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Affording a traditional 20% down payment on a home is a tall order for many prospective home buyers. Considering that the value of the average home in the United States currently sits at about $188,900, a 20% down payment will run the average home buyer a lot more money than most people have just sitting around in their bank accounts.
This leads many people to believe that they cannot afford to purchase a home. A 20% down payment is unreasonable for many people with other expenses, debt, or low-to-average income earners. But the good news is that there are a variety of ways that you can become a homeowner while putting much less than 20% down on the home that you would like to purchase.
The following are some great options for homeowners who are looking to purchase a home but may not be able to afford the full 20% down payment:
- FHA Loans: These loans are provided and guaranteed by the federal government through the Federal Housing Administration (FHA) offer loans to borrowers for a 3.5% down payment on the home if they have a credit score of 580 or higher. For those with a credit score between 500 and 579 that same loan is available for a 10% down payment. About 40% of all mortgage loans in the US are FHA loans.
- Conventional Loans: Conventional loans generally come with a requirement of a 5 to 20% down payment depending on the program. However, there is a Conventional 97 Loan Program that only requires a 3% down payment for you to purchase your home, which is even less than what an FHA loan requires.
- USDA Loans: USDA Loans with a 30-year term on it can be available for little as 0% down if you qualify. Credit scores of a 640 or higher are required for a USDA Loan in 2018 for automatic approval. These loans are primarily available in more rural areas and are used to encourage the development and settling of more rural parts areas.
- VA Loans: VA Loans are available to military members and their families and some of these loans can carry down payment requirements as low as 0% and many VA Loans will also not require mortgage insurance to be able to take out the loan.
These are just a few of the loan options out there that require a down payment of less than 20% of the total purchase price of the home in order for you to become a homeowner.
Consider Grants & Borrowing Funds:
Many of these loan programs accept financial assistance such as State Grants or even Community Lending Programs as well as any financial gifts from family members to be used as part of your down payment. Applying for one of these loans or using some gift funds from a family member can be the financial boost you need to be able to afford a down payment on your next home.
First Savings Mortgage has had many clients who have found great joy in owning a home without having to put 20% as down payment. First Savings Mortgage is here to help you find the same success as our previous clients have had. For more information on how we can help you find your next home please feel free to contact us.