends enrolling in homebuyer counseling programs in your community.
“If you don’t know what’s holding you back, you’re already a step backwards,” says Fuller. “Speak with an expert is the best way to know what to do next.