You probably know that many Home Loan lenders prefer borrowers to have about
20% in cash saved for a down payment on a new home. But for a house valued at
$200,000, thats a whopping $40,000! And most of us just dont have that type of
cash in the bank. Fortunately, there are a few ways you can buy a house with no
(or a low) down payment, such as:
GET A "SPECIAL" LOAN
Certain mortgage loans--like FHA loans or VA loans--are designed to help
borrowers with very little cash available for a down payment. These government
supported loans are available through most Home Loan lenders, so check with
yours to see if theyre a possibility. Some restrictions do apply. FHA loans,
for example, set a limit on how much you can earn and how much the house can
cost. VA loans are available only to veterans or veteran spouses that meet
certain guidelines. However, if you do qualify for these loans, they tend to
have lenient approval criteria, so theyre available to folks with
less-than-perfect credit.
GET A "PIGGYBACK" LOAN
If you dont have the 20% you need for a down payment, you may be able to get
a "piggyback" loan from your lender. Essentially, you borrow the money for your
down payment in a second, separate loan. Oftentimes, especially if your home is
valued at more than the selling price, this loan is in the form of a Home Equity
Loan or a Home Equity Line of Credit. Fortunately, in those cases, the interest
on your "piggyback" loan is usually tax deductible.
OTHER SPECIAL CIRCUMSTANCES
If you meet certain criteria--such as income guidelines--you may qualify for
special assistance from a state or local program. Ask your mortgage lender if
he/she knows about any of these programs in your geographic area. If you have
about 10% as a down payment, you can also get a loan if you agree to Private
Mortgage Insurance (PMI), which costs an additional $60 or so per month.
However, once the equity in your home reaches 20% of its value, youll be
permitted to drop the PMI. Here is a list of recommended Home Mortgage
Lenders online. Its important to use a reputable lender online to make sure
your personal information is secure.
Even if you dont have 20% saved for a down payment on a new home, there are
lots of ways you can still get approved for a mortgage if you do a little
digging.
