Do you need mortgage down payments? Not always.
Too many people believe they need to save a large pile of money to even think about buying a house. They believe that having a down payment separates the homebuyer wannabes from the endless renters. These same people probably have never tried to buy a house.
It’s easy to forgive people who think of home ownership as something only the well-to-do can manage. With mortgage down payments typically 20 percent of the purchase price of a house, it seems reasonable that only someone with a spare 30–60 grand sitting in the bank can afford it. But it’s that attitude, not the size of a down payment that stands as the biggest obstacle to the American dream of home ownership.
Why Lenders Require Mortgage Down Payments
Buying a house is a huge investment. Independent mortgage lenders and banks want assurance that a borrower intends to pay back the mortgage loan. Sure, the house itself is collateral, but the lender would much rather have the loan repaid than have a house on its hands.
A down payment for a mortgage, therefore, gives you an exceptional reason to repay your loan. If you default on your mortgage, you’ll lose more than just the house — you’ll lose the substantial down payment as well. Mortgage down payments give borrowers an immediate stake in their property and lender good reason to believe borrowers won’t default.
Buying a House Without a Down Payment
In certain circumstances, though, you can buy a house without any money down at all. That’s a difficult concept for some people to accept. It contradicts their previously held convictions. But it also opens their eyes to the possibilities of actually owning their own homes.
An independent mortgage lender like Prime Mortgage Lending can explain to you that there are at least two types of mortgage loan products that do not require any down payment. Really. All you have to do is ask a lender, such as Zachery “Zack” Adam of Prime. The two loans that don’t require a down payment are:
- VA loans. If you’re a veteran, an active-duty service member or an eligible surviving spouse, you may qualify for a mortgage loan guaranteed by the U.S. Department of Veteran Affairs (VA). Since the VA guarantees the loan, the lender doesn’t require mortgage down payments.
- USDA loans. Like the VA loans, you have to qualify for U.S. Department of Agriculture (USDA) mortgages. The house you’re purchasing has to be situated in an eligible area, and it has to be your primary residence. Talk to an independent mortgage lender like Zack to see if you and the house you want to buy fit the USDA guidelines. These loans are ideal for first-time homebuyers.
You also can take advantage of 100 percent finance options and down payment assistance programs. Depending on where you live, you can find government aid or non-profit organizations with programs to help you overcome the lack of a down payment. You have to apply and qualify, but it’s worth it if they’ll cover not only mortgage down payments, but also closing costs.
Buying a House with a Minimal Down Payment
Every homebuyer won’t qualify for a no-money-down mortgage, but even so, you still may not need the full 20 percent to consider buying a house. There are options; there are always options. And a good independent mortgage lender can find them for you. That’s just one of the reasons you should call Zack at 828-242-4780 when you’re looking to buy a house.
Some types of loans also favor the first-time homebuyer by requiring less money down. These loans also have some strings attached, but they cover a broader cross-section of the population. Here are two examples of low-down-payment mortgages:
- FHA loans. The Federal Housing Administration (FHA) protects these mortgage loans, so lenders require a smaller down payment. In some cases, you may need only 3.5 percent of the purchase price of the house. Zack at Prime Mortgage Lending can tell you if you qualify. Contact him.
- Private mortgage insurance. If you qualify for PMI — which often requires a decent credit history — you might only need a down payment as low as three percent of the purchase price. Mortgage insurance guarantees that the loan will be repaid, so the lender can be more lenient. With this option, however, you have to pay mortgage insurance every month in addition to your mortgage.
Don’t Fret Over Mortgage Down Payments
Many conventional mortgage loans don’t require 20 percent down. Find a lender willing to work with you, especially if you’re trying to buy your first house. The loan types listed here reflect the most common options, but sometimes, independent mortgage lenders like Prime Mortgage Lending can get you into your new home without costly mortgage down payments.