Owning a home is more than just a financial decision – it’s where our stories begin, where dreams take root and memories are made.

If saving for a large down payment seems overwhelming, it doesn’t always have to be. There are pathways to homeownership that require little or no initial investment. With these options, coming up with a down payment doesn’t have to be an insurmountable obstacle to buying a home.

What is a Mortgage Down Payment?

A down payment is an upfront contribution toward purchasing a home, typically a percentage of the total price. Making this payment reduces the loan amount and can lower monthly payments.

A conventional benchmark for down payments is 20% of the home price. For example, on a $200,000 home, a 20% down payment would be $40,000. But many buyers don’t need to save that much.

Smaller Down Payments

Some home loans offer 100% financing for qualified buyers. These loans would require no down payment. Keep in mind that homes with a down payment lower than 20% could require private mortgage insurance (PMI), which protects the lender against borrower default. The cost of the PMI is added to your monthly mortgage payment.

Types of Loans That Can Start Your Story

• FHA Loans: Federal Housing Administration (FHA) loans are among the most common for buyers with limited savings, requiring as little as a 3.5% down payment. The FHA itself doesn’t loan the money. Instead, it insures loans made by private lenders, such as commercial banks. Each lender sets its own rates and terms for FHA home mortgages.
• USDA Loans: The United States Department of Agriculture (USDA) Rural Development Guaranteed Housing Loan Program can provide 100% financing without down payment requirements for those seeking homes in designated rural areas. Eligibility depends on location, household income and other factors.
• VA Loans: Reserved for veterans, active-duty service members and eligible surviving spouses, United States Department of Veterans Affairs (VA) home loans offer the chance to buy a home with a low down payment or no down payment and no PMI requirement.
• Conventional Home Loans: Some conventional home loans may also permit low down payments for homebuyers who meet a lender’s qualification criteria. They may require specific credit and income criteria. You’ll likely need a relatively high credit score and a stable job history to qualify for low down payments.

Ready to start writing the next chapter in your journey toward homeownership? We can help. Find a lender near you to ask for more information about low down payment options and programs you might qualify for.

Sources:
https://www.benefits.va.gov/homeloans
https://www.hud.gov
https://www.usa.gov/government-home-loans
https://finance.yahoo.com/personal-finance/mortgages/article/zero-down-mortgage-144816007.html

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.