This is a series of blog posts specifically aimed at young adults or other first time home buyers, and one thing that sometimes intimidates potential buyers is the down payment. While a down payment may seem scary, we’ll go over the facts.
A down payment is the initial money you pay for the house. You probably don’t have the whole sale price in cash, so the bank takes a down payment and lends you the rest of the money. Some people have the misconception that you need 10 or 20% in order to purchase a house, but there are more and more programs that exist to increase home ownership. One of those is an FHA loan. An FHA loan is insured by the Federal Housing Administration. Qualifying buyers can purchase a home for 3.5% down (minimum of 580 credit score). See info about FHA loans here. Even the Conventional loan has lowered the down payments required. Qualifying buyers can purchase a home for 5% down, and sometimes even 3%! See info about Conventional loans here.
There are also two zero down loan programs available in some situations. The Veterans loans (VA) is offered to US Veterans. And the Rural Development loan can be used to buy properties in eligible areas (excluding highly developed cities like Grand Rapids, Wyoming, Kalamazoo).
As always, if you have questions about down payments or mortgages you should talk with a local loan officer! Talking with a trusted loan officer should be one of the first steps in the home buying process. Let me know if you want the names of some of the best banks and lenders in the area. Be sure to read next weeks post about closing costs. Find out the total cost of buying a house!