Thinking about buying a home but you don’t think you have enough for a down payment? There’s a common misconception that a 20% down payment is required, but it’s not! In fact, sometimes putting 20% down isn’t the best move. You can conserve some of that cash, pay off other debt, tackle repairs or make improvements to your new home, or have an emergency fund for unforeseen circumstances.Down payment options are transforming the way people buy homes, especially for first time home buyers. Finding the right loan program is the perfect way to start shopping for your new home. Speaking to a mortgage lender and getting pre-approved is SO important for a few reasons: you look for homes that are in your price range, when you submit an offer you come in stronger as a pre-approved buyer, and if it turns out you need to do a few things to fix your credit up you can begin that process immediately. 

FHA Loans: While the FHA doesn’t give loans, they do insure them. And with FHA loans, you can pay as little as 3.5% as a downpayment. The FHA will also insure loans for people with credit scores much lower than other loan insurance companies, sometimes as low as 500. 

VA Loans: The VA Loan is a no-money-down program available to members of the U.S. military and surviving spouses. The VA guarantees repayment to lenders and is a very straight-forward loan. VA loans are even available for intermittent occupancy, and bankruptcy and other derogatory credit issues do not immediately disqualify you. 

USDA Loans: While a USDA loan may sound as if it’s only available for rural and farming areas, it’s available in many suburban areas as well. Like a VA loan, the USDA loan is also no-money-down. You may also include eligible home repairs and improvements into your loan size.

Conventional 97 Program: This is a 3% downpayment program that can serve as a less expensive option compared to an FHA loan. The loan size may not exceed more than $484,350 even if the home is worth more than that, and the property must be a single unit dwelling. All the downpayment may come from gifted funds, as long as the gifter is related by blood or marriage. 

When you do put less than 20% down, be aware that many lenders will require you to have PMI. Private Mortgage Insurance protects the lender incase of foreclosure. While this will increase your mortgage payments, at the rate home values are increasing, with even just 3% down, you could refinance and and possibly pay PMI for fewer than 4 years. 

Realistically, the most important thing to consider when you’re deciding how much of a downpayment to make is: what you can afford? Making a larger down payment isn’t always what makes sense. Speaking to a trusted mortgage lender can help you make you best the decision for you.