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Home Buyer

Don’t Have a 20% Down Payment? No Problem

A 20% down payment is a common buying misconception. But despite what you might have heard, you can buy a home with less money. Sure, 20% down is ideal if you want to avoid private mortgage insurance and start off with more equity in your property. However, it can take years to save this type of money; and the longer you put off buying, the more likely that home prices and interest rates will increase. 

Homeownership offers financial security, stability and a sense of accomplishment. If you have limited cash reserves, plenty of low-down and no-down payment home loans are available.

1. Conventional Mortgage

A conventional home loan is a popular product. Whether you're looking for a fixed-rate or an adjustable-rate, a 30-year or a 15-year term, qualifying only requires a minimum credit score of 620 and a down payment as low as 5%. Some conventional products allow down payments as low as 3% for eligible first-time homebuyers.

2. FHA Home Loan

This government-backed mortgage loan accommodates borrowers with lower credit scores. Get an FHA home loan with a 3.5% down payment and a minimum credit score of 580. If your credit score is between 500 and 579, qualifying requires a 10% down payment. 

3. Gift 

If you’re employed and earn sufficient income to qualify for a home loan, but you don’t have enough cash for mortgage-related expenses, many mortgage programs allow grants or financial gifts from an acceptable donor, such as a relative, employer or charitable organization. Depending on the amount of the gift, some programs require a minimum borrower contribution. Gifts funds may be used for down payment and closing costs.

4. Low Down Payment Mortgages

USDA home loans and VA home loans do not require a down payment, although borrowers are responsible for paying their own closing costs. Qualifying for a USDA home loan requires purchasing a property in an eligible rural area. You may be eligible for a VA home loan if you’re active-duty military, a veteran, a member of the National Guard or Reserves, or the spouse of an eligible veteran.

5. Bond Program

These government-sponsored programs provide eligible borrowers with down payment and closing costs assistance. Programs vary by location.

Bottom Line

Don't let down payment misconceptions prevent you from purchasing a home. A 20% down payment has its benefits. You don’t have to pay private mortgage insurance and a large down payment can help you secure a lower mortgage rate. Even so, a low-down mortgage option makes it possible to purchase a house sooner. Let Cherry Creek Mortgage help you find an affordable home loan.