Five Down Payment Options Below 20 Percent


Struggling To Buy? You Have Options

Are you struggling to come up with a 20 percent down payment to purchase the home of your dreams? Since the housing market crisis of 2008, lenders’ loan requirements have become more stringent and, as a result, homebuyers have felt the pinch on their wallets. Though some aspiring borrowers have been able to pinch pennies to come up with the payment, many had to forgo the American dream altogether. But it’s not too late for this dream—many borrowers who fall short of the 20 percent down payment, including those with less than five percent down, are currently purchasing homes. Each mortgage product has its own benefits, disadvantages and eligibility requirements, so research them thoroughly. Be sure to ask your lender about any additional upfront fees and higher interest rates in exchange for low down payment options. That said, here are the top five down payment options for payments below 20 percent.

1. FHA Loans

Loans by the Federal Housing Administration (FHA) have become a popular choice. The FHA allows down payments as low as three-and-a-half percent, an attractive value for first-time homebuyers and lower-income borrowers. SEE ALSO: The Essential Guide To A FHA Mortgage

2. VA Mortgages

Though the days of zero-down offers dissipated with the bursting of the housing bubble, the Veteran’s Administration (VA) offers home loans with no down payment to the borrowers who qualify. Along with acceptable credit scores, applicants must either be currently in the military or have served previously. Non-military applicants may qualify as well, such as surviving spouses of veterans and officers of the Public Health Service or National Oceanic and Atmospheric Administration. Contact a mortgage professional to learn the eligibility requirements for nonmilitary borrowers.

3. HomePath Mortgage

Fannie Mae’s HomePath mortgage offers homebuyers a chance to purchase from its inventory of foreclosed properties. The loan offers borrowers the benefit of a low three percent down payment, and elimination of the mortgage insurance requirement. Minimum credit scores and other stipulations may apply, depending on the lender. Fannie Mae lists the foreclosed homes available for purchase on the website.  

4. USDA Rural Development Service

Borrowers with no finances for a down payment can also acquire home loans through the USDA Rural Development Loan Service. To qualify, applicants must earn less than 115 percent of the median income in the home's location. Eligibility requirements also stipulate that borrowers lack adequate housing, have decent credit and possess the ability to make the monthly mortgage payments, including taxes and insurance. SEE ALSO: Fannie Mae Mortgages For Public Servants

5. Conventional Mortgages

It’s a misconception that most lenders require 20 percent down payments for conventional mortgages. Borrowers can snag a loan with a down payment as low as five percent, if it’s backed by Fannie Mae or Freddie Mac. Participating lenders will expect good credit and be more apt to accept the application if the home is located in an area where the real estate market has stabilized.
Date of original publication:
Updated on: November 10, 2015

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