Coming up with a real estate down payment of 20% is difficult for many first time home buyers. It’s enough to make many people feel like they can’t afford to buy a home.
But did you know you can buy a home 7% down or even 0% down? It’s true! This article will go over some best practices and things to consider when trying to get the best deal on a real estate down payment.
1. What Is the Down Payment on a Home?
Most people do not put 20% down on a home. For most first-time homebuyers who financed their home, the average down payment is around 7% and for a repeat homebuyer, the average down payment was around 16% according to the National Association of Realtors.
But most people still believe that you need at least 20% for a down payment on a home in order to qualify for a loan.
2. What Is the Minimum Down Payment on a Home?
The minimum amount you will need for down payments really depends on the type of home loan you qualify for.
- Convention loans can have down payments as low as 3% for qualified buyers. Some lenders even offer special assistance and may grant loans with an even lower down payment.
- FHA loans are backed by the Federal Housing Administration. These loans require a minimum OF 3.5% down. FHA loans allow applicants to have a lower credit score than you would need to apply for a conventional loan.
- VA loans are given to military veterans and service members. These loans are backed by the U.S. Department of Veterans Affairs and usually do not require a down payment.
- USDA loans are available for certain rural buyers. Like VA loans USDA loans are backed by the federal government and usually require no down payment.
3. Is a Down Payment Necessary to Buy a Home?
As you can see from the breakdown of loans above, a down payment isn’t always necessary. VA loans and USDA loans both have zero down payments. The FHA has allowed home loans to go through with as little as 5% down since the mid-80s.
These days there are many different first time home buyer programs that can provide assistance and reduce the cost of the real estate down payment.
4. How to Buy a House Without a Down Payment?
If you are looking to buy a home without a down payment visit VA loans if you are a veteran or service member. They will give you the information you need. If you are not a veteran or service member you can still check out loans given out by the USDA.
5. Should I Put Down 20% Anyway?
Even though it may not be required for you to put down 20% it is still a good idea. Here are a few of the reasons why.
- You won’t have to pay for mortgage insurance
- Your monthly payments will be lower
- You’ll probably have a lower interest rate
What Is a Good Real Estate Down Payment?
The right amount for a real estate down payment is different for everyone. Deciding how much to put down depends on your financial situation, the housing market in your area, and the home you want to buy.
Yuma Real Estate Professionals can help you find a home in Yuma, Arizona. We specialize in residential, investments, and land. Meet our professional team of agents and let us help you make your dream of owning a home a reality.