Smart Alternatives to Putting 20 Percent Down

When you started researching what it takes to buy a home, you probably came face-to-face with one number over and over again: 20 percent. Traditionally, that’s how much was needed to buy a home.

These days, there are a number of alternatives to the 20 percent down payment, with some options requiring down payments of 3 to 5 percent, while others offer loans with 0 percent down.

Keep reading to learn more about these alternatives…

Alternative #1 – FHA Loan

If you’re a first-time homebuyer, consider a Federal Housing Administration (FHA) loan. It’s a type of federal assistance loan that allows lower-income Americans to borrow money to purchase a home they could not otherwise afford.

Buyers can get an FHA loan with a down payment as low as 3.5 percent of the purchase price, according to the U.S. Department of Housing and Urban Development.

Alternative #2 – Down Payment Assistance through City and Federal Programs

In many cities, the local or federal government offers assistance programs to revitalize areas hit hard by natural disasters or recessions. In these cases, homeowners are often able to get a helping hand if they know where to look.

These city and state programs are out there, but you have to do your research in order to find them. If you have a particularly good mortgage broker that you are working with, they should be able to point you in the right direction.

Alternative #3 – Get a Veteran Affairs (VA) Loan

According to the Department of Veteran Affairs, a VA loan can help you purchase or refinance a home at a low interest rate, and often doesn’t require a down payment. To qualify for this loan, potential homebuyers must meet specific service requirements and have:

• Good credit score
• Sufficient income
• Certificate of Eligibility (COE)

Alternative #4 – Get a USDA Loan

The U.S. Department of Agriculture (USDA) insures low-down-payment loans to low-income borrowers who want to buy houses in rural areas. Buyers can qualify for this loan if their income is no greater than 115 percent of the median income for the area. The USDA approves qualified houses based on the location of the home. Buyers can put zero money down, but they are still required to pay mortgage insurance.

The loan amounts vary considerably depending on a number of factors, including:

• The part of the country the house is located in
• Whether it’s in an “eligible area”
• If the income of the family buying the home fits within certain limits relative to the median incomes within that particular area

From Yahoo Homes

 
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