How much downpayment do I need to buy a home?

Many folks who would like to purchase a new home can qualify for several different kinds of mortgages, but they can't afford a large down payment.  A conventional loan will require a 20% downpayment to avoid PMI (private mortgage insurance)  With an FHA loan you can put down as low as 3.5% of the purchase price.  Please note that closing costs are different than downpayment.  A qualified loan officer will be able to review your scenario and advise you what your minimum amount down will need to be based on your unique situation. 

Some ways to save up a bigger downpayment

Reduce expenses and save.
Be on the look-out for ways to reduce your expenditures to save toward a down payment. Also, you can look into bank programs through which some of your paycheck is automatically transferred into a savings account every pay period. Some practical ways to build up funds include moving into less expensive housing, and skipping a year's vacation.


Work more and sell items you do not need. Try to get a second job. This can be exhausting, but the temporary difficulty can help you get your down payment. You can also get creative about the items you could be able to sell. Maybe you have desirable items you can sell on an online auction, or quality household goods for a garage or tag sale. Also, you can consider selling any investments you own.

Borrow your down payment from a retirement plan. Research the specifics of your particular plan. Many homebuyers get down payment money by withdrawing funds from their Individual Retirement Accounts or borrowing from their 401(k) programs. Make sure you are clear about any penalties, the way this may affect on your income taxes, and repayment terms.

Ask for assistance from generous family members. Many buyers are sometimes lucky enough to get down payment assistance from thoughtful parents and other family members who may be prepared to help get them in their first home. Your family members may be eager to help you reach the goal of having your own home.

Learn about housing finance agencies. These types of agencies offer special mortgage loans for moderate and low income homebuyers, buyers interested in renovating a home within a targeted area, and other groups as specified by the agency. Working with a housing finance agency, you can be given a below market interest rate, down payment help and other advantages. These kinds of agencies may assist eligible buyers with a lower rate of interest, get you your down payment, and offer other advantages. The primary goal of non-profit housing finance agencies is boosting home ownership in specific places.

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Learn about low-down and no-down mortgage loan programs.

  • Federal Housing Administration (FHA) loans

    The Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD), plays a vital role in assisting low to moderate-income individuals get mortgage loans. An office of the United States Department of Housing and Urban Development(HUD), FHA (Federal Housing Administration) helps individuals get FHA assists first-time buyers and others who might not be able to qualify for a traditional loan by themselves, by providing mortgage insurance to the lenders. Interest rates for an FHA loan usually feature the current interest rate, but the down payment amounts with an FHA mortgage will be lower than those of conventional loans. Closing costs can be financed within the mortgage, while the down payment might be as low as 3 percent of the total.

  • VA mortgage loans

    Guaranteed by the Department of Veterans Affairs, a VA loan assists service people and veterans. This specialized loan requires no down payment, has limited closing costs, and provides the advantage of a competitive rate of interest. Although the VA does not finance the loans, it does certify eligibility to apply for a VA loan.

  • Piggy-back loans

    A piggy-back loan is a second mortgage that you close with the first. In most cases the first mortgage is for 80% of the cost of the home and the "piggyback" is for 10%. The borrower covers the remaining 10%, rather than putting the usual 20% down payment.

  • Carry-Back loans

    In a "carry back" agreement, the seller commits to lend you some of his own equity to help you get your down payment money. The buyer finances the majority of the purchase price through a traditional mortgage program and finances the remaining funds with the seller. Typically, this kind of second mortgage will have higher interest.

The satisfaction will be the same, no matter which method you use to come up with your down payment. Your new home will be worth it!

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