Average home prices have been climbing in recent years, meaning most home buyers are saving even more for a down payment. Traditionally, many lenders required 20 percent down on a house before issuing a conventional mortgage, but times are definitely changing. If you find it difficult to save tens of thousands of dollars toward a home down payment, there is good news. Even though most lenders still avoid funding 100 percent of home loans, there are lending programs available that make it easier to acquire the funds you need to secure financing for your house.
Reduced Down Payments
There are several reduced down payment loan programs available to home-buyers in the U.S. Most are insured by the federal government, offering private lenders a layer of protection against consumer default. Some, such as the FHA loan, require buyers to pay for mortgage insurance. Others, such as VA loans, do not. Examples of reduced down payment loans include:
- FHA Loans (3.5% down) – low credit score requirements; first-time home-buyers
- VA Loans (0% down) – reserved for military veterans
- USDA Loans (0% down) – rural home buyers; low mortgage insurance requirements
- Conventional 97 Loans (3% down) – not government-backed; requires better credit than FHA
Loans for Mortgage Down Payments
Generally, lenders do not allow you to borrow money to cover the down payment requirements for your mortgage. However, there are ways to circumvent this rule in some cases. For example, ’80-10-10 piggy-back loans’ are often available for jumbo loans, giving borrowers the opportunity to pay 80 percent of the home’s value from the primary mortgage, 10 percent from a secondary loan, and 10 percent out-of-pocket.
For borrowers without jumbo loans, there are other ways to come up with the money. For example, if you find a home for sale in Rockport that you like and need help getting the funds for a down payment, you may be able to apply for a grant through a down payment assistance program or use a financial gift from family or a friend to cover your entire down payment requirement on an FHA loan. It may also be possible to tap into funds from your retirement accounts or credit card cash advance line, but doing so is likely to incur expensive fees or interest. Talk to your lender about your mortgage down payment options to find a solution that is right for you.