Can I Buy a Home Without a 20% Deposit? Maybe

Purchasing a home is most likely the biggest investment you will make in your lifetime. If you are in the market to buy a home and have done your research, then you no doubt have come across the general requirements for obtaining a mortgage loan. In addition to having good credit and a stable income, you also need money down . . . and most lenders will tell you that twenty percent of the home’s selling price is what you will need. Twenty percent of a home’s value is a lot of money, no matter what the purchase price is, and the down payment is what often scares people away from buying a home. You may be wondering if there a way around putting down so much money. Fortunately, you do have some other options. Here are the details.

Low down mortgage loans. It is possible for you to obtain a mortgage with as little as a three percent deposit. How? Apply for an FHA loan. FHA loans are insured by the government (see below), and they therefore take a little more qualifying, but if you can qualify for an FHA loan, you will benefit not only from a low down payment requirement, but also from a relatively low interest rate.

Mortgage insurance. Low down payment loans are a higher risk than their twenty percent down payment counterparts. Therefore, lenders need to balance that risk in some way, and they generally do that by requiring that you partake in a mortgage insurance program. Mortgage insurance is provided by the government, and is a standard constituent of FHA loans. You pay a monthly premium until your mortgage is paid down to an acceptable amount – generally seventy-eight percent of the home’s value.

Down payment assistance programs. There are additional ways to skimp on your deposit, if you are resourceful. Look into your local government’s down payment assistance programs. These usually come in the form of a grant (money you never have to pay back), or a zero or low interest loan. Different programs have different qualification guidelines, so it is in your best interest to work with either a real estate professional or a mortgage broker (or both) to identify your options and get through the application process.

Don’t let a huge deposit stop you from pursuing your dream of home ownership. Instead, do your research and be resourceful. There are ways to avoid the twenty percent down payment requirement, if you know what to look for.

About the Author: Holly Zinner is a real estate specialist who enjoys helping first time home buyers. She also works to help businesses find office space to rent as well as phone and PBX services to keep things running smoothly.

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