If you’re thinking about buying a home, one of the first questions you may have is how much money you’ll need for a mortgage down payment. While the answer is almost always “it depends”, one thing is for sure – most people are surprised to find out it takes less money than they think to buy a new home. In fact, there are many mortgage programs that help people buy homes with NO moortgage down payment at all, and other programs that require very little. We’ll give you some of the basics here, and if you have any questions, we invite you to reach out and ask an expert here!
The 0% down payment options
There are several 0% mortgage down payment options that allow a borrower to buy a home with no down payment money. Some of these programs also allow for a seller to help with closing costs, so if you qualify for these loans it is possible to get a house without putting any money down!
The VA Loan
If you’re an eligible veteran, you can get up to 100% financing to buy a new home, and both a lender and seller can contribute to closing costs, so you’re able to buy a new home for very little money out of pocket and none of that money required as a mortgage down payment. VA loans offer tremendous benefits in that they have very low fixed rates and no monthly mortgage insurance. This combination of factors gives veterans access to one of the best loan products available.
The USDA Loan
USDA loans are available to low and moderate income buyers looking to buy outside of major metropolitan areas. The JM Loans team can quickly tell you if you’ll qualify based on your income and the area you’d like to buy a home. Like VA loans, USDA loans require no down payment and allow a seller to contribute toward closing costs, so it’s possible for buyers using a USDA loan to get into a home with little to no money out of pocket.
The DPA Programs
DPA stands for Down Payment Assistance, and comes in many forms. Sometimes it’s a grant from a local county or organization. Other times it’s a nationwide program that offers a 2nd mortgage to cover a down payment requirement. DPA comes in many forms, but usually has to be through an approved program that’s been given the OK by HUD or Fannie Mae. DPA programs often assist with down payment but sometimes can help with closing costs as well. We’re very familiar with down payment assistance products across the country (some of ours are nationwide!), and each DPA program can be a great solution to your mortgage down payment needs.
The 3% Down Options
Do you need 20% down to buy a home? This is usually a misconception when people are seeking a conventional mortgage loan, but in reality, you can get a conventional loan with as little as 3% down. 20% down avoids the need for mortgage insurance (PMI), but conventional loans are available with far less down, and like the 0% down programs, allows a seller to contribute toward closing costs.
The Just a Little Over 3% Option
FHA loans require a 3.5% mortgage down payment, and can sometimes offer lower rates and cheaper PMI than conventional loans, making them a great loan option for many borrowers.
FHA loans are also able to be accompanied by DPA help to turn a 3.5% down payment requirement into $0 out of pocket for a borrower down payment. Sellers may contribute up to 6% of a purchase price toward a buyers closing costs, so FHA is another viable solution for buyers without too much of a down payment. FHA is especially helpful for buyers with a low down payment and less than perfect credit. Rates are more forgiving on FHA loans than conventional loans for past credit issues and lower FICO scores.
Whether it’s through FHA coupled with a DPA product, a conventional loan, or if you qualify for USDA or VA programs, chances are the amount of money you need to buy a new home is less than you think. Call us today at 484-680-4852 to get details, and learn which option is the best for you. Whether you’re short on funds or looking to put 20% or more down, we’ll have loan options for you!