Coping With Down Payment Dilemmas

It's a major aspect of buying a home that many home-buyers struggle with – the down payment. You might have a great, steady job with sufficient income and your credit score could be the envy of others but those things might not be quite enough. In some cases, a down payment is important, but not always. If you are confused about down payment issues, read on and learn a bit more about why they are often needed and some ways to get around that requirement.

Down Payments May Be a Necessary Evil

Traditionally, lenders want applicants to put down about 20% of a home's value as a down payment. Down payments reduce the lender's liability if things should go badly and the loan defaults. For example, a $500,000 dollar home would require a $100,000 down payment at 20%. The lender now has a guarantee of at least that much equity against default by the buyer. Down payments are also handy when the buyer is approved at a mortgage amount that falls below the purchase price of a home. Buyers can make up the difference using cash. The money for a down payment is another issue. Some buyers save for years to achieve a down payment. If it's your second or later home, the down payment can come from the sale (profit) of the old home.

Ways to Avoid the Down Payment Dilemma

Some traditional lenders offer special loan programs aimed at those with little to no down payment money but most of the best options come by way of government-backed loans. Take a look at just a few common loan programs that call for low or no down payments:

  1. FHA – The Federal Housing Administration offers two loan options for buyers that greatly reduce the percentage of the down payment required. One offers a loan for a 3.5% down payment and the other one offers a loan at a 10% down payment.
  2. USDA – The U.S. Department of Agriculture set out to help farmers but the areas covered nowadays also include areas just outside of cities across the US. You don't have to have a farm to qualify and they offer two programs aimed at mostly low-income applicants.
  3. VA – The Veterans Administration offers former and current military members a great no down payment required program.

To get more information about any of the above options, speak with a personalized mortgage advisor as soon as you can. 

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20 October 2020
It's a major aspect of buying a home that many home-buyers struggle with – the down payment. You might have a great, steady job with sufficient income