How to Buy a House Without a Huge Down Payment

Saving for a full 20% down payment on a house is a huge challenge for many people. In parts of the United States where an average home sells for $250,000 to $500,000, you might not have a way to save $50,000 to $100,000 for the down payment. Even if you have enough income to pay the mortgage, insurance, taxes and maintenance costs of owning a home, the down payment situation could get in your way. Here’s what you need to know about what happens if you don’t have the full down payment and some programs you might consider in order to help you buy your first home.

What Happens If You Don’t Have a 20% Down Payment?

If you don’t have a 20% down payment for the home you want to buy, you must purchase private mortgage insurance. The private mortgage insurance covers the lender if you default on the mortgage. This is required until you reach 20% equity on the principal of the loan. The private mortgage insurance will be automatically added on to the mortgage payments that you pay every month.

USDA Loans With No Down Payment

The United States Department of Agriculture (USDA) offers mortgage loans to homebuyers with low-to-moderate income. The goal of this program is rural development. This financing is available to qualifying buyers who purchase a home in a rural area. The USDA considers most places outside of large cities to be “rural.” This is a zero-down payment with a mortgage insurance premium of just 0.35%.

VA Loans With No Down Payment

If you are active-duty military or a veteran of the United States Armed Forces, you could be eligible for a VA mortgage. This mortgage is 100% financing with no down payment required. You don’t have to pay for private mortgage insurance with this financing plan. There is a 2.15% VA funding fee, and that fee can be rolled into the amount of your mortgage loan. You need to have a credit score of 620.

FHA Loans With Down Payment Assistance

Loans from the Federal Housing Administration (FHA) give first-time homebuyers a lot of flexibility in the financing of the home. If your credit score is at least 500, you can get a home with just a 10% down payment. If your credit score is at least 580, you can make just a 3.5% down payment on the home. FHA loan options include 15-year and 30-year fixed-rate mortgages. An adjustable-rate mortgage is also available through some FHA lenders if you have a high enough credit score.

Evolve Bank & Trust Home Loan Centers (HLCs) are not full service branch locations of Evolve Bank & Trust. These HLCs do not engage in general banking transactions, such as deposits or payments, and only provide Residential Mortgage Loans. Equal Housing Lender. All loans subject to credit approval. Corporate NMLS# 509256