*Update March 2015: In addition to the VA and FHA loans detailed below, there is now a 3% down conventional option for buyers within certain income limits. It does require a higher credit score than FHA. You can find more information on the new program here.
It could be due to the economy or the fact that most people stay in their home an average of only 5-7 years, but the truth is that home buyers are not putting as large down payments as our parents and grandparents did. The average down payment for a house 20 years ago was 20%. Today, it’s common for people to put as little as 3% down on their new home.
No Down Payment Mortgage
Simply put, a no down payment mortgage is a mortgage for which you don’t put any money down on the purchase of your house. In today’s market, finding a no down payment mortgage may be extremely difficult unless you are a veteran and eligible for the Quicken Loans VA loan – which almost never requires a down payment. VA loans are a great option for veterans who want to buy a home because not only can a Veteran put zero down, but these types of loans get also approved faster than other types of loans.
Most Veterans are not aware of the benefits of VA home loans, so if you know someone who has served in the military let them know!
Low Down Payment Mortgage
If you haven’t served in the military, there are still other options. A popular choice for home buyers is the “low down payment mortgage.” The FHA loan is a mortgage that only requires a 3.5% down payment. “FHA loans:/home-loans/fha-loan are backed by the government and also have more flexible guidelines, including lower credit score requirements. They are a great option for first-time home buyers.
Who Is a Good Candidate for a Low Money Down Mortgage Loan?
For some people, a low money down home loan may be the only way to buy a home, especially if you don’t qualify for a VA loan. First-time home buyers may not have enough saved up for a 20% down payment, or might want to use the money they’ve saved for other uses like buying furniture or other necessities for their new home. Some people may actually decide to use their savings to pay off debt (since mortgage interest is tax-deductible and credit card interest isn’t). Whatever the reason, FHA loans are a great option for many home buyers.
We hope this information was helpful in your search for your new home! Please let us know if you have any questions by contacting one of our home loan experts or by leaving a comment.