Conventional wisdom tells us we should have a 20% down payment ready to buy a new home. And that seems like a big deal — it can take years for a first-time homebuyer to save that much.
But that’s not necessarily the case! Many homebuyers choose to not put down a full 20%. In fact, the median average down payment for 2020 was 12%.
There are many government programs such as VA and USDA loans that don’t need down payments at all. But, with those programs, the borrower or the home must meet specific requirements before a loan can be approved. For example, to qualify for a VA loan, the borrower must be an active duty or retired member of the military.
Some other government programs — and even some conventional loans — allow for less than 20% as a down payment. One of the most popular government programs for first-time homebuyers is a Federal Housing Administration loan, which can require as little as a 3.5% down payment.
Conventional mortgages from companies such as Fannie Mae and Freddie Mac can also have lower down payments that range from 3-5%.
Do these extra-low down payments sound amazing and make a new home more attainable for you? Before you rush off to submit an offer on your dream home or apply for every loan, here are some things to consider:
- Figure out what you qualify for! Many of the loans listed above have stringent qualifications that borrowers need to meet. Do some research online and talk to a loan officer.
- Remember that the down payment is one piece of the pie – you need to have additional money for closing costs, renovations and emergencies.
- Lower down payments often mean you’ll be paying higher interest rates for a longer period of time.
We know this is a lot to cover, and it can be incredibly confusing! But don’t worry — our experienced loan officers at AMKO Lending can walk you through the process and discuss which options are best for you. It’s literally our job — we find the best rates for people embarking on the homebuying process!
