There are loan options to help you get into a house for less than a 20 percent down payment.
With home prices soaring, many first-time homebuyers may be wondering whether or not they need to put 20% down towards a home purchase. This can seem daunting with the average home price in Buncombe County rising well above $500,000. A house listed at that price would require a $100,000 down payment to meet that 20% standard, wow! Not to mention we haven’t even discussed the other fees associated with purchasing a home, such as inspection expenses and closing costs. Hang in there folks, there are programs and loan options out there to help you get into a house for less than a 20% down payment.
Here are some possibilities:
FHA Loans: FHA (Federal Housing Administration) loans are a type of government-backed mortgage that is designed to help individuals and families who may not qualify for traditional home loans obtain financing to purchase a home. These loans require a minimum down payment of 3.5% and offer more relaxed credit score and income requirements compared to conventional loans.
It’s important to note that FHA loans do require borrowers to pay for mortgage insurance, which protects the lender in case the borrower defaults on the loan. This insurance premium can be paid upfront or added to the loan balance.
VA Loans: If you are a veteran or an active-duty service member, you may qualify for a VA (Veterans Affairs) loan. These loans require no down payment and offer competitive interest rates. With a VA loan, you don’t have to pay mortgage insurance, which can save you thousands of dollars over the life of the loan.
USDA Loans: If you are looking to buy a home in a rural area, you may be eligible for a USDA (United States Department of Agriculture) loan. These loans require no down payment and offer low-interest rates. To be eligible for a USDA loan, you must meet certain income requirements and live in an eligible rural area. The USDA has a map on its website that shows which areas are eligible. USDA loans can be used for a variety of purposes, including purchasing an existing home, building a new home, renovating or repairing a home, and refinancing an existing USDA loan.
Conventional Loans: While conventional loans typically require a 20% down payment, there are options available that allow for a lower down payment. For example, some lenders offer conventional loans with as little as 3% down. Conventional mortgage loans offer a variety of term lengths, which allows borrowers to choose a repayment schedule that works best for their financial situation. It’s important to note that if you make a down payment of less than 20%, you will likely have to pay private mortgage insurance (PMI) until you have built up enough equity in your home.
Down Payment Assistance Programs: There are various down payment assistance programs available that can help homebuyers with their down payment. These programs may be offered by state or local governments, non-profit organizations, or private lenders. If you are interested in learning more about down payment assistance, I recommend checking out the local non-profit Mountain Housing Opportunities to see what they can offer and what the eligibility requirements are.
Additionally, speaking with a mortgage lender who is well versed in these programs is an invaluable step in your home purchase journey. I’d be happy to recommend several local lenders that would be willing to speak with you, educate you, and help get you qualified for a loan. Historically, homeownership has been one of the most effective ways to build wealth over time. The path there does not require a 20 percent down payment.
–Lauren is a real estate professional located in Asheville, North Carolina. With a keen eye for detail and a commitment to excellence, Lauren can guide you through your real estate journey successfully. Whatever your real estate needs may be, Lauren will work diligently to maximize your sale, whether you’re buying or selling. Contact Lauren for more information and referrals on how to get started.