Is It Possible To Buy a Home Without a 20% Down Payment?
It is a common belief that in order to purchase a home, you need to make a down payment of 20%, and it can often be very challenging for many people to save enough money for that amount. Although it saves money in the long run to make a higher down payment, you can still be eligible for a mortgage if your down payment is less than 20%. If you are interested in purchasing a home in San Luis Obispo, California, and have questions about the associated costs, Central Coast Lending With Mike can help. Read on to learn more about your down payment options when buying a home.
How Much Money Should I Spend On a Down Payment?
Your minimum down payment requirements will vary by lender, but ultimately it will be up to you to determine how much of a down payment you can afford. Even though some lenders will require you to make a 20% down payment depending on the type of loan you receive, there are many programs available that will allow you to borrow funds and charge mortgage insurance if you are unable to make a 20% down payment. Some common types of available programs that help borrowers buy a home for a lower down payment include:
- FHA loans – These are backed by the federal government and help borrowers with a lower credit score qualify for a loan. They have down payment options as low as 3%.
- VA loans – These are also insured by the government and are intended for military servicemen and women and veterans. They do not require a down payment.
- USDA loans – These are intended for homeowners located in rural and suburban areas, and offer low down payment options.
- Conventional loans – These loans are not insured by the government, but come with great terms and rates and have down payments as low as 3.5%.
How To Subsidize The Down Payment For Your Home
Your down payment amount and the type of loan you obtain will depend on both your financial situation and the type of home you want to buy. In order to save money for a home down payment, you will want to carefully budget and plan. It is crucial to reduce the current amount of debt on your credit cards, car payments, student loans, etc., and you will want to cut down on spending money on unnecessary purchases. You don’t want to spend your entire amount of savings on the down payment because you will also need to factor in funding for other associated home costs, such as closing costs, homeowners insurance, property taxes, HOA fees, etc. It is also important to budget for any unforeseen expenses that you might incur, such as home repair, maintenance, and appliances.
If you need assistance understanding your financing options in San Luis, Obispo, contact Central Coast Lending With Mike today for a consultation.